Future Fuels is raising a £40m fund to invest in the British Renewable Transport Fuel (RTF) market.
Run by Future Capital Partners (FCP), the investment has acquired a site and planning permission for an ethanol plant in North East England. It aims to capitalise on EU and UK government legislation, which mandates 13% of all petrol fuel must come from renewable sources by 2020.
FCP head of sales and marketing Piers Denne says: “We believe there will be a huge level of inward investment in this area, but with four years from plan to plant there will be a material shortage of ethanol, at which point we would expect the consolidation of the market.
“At the moment, just 2.3bn of Europe’s petrol comes from renewable sources, and it needs to increase this to 23bn to meet the targets.”
Future Fuels plans to develop the Grimsby site to produce ethanol, and a high-protein animal-feed by-product of the process. It has already secured 10-year purchase agreements for the ethanol and animal feed.
It has also signed a 15-year off-take agreement for its CO2 by-product with a gas supplier to the food and drinks market.
FCP forecasts the plant to produce an income of more than £1.5bn over 10 to 15 years.
FCP CEO Tim Levy says: “This is a well thought-out investment proposition put together by proven partners who have built and operated commercially functioning plants using proven technologies.
“EU environmental legislation demands everyday motorists will require the petrol in their tanks to be blended with an ever-increasing proportion of bio-ethanol by 2020. This is one of only three production plants in the UK.
“This is a growth industry for Britain and one we have the right attributes for.”
Future Fuels says it expects to provide a return of over 30% over annum over a five- to seven-year period. It plans to raise £40m of equity of which it has already raised more than £15m.
