Virgin, NTR join for €260m US biofuel venture
Irish utility group NTR and Richard Branson's Virgin Group are set to join forces on a €260 million alternative fuels venture in the US.
The new company, Virgin Bioverda, will be formed from a marriage of Virgin's fuels division and NTR's biofuels business, Bioverda. It will initially focus on the American ethanol market. The substance, used to make fuels such as biodiesel, is made by processing oil produced by crops such as rapeseed and corn.
The pair are planning to finance the development of two ethanol-producing facilities in Indiana and Tennessee. NTR predicted yesterday that this would require an investment of €260 million.
The facilities will each produce 100 million gallons of ethanol a year. NTR says the US is using four billion gallons of the substance a year, and this is set to increase to 10 billion by 2010 as mandatory quotas laid down by the US government are met.
NTR finance director Michael Walsh said the US was one of the fastest growing markets for renewable fuels.
"Concerns about climate change and the need for energy security are going to drive a huge rush to renewables in the US," he said.
"This partnership [ with Virgin] means that we can get in early and big and secure first-move advantage."
Mr Walsh said it took Bioverda and Virgin just three months to agree on starting a joint venture. He said both companies shared the same approach and attitude towards investing in the renewable energy sector.
The venture will be split on a 50:50 basis and they will take majority stakes in both ethanol plants.
NTR is already an investor in the fourth-biggest player in wind generation in the US through its holding in Airtricity, another Irish business. It has turbines with the capacity to generate up to 215 megawatts (mw) in the US and plans to add a further 650mw over two years. This is equivalent to 20 per cent of the Irish electricity market.
News of the Virgin joint venture came as NTR, which also operates toll roads, the Greenstar waste management business and Bioverda, and owns a stake in Irish Broadband, released results for the six months to September 30th.
The company has switched its financial year to end on March 31st. The results it released yesterday are compared to the six months to December 31st, 2005.
Mr Walsh said energy companies see demand increase in winter and fall in summer, so the numbers do not offer a direct comparison. The figures show that group revenue was up 7 per cent to €206 million from €192 million. However, earnings before interest, tax and write offs dropped €4 million to €30 million.
The company blamed the seasonal switch, increased development spending and a fall-off in earnings in Irish Broadband. Operating profit dropped to €7.1 million from €11.8 million.
NTR raised €170 million in September. The company's shares trade on the grey market, as it is not listed on any stock exchange.
Shareholders include the Roche family and One51, led by former IAWS boss Philip Lynch.