Tag Archives: green
Tilbury Power Plant Closes After Biomass Grant Refused
http://www.ft.com/cms/s/0/50907714-0374-11e3-b871-00144feab7de.html#ixzz2bqG9g4oW By Guy Chazan One of Britain’s oldest power stations will close on Tuesday after the government refused to award it a subsidy to switch from coal to biomass. RWE npower, the energy supplier, said it had taken the “difficult decision” to shut down Tilbury on the river Thames in Essex after the government said a project to convert it to biomass was ineligible for its new low-carbon support mechanism. The decision brings the curtain down on a plant that has been generating electricity for 46 years and casts a shadow over Britain’s plans to source a growing proportion of its power from wood pellets. Tilbury B was scheduled to close under an EU environmental measure known as the Large Combustion Plant Directive (LCPD). Under the legislation, Tilbury was allocated a quota of 20,000 hours of operation from January 1, 2008. In 2011, RWE decided to switch it to biomass for the remainder of its LCPD hours, due to end at midnight on Tuesday. RWE had hoped to convert the plant from coal to biomass, which would have given it an extra 10-12 years of life. But after the Department of Energy and Climate Change decided the project was ineligible for its low-carbon energy subsidy, the “contract for difference”, RWE said the plan was “no longer economically viable”. The decision will be a blow to the biomass industry but will be welcomed by environmentalists, who have argued that increasing demand for wood pellets as a feedstock for biomass plants could lead to the destruction of biodiverse forests, as more land is taken up for tree plantations. A fire at the Tilbury biomass plant in February damaged storage units holding thousands of tonnes of wood pellets, weeks after the facility began commercial production. Continue reading
Sustainable Plantation Investment Reaps Profits
Monday, August 12, 2013 Beverly Chandler, Opalesque London: Interviewed for Opalesque Radio by Sona Blessing, Mark Wills, Managing Director, Sustainable Asset Management told of his two decades of experience in the world of banking and financial services. Amongst other companies, he has worked at Royal Bank of Scotland’s private banking division, specialising in tax planning and portfolio management for high net worth investors and he was also responsible for co-establishing International Financial Services in Singapore. In this podcast entitled From Soil to Oil, Wills elaborates on how and why he thinks investors with a shorter timeframe can still invest in timber, as an asset class, that generates a conservative annualised ROI of 14%. Asked to explain the difference between investing in timber, as opposed to timberland, Wills said: “Timber as an asset class is growing in popularity amongst informed investors. This interest has certainly been more pronounced and can be partially traced back to the negative experiences made during the global financial crisis. Since, investors have and are increasingly looking to diversify into real-tangible assets such as Timberland. Forestry per say, as an investment class, offers limited correlation to market led investments; diversification, as a defensive component of an investment portfolio; a hedge against inflation and it is less susceptible to the effect of shifts in interest rates and political change and the do good and feel good factor – i.e. it is socially responsible and a renewable resource.” Wills explained that some investors perceive the timeline for forestry investments as being long and, he commented, it’s true, it can be as long as 10-20 years, depending on the species being cultivated. “However the timeline can be dramatically shortened if the species of tree invested in – is specifically designed and subject to a process that optimises its inherent value. The tree and therefore the investment is not just dependent on its organic growth. One such species is the Aquilaria tree, a critically endangered tropical soft wood indigenous to South East Asia.” This particular tree is regarded, by some, as the most valuable wood in the world due to its ability to produce a highly sought after commodity known as Agarwood. “The process the tree goes through for it to be able to produce Agarwood means that the tree is not reliant on just organic growth to provide returns. The timeline for investment in both the growth of tree and the process is shortened to seven years. Relatively short in the context of forestry standards” Wills explained. In order to make plantations of Aquilaria financially viable, the plantation owner provides a complete care package for the investor incorporating the entire soil to oil process. “The investor participates by buying sapling Aquilaria trees that are initially cultivated in the plantation nursery and then replanted on the plantation. The plantation allocates one out of every three trees it plants/owns for investors, which means that the same process of cultivation; husbandry, security and maintenance is afforded to all trees grown on the plantation whether owned by the investor or by the plantation owner themselves.” Once the tree reaches a certain age, usually five years, the tree is ready for innoculation whereby an organic compound is administered into the tree at multiple points to induce a natural biological defensive reaction. This natural reaction causes the normally white wood of the tree to become discoloured, resinous and fragrant and this is called Agarwood. “This natural biological reaction; which