Top raw sugar producer to spend P1.4B on ethanol distillery

MANILA, Philippines - Sugar group Roxas Holdings, Inc. will invest P1.4 billion in an ethanol distillery to take advantage of the increasing demand for clean energy, as well as add more value to its sugar production business. In an interview, Chairman and Chief Executive Officer Pedro E. Roxas said ethanol is a growth area for the company and forms part of a plan to expand and diversify into sugar-related businesses. "The ethanol business, for us, is a value-added business. [We’re] utilizing a raw material that we already produce, and at the same time we diversified so we can spread our risks over different segments of the marketplace because sugar is highly volatile," he told BusinessWorld. Mr. Roxas said the company would be putting up a distillery that will likely be located in Batangas or Negros Occidental where it collectively maintains three sugar plants. Molasses will serve as the raw material and about 75% of the molasses requirements will be obtained internally, he added. Because it is easy to manufacture and process, and can be made from very common materials such as sugar cane, ethanol or ethyl alcohol is steadily becoming a promising alternative to gasoline. Incorporated in 1927 as a sugar milling company, Roxas Holdings, through its subsidiaries, produces raw and refined sugar, which it sells to local food and beverage manufacturers. It also ships a portion of the production to the US. The group is now the biggest raw sugar producer, taking up 19% of the country’s production, and the second biggest in refined sugar production. Last year, Roxas Holdings produced 350,000 metric tons (MT) of raw sugar and 250,000 MT of refined sugar. Mr. Roxas said funding for the distillery plant would come from bank loans it had obtained for its P4.7-billion capital expenditure program. He added that the company is in talks with both independent and big oil companies for the sale of its ethanol product when the plant becomes operational by end-2009 at the earliest. "The idea is to sell it to oil companies for them to blend it with gasoline to a ratio mandated by the government, which is initially 5%. Then eventually [the mix] will go up to 10% ethanol and 90% gasoline," Mr. Roxas said. The law forces oil firms to blend gasoline with cleaner fuel to reduce greenhouse gas emissions that lead to global warming. Earlier this year, Roxas Holdings set up Roxol Bioenergy Corp. in preparation for the ethanol business. Should the ethanol business succeed, the company might also put up distillery plants within the region either through acquisition of plants or by forming joint ventures with local companies in countries they could invest in, Mr. Roxas said. Domestic sugar consumption is estimated at 1.9-2.1 million metric tons. Last year, the sugar industry produced 2.23 MT of raw sugar and 1.08 million MT of refined sugar. Roxas Holdings’ consolidated sugar manufacturing subsidiaries under the CADP Group Corp. are Central Azucarera Don Pedro, Inc. and Central Azucarera de la Carlota, Inc. It also has a 45% equity investment in Hawaiian Philippine Co., a sugar mill in Silay, Negros Occidental. — Lovely Nica P. Lee, BusinessWorld