NTR takes road less travelled in biofuel venture

John Mullins is leading the firm's shift from tolls to utilities, writes Barry O'Halloran

NTR is associated in many people's minds with the on/off political spat about toll roads, but the company has been steadily branching out of that business for several years to the point where it's a fully-fledged utility company.

This month it launched its latest division, in bioenergy. NTR says the new operation, Bioverda, will sit happily in between its current waste management and alternative energy activities, and in some respects tie them together.

It does sound like a neat synergy. Through Greenstar, NTR processes and deals with waste and its shareholding in Airtricity puts it in the game of generating electricity from alternative energy sources.

Bioverda's plants in Germany will produce biodiesel from rapeseed. A facility for which it is seeking planning permission in north Cork will processes liquid farm waste to generate electricity and produce environmentally safe fertiliser.

NTR stressed the tie-in with its existing activities in its launch publicity. Bioverda's managing director, John Mullins, stresses it, too, saying that it was the company's involvement in energy and waste that sparked the idea in the first place.

"We could see clearly all the way through the process that there was a space opening up in biofuels, we had a look early last year and had a sense that it was strategic," he says.

"The NTR board gave the go-ahead in May or June last year." From that point, Mullins and his colleagues did not waste time. They began looking for opportunities and once they found one in Germany, closed the deal in 12 weeks. Bioverda will be putting the roof on its first rapeseed processing plant in Germany next month.

NTR is committed to making an initial investment in Bioverda of €120 million.

This includes €67 million in the German plants at Neubrandenburg and Ebeleben, in Thuringen, that will process rapeseed to produce diesel motor fuel.

Germany is the biggest consumer of biodiesel in Europe, and EU directives require all other member states to follow its example by the end of the decade.

It's also one of the biggest rapeseed producers in Europe, and Mullins says that Bioverda is locating its plants in the middle of the main seed growing area. He says that Bioverda will be profitable almost from the get-go, and the company should be generating revenues of €300 million in three years and employing 200 people.

"Bioverda will be profitable initially because the contracts are already established for the first two years. We have the plant, the technology is not complex," he says.

"We're right in the middle of the main rapeseed cultivation region in Germany, the grain silos from the major co-operatives are next to us, they are the biggest grain silos in Europe. Our strategy is to get out and capture the seed and get the long-term contracts."

He points out that embarking on this project raises obvious questions of balancing scale, financing and risk. "This time we're going to be playing with commodities and there will be an emphasis on the trading abilities in the company."

While it is characterised as a utility, this will be a new departure for NTR by focusing its efforts on developing assets - that is, roads, power generation facilities and seed processing plants and getting a return for its shareholders, which includes a new venture One51 from former IAWS boss Philip Lynch.

"Fundamentally we asset manage and we finance, we optimize the returns from the assets," Mullins explains.

"The labour markets and the technical markets provide the materials and the expertise that we need."

The other arms of Bioverda will involve using methane from liquid waste, landfill and coalmines as an energy source. Methane is a worse offender in greenhouse terms than carbon dioxide - 20 times worse, in fact.

Bioverda has sought planning permission for a facility at Araglin between Mitchelstown and Fermoy in North Cork. It will process liquid waste, use the methane as an energy source to generate electricity and convert it to carbon dioxide, cutting the greenhouse gas load from liquid agriculture waste by 95 per cent.

The process is known as anaerobic digestion. Along with electricity, the plant will also produce pellets that can be used as fertiliser. Mullins explains that their advantage is when they are spread on farm fields, they pose less of a danger of "run off" - where rain causes fertilisers and slurry to run off the land and ultimately into waterway - because they dissolve into the soil in rain. They will also keep farmers within the terms of the controversial nitrates directive.

EU directives and international agreements are driving a lot of what NTR is doing with Bioverda. Ireland will have to cut its dependence on fossil fuels and our production of greenhouse gas in the coming years or face big fines.

For example, the EU is demanding that 5.75 per cent of all transport fuel must be biofuel by the end of the decade.

Failures to stick to the various commitments that the Government has made on our behalf with the EU and in treaties like the Kyoto Accord on greenhouse gases will result in the State being fined tens of millions of euro at a time. They will be paid from the exchequer, which ultimately means that taxpayers have to pay the price.

Mullins warns that the Government must have a cohesive long-term policy to ensure that the State meets its commitments. While he sees that it is taking a lot of positive steps, he's not sure that everything is being done in the co-ordinated fashion in which it should. He also believes that the greenhouse gas offsets purchasing system that the Government is proposing to keep the Republic within its Kyoto Accord commitments should not be regarded as a long-term solution.

Regulations of another kind are also set to have an impact on Bioverda's plans. The company expects that if it gets permission from Cork County Council for the Araglin anaerobic digestion facility, that this will be met with objections.

Mullins believes that it will be three years before it finally gets through the process and finds out whether or not it can go ahead with the plant.

"That's the way with infrastructure projects in this country," he says. However, he speaks favourably of Germany, which has an administrative rather than a legally-based planning system. As a consequence, the whole process, including dealing with objections, takes three months rather than three years.

Nonetheless, Bioverda is already planning to expand on the facilities which it has already under way. "Our aim is to be in motion on five plants within three years," Mullins says. "It's what we're setting out to do."

Factfile

Name: John Mullins

Post: Managing director, Bioverda, NTR's new biofuels division

Background: Born in Cork, he studied engineering at University College Cork (UCC) and graduated with first-class honours

Career: He started work with the ESB in Dublin first in operations on the national grid and then in corporate strategy. He later moved to the UK where he worked with PWC as a consultant on utilities. After returning to Ireland he worked for ESB International before moving to NTR, where he held a number of executive roles before taking up his new post

Why he is in the news: Bioverda, the NTR division which he is heading, is expecting to deliver revenues of €300 million within three years and be profitable in its first full year of operation