in the wild could take from between 10-20 years, on plantations takes between 12-18 months to create sufficient commercially viable quantities of Agarwood. The trees are then harvested and processed at a production plant, where by the infected Agarwood is separated from the uninfected white wood. Oil is distilled from the infected wood and sold on the open market thus generating returns for the investor based on the price the oil is sold for.” Terms for investing in Agarwood include that the investor agrees to purchase the saplings at a fixed price and the plantation owner agrees to manage the entire growth and management process from soil to oil. “Investors are invited to the plantations to see their trees any time they wish. The investor also has the market price of the oil underpinned by a minimum buy back, specified in the SPA. The oil will be sold at market price and the investor will receive market price or the minimum buy back price whichever is higher.” The returns investors can expect range from 14% upwards and currently range around 17-19%. Although the harvest cycle is short, the growth of the tree takes place over a five year period prior to that. The trees are intercropped with complimentary species, that add nutrients to the soil and additionally organic fertilisers are used to aid the growth of the tree. Once the plantation is harvested, the plantation will be agronomically assessed for suitability of replanting. Wills explained how this process compares with investing in hardwood. “Teak is a tropical hardwood as opposed to a softwood like Aquilaria. Teak’s appeal is for its durability and high quality finish. Whilst its uses are varied, from furniture to boat building, its uses are all very similar. Aquilaria because of the process it has to go through to attain its value, has a more diverse range of commercial applications and therefore a wider range of end market opportunities. A crucial differentiator is the longer investment time horizon of 20-25 years that investing in Teak entails. In contrast, because of the process the Aquilaria tree goes through in its natural state, as an investment – its cash-flow/revenue generating ability is considerably shortened.” Wills’ firm, Sustainable Asset Management, currently has 5,000 acres of plantation in Sri Lanka and approximately 1,000 acres in Thailand plus a large land bank in hand for continued planting. “The new plantation focus is on Thailand as we believe, it offers a conducive biological environment. The plantations are located all over Thailand to manage the risk of natural disaster. Whilst fires are unlikely in tropical conditions unless deliberately started; ensuring the plantation assets are located all over Thailand helps us better manage such risk. Further, extensive due diligence is undertaken on each plantation location to ensure that the land does not fall within in the range of a flood plain. In the floods experienced by Thailand in of 2011 – none of the Aquilaria plantations were affected.” Because Agarwood has many applications, the end product determines what price it can be sold for. “For example: Agarwood oil/Oudh prices range from $15,000 – 80,000 per litre. Agarwood chips, average quality $1,000 per KG and Agarwood sculptures – rare pieces of wood infused with the mould tend to fetch $1.5 – 2m per KG and earlier this year a rare piece of 600 year old Agarwood sold for $20m.” The potential risk to the investor of investing in plantations is managed two ways in the plantation business. First risk is loss of stock, which is protected by extensive buffer stock (roughly three times the size of existing investor stock). The trees are replaced for investors if affected by theft, natural disasters and disease, for example, Wills explained. “Downside market price risk is protected by offering the investor an underpin on oil prices It is however an investment in ‘nature’ and as such there will be some degree of unpredictability. However as a plantation business, it is our role to ensure that we manage the risk of that unpredictability and we are able to do this because of our scale.” Wills explained that while there are other participants in the market, their involvement tends to be at different points in the value chain. He said: “Few participants have a complete end to end market value proposition. By this I mean there are other Aquilaria plantation owners, but few have the capacity and know how to be able inoculate and process the trees into Agarwood. Those that do are considerably smaller in size. As far as land rights are concerned, we wholly own the land on which we plant. The forestry industry in Thailand receives Royal patronage and we have developed a close relationship with the local authorities as well as the Royal household through investment initiatives into the local community with socially responsible activities such as investing in schools, sponsoring villages as well as a range of other activities designed to help develop rural areas in Thailand”. You can listen to Sona Blessing’s Opalesque Radio podcast entitled From Soil to Oil here. Continue reading
Agriculture Is The Future Of Nigeria
