INTERVIEW-Bateman sees biofuel plant boom outside U.S.

By Chris Wills

LONDON, July 17 (Reuters) - The CEO of Dutch engineering company Bateman Litwin N.V. BNLN.L said Europe, China and Australia would drive demand for new bioethanol processing plants as it unveiled the purchase of U.S.-based firm Delta-T.

"In the next three years I think we will see a slowdown in demand for bioethanol plants in America, even though the Senate is looking at new orders to increase the number of gallons required ... The real markets are in Europe, Australia and China," Chief Executive Shuki Raz said by phone on Tuesday.

Bateman, which designs and makes refineries for the oil and gas industries, is paying $45 million in cash and issuing 11.8 million shares to buy bioethanol technology firm Delta-T, which licenses the technology for and designs processing plants.

An expected drop-off in plant demand in the U.S. is because of a supply bottleneck, while in the other areas demand will be boosted as governments target the increasing use of biofuels alongside gasoline for transport, Raz said.

Biofuels, such as bioethanol, can reduce exhaust emissions and dependence on fossil fuels, though there is still much debate on whether all biofuel production methods reduce carbon emissions overall.

The anticipated slowdown in U.S. demand for new plants is because of the high price of feedstocks such as corn and the higher charges from a small number of construction firms who have the expertise, Raz said.

Bioethanol is one type of biofuel, in which the fuel comes from sugar or starch found in crops such as corn and wheat. Another is biodiesel, which uses plant oils such as palm oil.

Delta-T, which has a 25 percent share of the U.S. market, is currently involved in the construction of 34 plants and has completed more than 100, Raz said. It has already worked in Europe, China and Australia.

The acquisition will be earnings enhancing in its first full year, Bateman said. The deal values Virginia-based Delta-T at 19.5 times 2006 earnings before interest, tax, depreciation and amortisation, broker Credit Suisse said in a note.

In the longer-term Delta-T is looking at new processes that reduce, or replace, the use of corn and wheat for bioethanol.

"The future is bioethanol from cellulose and waste, as all of us know ... That's where we want to be in two to four years, and Delta-T is already busy working on second-generation biofuels," said Raz.

Shares in Bateman Litwin were up 2.9 percent at 319p by 0929 GMT, after broker Credit Suisse raised its price target to 290p from 240p on the back of the deal.