A Greenfield bio-fuel project in Belarus

By bne IntelliNews September 4, 2009

Ben Aris in Berlin -

It has been more than 20 years since reactor number four blew up at Chernobyl in northern Ukraine, causing the worst environmental disaster in history. Since then, the countries worst affected by the disaster have been frustrated in their efforts to clean up the radioactive mess, but a new project promises not only to decontaminate the soil in as little as 30 years, but could make Belarus a strategic player in Europe's emerging bio-fuels market.

Over 80% of Chernobyl's fallout came down in southern Belarus, contaminating 48,000 square kilometres, or just under a quarter of the country's territory - an area the size of Denmark - with a deadly rain of strontium-90, caesium-137, plutonium and americium. Left to nature, it will take up to 600 years for the radioactive dust to disappear on its own. Strontium is a particularly nasty contaminant, as it is next along from calcium in its period group and so easily gets into bones, causing leukaemia and other cancers.

But Belarus' efforts to reclaim its land have gone nowhere thanks to a lack of support by the international community. The worst affected countries jointly applied to the UN for $646m to finance 131 projects to decontaminate the area in 1991, but received a pitiful $8m. In 1997, they tried again with a more modest claim for $90m for 60 projects, but received a pledge for a mere $1.5m. The international community has done nothing more than providing a little money to ensure the sarcophagus that covers the reactor remains intact so no more radioactive particles get into the atmosphere. The cash-strapped government in Minsk doesn't have the money to tackle the problem on its own.

So imagine the government's enthusiasm when it was approached by Ann McClain in 2003 with a proposal to build an ethanol plant in the southern city of Mozyr, inside the contaminated zone, that will suck the radionuclides out of the soil 20-times faster than they would decay on their own. As a bonus, the plant will earn the Republic money by exporting badly needed bio-fuels to the European market.

At first pass, McClain is an unlikely champion of bio-fuels in the region. She has travelled widely in the east since the fall of the Soviet Union, but she is a restorer and museum curator by training and a member of a team working on the World Monument Fund that restored Tsarist palaces listed on Unesco world heritage sites, among other things. However, she has always had an interest in ecology and during a project to preserve the Belovezhskaya Pushcha/Białowieża Forest, she became interested in the Chernobyl zone.

She approached her uncle, the late Freddy Heineken and former president of the Dutch brewing company, with a plan to rescue the region by using grain crops to pull the radionuclides out of the ground, which could be commercialised by turning the radioactive grain into ethanol. The Heineken Foundation paid for the initial feasibility study, which found the idea was a flyer.

Clever plan

The plan is beautifully simple and makes money at each stage. Plants are very good at sucking up radionuclides (which is why radioactive contamination is such a problem), but the trouble is farmers normally plough the radioactive stalks back into the soil.

McClain founded Greenfield Project Management that will build an ethanol plant to produce up to 450 tonnes of the alcohol a year in the first stage. At the same time, a power plant will be built that will burn the stalks from grain plants to generate heat and power, which will both run the ethanol plant and sell power to the Belarusian national grid. Each crop of grain will remove a little more of the contamination that ends up in the ash produced by the power plant, which can then be removed. Initially, the ethanol plant will need outside grain to run, but in the second phase the 48,000 square kilometres of land in the region will be put to work growing contaminated grain to sustain the ethanol production, which can't get into the end product, as strontium is four times heavier than ethanol. "Alcohol is extremely volatile and no radioactive containments pass through the process. During the distillation process, the strontium and caesium are too heavy and won't rise up the fractionating tower," says Basil Miller, head of communications at Greenfield.

However, the UN's International Atomic Energy Agency (IAEA) is not so sure. Its head of waste, Didier Louvat, told New Scientist that, while the bio-fuels process should be safe, Belarus doesn't have an adequate way of disposing of the radioactive ash. "The disposal facilities Belarus set up after the Chernobyl accident are not acceptable, so they will need safe storage until they have something better," Louvat told the journal.

The radioactive contamination complicates things, but it also plays to the project's advantage. The storage problem can be solved, but what is so clever about the project is that the grain grown in the region can't be eaten anyway and so can't compete with grain grown for food. In the summer of 2007, the global economy faced its first shock when food prices around the planet suddenly spiked partly driven by the rising demand for bio-fuels. As the Belarus grain is inedible, it is insulated from rising food prices. "In effect, we are substituting an industrial process with an agricultural one... The grain we produce will be extra to the country's existing agricultural output and so we won't compete with the production of food," says Miller.