Editor’s Note: This article is part of a series by the Financial Times’ This Is Africa publication on realizing Africa’s agricultural potential, in partnership with the Rockefeller Foundation . The Skoll World Forum is a proud media partner for the initiative, and you can find the whole series here . Adam Robert Green is a senior reporter at This is Africa, focusing on trade and investment, development policy, energy and social service delivery. In the 1960s, before it turned to oil, Nigeria was one of the most promising agricultural producers in the world. Between 1962 and 1968, export crops were the country’s main foreign exchange earner. The country was number one globally in palm oil exports, well ahead of Malaysia and Indonesia, and exported 47 percent of all groundnuts, putting it ahead of the US and Argentina. But its status as an agricultural powerhouse has declined, and steeply. While Nigeria once provided 18 percent of the global production of cocoa, second in the world in the 1960s, that figure is now down to 8 percent. And while the country produces 65 percent of tomatoes in west Africa, it is now the largest importer of tomato paste. Nigeria’s minister for agriculture, Akinwumi Adesina, reels off these statistics with regret as he discusses the country’s deteriorating agriculture sector. “Nigeria is known for nothing else than oil, and it is so sad, because we never used to have oil – all we used to have was agriculture,” he says. Nigeria’s oil has come at the detriment of the agriculture sector, he claims, “and that is why we had a rising poverty situation. We were having growth but without robust growth able to impact millions of people because it is not connecting to agriculture.” That might explain why Nigeria’s economic statistics are so puzzling. While the country has been posting high growth figures, and makes it into Goldman Sachs’ ‘Next 11’ emerging markets group, absolute poverty is rising, with almost 100 million people living on less than a $1.25 a day. The National Bureau of Statistics says 60.9 percent of Nigerians in 2010 were living in absolute poverty, up from 54.7 percent in 2004. But it is not just oil that has hollowed out the agriculture sector, with knock-on effects on poverty rates. Restrictive trade policies also had an effect, especially in the late 1970s and early 1980s. Tariff increases, a rise in import licenses and duties, and export bans and tariffs – as well as a centralisation of marketing of agricultural produce through the formation of crop-specific commodity boards – all created a lumbering, inefficient private sector, as well as opening up many opportunities for corruption. Today, Nigeria has transitioned from being a self-sufficient country in food to being a net importer, spending $11bn on imports of rice, fish and sugar. “It just makes absolutely no sense to me at all,” says Mr Adesina. “My job is to change that.” Not everything is in the minister’s hands, of course. Climate change poses a threat to Nigerian agriculture – the World Bank recently predicted an up to 30 percent drop in the country’s crop output due to erratic rainfall and higher temperatures. But when it comes to achievable changes, Mr Adesina seems well placed to act on what lies within reach, combining an encyclopaedic knowledge of his country’s agriculture sector with a clear strategic vision. While ministers’ portfolio’s are often fast-changing, giving them limited time to develop expertise in any given sector, Mr Adesina has a strong background as vice president of policy and partnerships at the Alliance for a Green Revolution in Africa (Agra), and a decade at the Rockefeller Foundation. He was appointed by UN secretary-general Ban Ki-moon as one of 17 global leaders to spearhead the Millennium Development Goals. His energy is palpable, and he looks well positioned to engineer a major turnaround in Nigerian agriculture. The change needed, he says, requires a shift in mindset. “We were not looking at agriculture through the right lens. We were looking at agriculture as a developmental activity, like a social sector in which you manage poor people in rural areas. But agriculture is not a social sector. Agriculture is a business. Seed is a business, fertiliser is a business, storage, value added, logistics and transport – it is all about business.” He wants to change the sector’s image, putting it at the forefront of national development. “Agriculture is the future of Nigeria. And agriculture that is modernised, that is productive, that is competitive. We must be a global player,” he says. Nigeria’s respected finance minister, Ngozi Okonjo-Iweala, speaks positively about Mr Adesina’s reforms to date – especially in cleaning up the corrupt fertiliser industry. Now, rather than directly participating in the delivery system for fertiliser, the government leaves that to the private sector and only provides the subsidy. This change has tackled 40 years of corruption, and ended it – Mr Adesina claims – in 90 days. Ms Okonjo-Iweala says it has been easier to work with Mr Adesina than previous ministers. “It is not only about doling out subsidies which do not reach farmers,” she says. “That was frustrating for me the first time [I was finance minister]. Now he came and cleaned up the fertiliser issues.” Nigeria is now seeking to add 20m metric tonnes to the domestic food supply by 2015 and to create 3.5 million jobs through agriculture. This requires more sophisticated thinking about the value addition of individual crops – cassava being but one example. “We are the largest producer of cassava in the world, at 40m metric tonnes, but I want us to become the largest processor of cassava as well,” Mr Adesina claims. “We can focus on using cassava for starch, dry cassava chips for export to China, cassava flour to replace some of the wheat flour that we are importing. So we are restructuring the space for the private sector to add value to every single thing.” Continue reading
