UPDATE 1-Abengoa to restart biggest Spain bioethanol plant

Tue Jul 15, 2008 11:15am EDT

(Adds details, background)

MADRID, July 15 (Reuters) - Spanish energy company Abengoa (ABG.MC) on Tuesday said it would restart its biggest bioethanol plant in Spain "in the coming weeks" in the expectation that legislation on compulsory blending in petrol will revive the domestic market.

The 158,000 tonne-per-year plant, in the central Salamanca province in central Spain, is half owned by food group Ebro Puleva EVA.MC and has been halted since September. The joint venture is known as Biocarburantes de Castilla y Leon (BCyL).

Spain's Parliament last year passed a bill that would require that all petrol sold in the country be blended with a minimum of plant-based ethanol, which is due to come into effect on January 1, 2009.

"BCyL trusts that it (the law) will help to stimulate domestic demand," a statement from Abengoa said.

The Salamanca plant originally opened in April 2006 and was designed to supply the domestic market, but slow demand has led it to close for months at a time.

Javier Salgado, chief executive of Abengoa's renewables unit, said earlier this year that Salamanca was too far from Spanish ports to make it profitable for the export market.

He denied that soaring grain prices GRAES01 were to blame.

The plant was designed to run on barley, and is in the middle of Spain's grainbelt region of Castilla y Leon, which is expected to produce 5.1 million tonnes of the cereal this year.

Abengoa operates two other bioethanol plants in port cities La Coruna and Cartagena, which together have a capacity of about 257,000 tonnes per year, but produce mainly for export.

Even without Salamanca, Salgado told Reuters in an interview in May that he expected Abengoa's bioenergy sales to rise by 30 percent this year.

The company operates a bioethanol plant in Brazil and plans to open new plants in France, the Netherlands and the United States. (Reporting by Martin Roberts; Editing by James Jukwey)

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