This is not the first time that the idea of using plants to commercialise the clean-up of radioactive contamination has been suggested. The IAEA floated the idea of growing rapeseed in the badlands and using the grain to make oil. But the trouble with that and similar other proposals has been the output is food and the added costs of dealing with the radioactive stalks makes the resulting oil a lot more expensive than the competition. By changing the end product from a food to a bio-fuel, the Greenfield project changes the rules of the game. "The costs of production [of food products] will always be higher than the costs of producers in other regions of Belarus, or elsewhere," says Andrei Savinykh, deputy permanent representative of Belarus in Geneva, who is selling the idea to the international community. "But the basic principle here is to eliminate the category 'food' from the production and change the formula to soil/biomass/bio-refinery/energy products."

Greenfield project

The government in Minsk was quickly sold on the idea. The agreements were signed in 2005 between Greenfield and Belbiopharm, the state-owned holding company that runs the country's vodka producers, among other things. A full-scale feasibility study followed, after which a joint venture was set up in 2006 to implement the project.

Greenfield was just about to launch a roadshow to raise part of the €245m needed to build the plant and power station when the crisis struck. Dutch bank ABN Amro was the lead financial partner and was going to raise the bulk of the money, but after it was first walloped by the crisis then distracted by its own takeover saga, Greenfield parted ways with the bank last year and has been looking for strategic investors instead. "Most of the money was going to come from ABN Amro and private equity investors, but since the crisis hit, funding has dried up - especially private equity," says Miller. "Instead, we have managed to bring in several strategic investors that we needed to make the project more bankable."

Amongst the most important is Ireland's Project Management Group, which has been building running brewing plants in Central and Eastern Europe and is amongst the biggest project management companies in Europe. PMG is drawing up the technical plans for the plants that will also flesh out the financial plans and has agreed to only put in a bill for its work once the funding for the first phase has been raised. These plans will be ready sometime in May next year and construction on the plant could begin before the end of 2010. "The Belarus government will contribute €20m and we will need to raise about €100m. We have talked to a lot of potential investors and no one will sign yet, but they have given us their criteria. If we tick their boxes, the investment will follow," insists Miller.

There are essentially only two big boxes that need checking. The first is a guarantee for the initial supply of grain to run the ethanol plant, as it will take another five years to plant the surrounding fields to make the plant self sufficient. The Belarusian government singed off on the grain supply deal in August. Amongst the potential investors is the country's largest bank Belarusbank, which bolsters the project, as not only will it produce funds, but as it provides most of the funding for Belarus' agricultural sector, it will also be an important partner for ensuring grain deliveries to the plant run smoothly. Tick box one.

The second box is a guaranteed off-take agreement for the ethanol that the plant produces. Greenfield is in talks with various buyers, but negotiations with Russian oil company Lukoil's Geneva-based ethanol trader Litasco are well advanced and Miller is optimistic a deal can be signed in the next few months. The pen is poised over box two.

Good green business

Providing Greenfield can raise the €100m it still needs, the plant should be a good earner and the benefits are multiple. The most obvious benefit is the return of the land to productive use in only one or two generations' time. A study by ABN Amro found that this alone should add 3-6% to Belarus' GDP and 15% to its agricultural production once its functioning again.

But the real money should be the ethanol. The EU recently passed the Renewable Energy Directive that is supposed to reduce emissions of greenhouse gases by 2020 and includes a call for replacing 10% of petrol burnt by cars with ethanol.

The trouble is that the member countries have a nasty habit of ignoring these directives. At the beginning of the 1990s, the EU passed its bio-fuels directive that demanded members replaced a minimum of 2% of their gasoline with bio-fuels by 2005 - which didn't happen; only Germany and Sweden have managed to meet the target and bio-fuels accounted for only 0.8% of all Europe's fuels by the end of 2005. The directive goes on to call for 5.75% of petrol to be replaced by bio-fuels by 2010, which also is very unlikely to happen.

Part of the problem is that even if members wanted to comply, none of the member states produce much ethanol. Farmers are reluctant to swap production of grain from food to fuel, as they get more money for food and forcing them to change is a political non-starter.

The Mozyr plant will go a long way to solving the supply side of the problem. It will be able to produce about 600m litres of fuel a year at full capacity and this could rise to 5bn litres if all seven mooted plants are built, against the 25bn litres a year Greenfield estimates will be needed by 2020 if the directive is followed. Moreover, thanks to the low cost of operation in Belarus, the plant should be able to produce ethanol for €0.35 per litre, about half the price in Western Europe. One of the big themes to come out of the current crisis is the need to spend on green energy: it's time for investors to put their money where their mouth is.

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