Making Algae Biofuels Pay

BD: What’s the project capacity?

RS: The deal we have signed is for 400 modules or modular equivalents, representing 270000 tons of CO2, 100000 tons of algae, with a 50/50 oil and biomass split.

BD: What could be the ultimate scale at the Bayswater plant?

RS: We could scale up to 2000 over a period of time. It’s really up to us, based on the dynamics of the system, we could scale up in a couple of years. It’s not physically difficult to do, it’s more about steady cash flows. Obviously you want to look at the capex getting away too much, but based on current feed and oil prices, the payback should be in four years or less.

[Editor’s Note: Macquarie Generation is a NSW state-owned Corporation established in 1996, which owns and operates Liddell Power Station and Bayswater Power Station between Singleton and Muswellbrook in the Upper Hunter Valley of NSW. Each year Macquarie produces the equivalent to 40% of the electricity needed by the people of New South Wales.]

BD: Is the project working with flue gas, or having to scrub it?

RS: Using flue gas. Under Australian regulations, it is already required that it’s pretty well scrubbed sulphur and mercury and emissions like that. So it’s minimal in mercury and low in sulphur. But we take the CO2 through water, as well, so there’s a dissolution process.

BD: What’s the capex for the initial project, the 400 modules?

RS: $140 million

BD: How is that being raised?

RS: We’re talking to group in US and others . There’s a [debt] structure which could take the form of a bond raise. For the initial plant, there’s quite a significant tax rebate available. It’s 45 cents on the dollar.

BD: Is that a refundable tax credit, or transferrable?

RS: It’s a cash rebate into the company’s coffers based on expenditures.

BD: And the government has signed off on this project for that?

RS: We’ve already spent 9 months with Deloitte to get through that tunnel, and we’re already approved for a $27M project and we are working right now to get that expanded to the full $140 million. I don;t know how they came up with $27M but they did.

BD: What products besides fuel?

RS: Livestock feed. We’ve had good discussions so far with GrainCorp., which ADM owns 20 percent of, and also preliminary discussion with Cargill.

[Editor’s Note: Archer Daniels Midland last week launched a AUS$2.7 billion bid for the remaining 80 percent of GrainCorp, valuing the overall company at AUS$3.4 billion.]

BD: And the fuel offtake?

RS: On the biodiesel side, we are hoping to shortly formalize the relationship with Biodiesel Industries Australia, outside of Maitland [in New South Wales] for up to 15000 tons of algae oil to start with. They sell all their biodiesel to Caltex.

Editor’s Note: Biodiesel Industries Australia owns and operates Australia’s first commercial biodiesel plant, located in Maitland, NSW. In 2003, Newcastle City Council launched Australia’s first biodiesel fleet running on fuel supplied by BIA, and in 2006, BIA was the first biodiesel producer to contract with a major oil company (Caltex) to supply more than 600 million litres of biodiesel blended fuel in the NSW market.

BD: What construction challenges are left unsolved?

RS: Our partner is WorleyParsons, and we have gone through the prelimiary discussions on the project. They don’t frankly see it as anything but a straightforward project. To them, we’re not building something complex like the Sydney Harbor Bridge.

BD: What do the timelines look like for the project?

RS: The timelines are tight but achievable. At the end of Q1, we want to have funds in place, and in parallel go down the permitting process. It’s a benign system Now, this is an enclosed system on an existing industrial site using indigenous Aussie algae, so we are not expecting a major hold-up on the permitting front, but it takes time.

At CSIRO Hobart, we’ve been working with Dr. Susan Blackburn [Editor’s Note: Dr. Blackburn heads the Australian National Algae Culture Collection], and with a team from the University of Wollongong, and Evolve Engineering as our environmental engineer. Generally, they don’t see it as complex in terms of permitting, and we will lean on government as needed.

There’s a lot of good will for this project in Newcastle and The Hunter Valley. They like it at Macquarie, and as you probably know, power groups are generally quite conservative and can be a pretty crusty bunch. But these guys went quietly through their process, and got through the procedure, and now they are practically more enthusiastic than us, which is hard to be.

We talk about other geographies for the company’s expansion, feasibility, the role of tax and renewables policy, and how Algae.Tec should be seen in the market. All today via the page links below.