Ethanol Africa has temporarily halted construction of its Bothaville, Free State ethanol production plant due to delays in raising additional funding and indecision over which construction model would be most suited to the project.
Joe Kruger, managing director of Ethanol Africa, said although the government has publicly stated its commitment to developing a biofuels industry, delays in formalising its support in the Draft Biofuels Industry Strategy were to blame. “This has caused serious delays in Ethanol Africa’s endeavours to raise additional funding for the Bothaville plant,” Kruger said in a statement.
However, Kruger noted that the company had access to an additional pool of government funding as the project is strategically important to the country. Nevertheless, he said potential investors look very closely at the security of an ultimate market and government support on a national scale before supporting biofuels projects. Ethanol Africa project manager Martin Jooste said although construction has been delayed, the plant will be completed in the third quarter of 2008 and ethanol production will commence soon afterwards. The company had planned to start production in the first half of 2008.
Jooste said the board of directors and investors have yet to decide on which construction model would best suit the project. He said construction had been delayed by two to three months to find the correct model, iron out technical difficulties and obtain pricing for the alternative EPC (Engineering, Procurement and Construction) model. “The whole decision is about whether we as owners are prepared to take some risk and can we pocket savings,” Jooste said. The current execution plan for the project follows the EPCM (Engineering, Procurement and Construction Management) model where any risk and overrun in costs are for the owners’ account.
The contractor only profits from the man-hours spent on the project. Jooste said he prefers this model because the owner will have more control over the process. Alternatively, in the EPC model the contractor is not only responsible for construction management, but also takes responsibility for the construction costs. Jooste said all the capital for the plant construction is handed to the contractor and as the contractor will assume risk for the project, he will charge a risk premium. “The client has very little control and saving is all for the contractor’s account,” Jooste explained. e said technical issues have also caused delays as they have to decide if roller or hammer milling will be used in the plant.
Although Ethanol Africa has started with some groundwork, equipment has been removed from the site to avoid incurring additional costs, Jooste said. Ethanol Africa intends to proceed with an additional seven plants between 2008 and 2010 following the successful start-up of the Bothaville facility. – Wilma den Hartigh
