Thursday
Apr042013
by 
Bishop Hill
Bishop Hill Gross loss
Apr 4, 2013 Energy: biofuels Further to yesterday's posting about the Ensus factory I have got hold of a set of the company's accounts.
Rather remarkably, they do not appear to have managed to make a gross profit yet, let alone a net one (although in fairness last year they posted a net profit due to a financial restructuring). It appears that the biofuels business is a bit of a financial black hole.
Now if you were the owners of a £100m biofuels plant that was haemorrhaging money and had the prospect of a long shutdown ahead of it, what would you do?
That's right, lobby the government for "support". I wonder how many meetings Ensus and its owners have had at DECC. And I wonder what effect the House of Commons recent look at the subject will have.
Reader Comments (36)
The first thing I would do is appoint a Lord or any other politician to the board in an advisory role (highly paid of course) and create an interest in what we do that's the first thing I'd do!
Regards
Mailman
"I wonder how many meetings Ensus and its owners have had at DECC."
If I were a betting man ... I'd put a few bob on what DECC will want to gag it's employees over....
http://www.telegraph.co.uk/news/9967901/14m-bill-for-gagging-axed-public-officials.html
and
http://www.mirror.co.uk/news/uk-news/department-energy-bonuses-payoffs-cost-1792493
From the comments thread at your earlier post on this company, I see that one director was "Sir Robert John Margetts". I take it that that's Rob Margetts, who used to be a big banana at ICI. ICI doesn't exist any more either.
Thanks for digging this up.
I was wrong, so, about public availability of their accounts. My head was in a different jurisdiction.
They are losing money hand over fist, though.
Sounds like a FOIA request is in order :-)
Reposted but still relevant.
All "renewables" are a scam, to a greater or lesser extent.
This was one of the "greater".
http://motls.blogspot.co.uk/2013/04/italy-seizes-17-billion-from-sicilian.html#more
We farmers are/were very fond of the Ensus plant. The best thing that could happen to us as an industry (and any industry, I suppose) is a shortage of what we make. So we like organic farmers, because they voluntarily produce less than they could (although war has broken out a bit now that they're trying to boost flagging sales by saying "Of course, OUR wheat is safe...."). We just love all those farmers who have jumped into the vineyard game - my neighbour has several bits of south-facing chalky land that he has poured squillions of pounds into, and all on the promise some years ago of, ahem, Global Warming. So something that comes along and promises to need a million tons of wheat is a Good Thing.
But it true: there's a shortage of wheat, after a run of very dodgy harvests. I walked my wheats yesterday, freezing to death in the lazy wind (i.e., it doesn't bother to go round you, it goes right through you). I've planted 240 acres (don't laugh, North Amercan readers!): a third went in in September and looks OK. A third got sown 'on the frost' in December and looks pretty poor (what the slugs haven't eaten), and the last third went in at the end of Feb/early March, This late is risky for winter wheat - it has to have a certain number of frosts to be 'vernalised', i.e. know that it has had a winter. Otherwise it grows as just a grass, with no ear at harvest. Anyway, there has been no lack of frosts! The green shoots are just about to break cover, having sat under the ground in freezing conditions for a month.
My point is that it's safe to say that harvest 2013 (in the UK anyway) is not going to fill the barns. It'll do very little to address the world shortage (although we're a tiny producer). The scary thing is that there are still those who believe in the existence of grain mountains. But what baffles me is that the futures prices for wheat are so low. Now, if I were a gambling man.......
The biofuels industry is lobbying the EU and no doubt the UK government. So is Oxfam in the opposite direction. They describe biofuels as a 'pot of gold'.
"Big business continues to win in the biofuels bonanza, piling up the profits on the back of poorest who are suffering increased hunger and poverty." Obviously Ensus has been getting it wrong somewhere.
http://www.oxfam.org.uk/blogs/2012/10/biofuels-reaction
The EU seems to be pushing the emphasis away from food stuffs and towards agricultural waste.
http://pellets-wood.com/europe-is-going-to-transfer-to-biofuels-of-agricul-o10606.html
As for lobbying the UK government for support, aren't there EU rules about support for industry?
Big companies and investment consortiums are perfectly capable of throwing away £100 million on a hopeless venture.
Part of the problem is the high cost of fossil fuel needed to produce bio fuel. Obviously the ultimate answer is to entirely replace fossil fuel and use only bio fuel to make bio fuel, n'est-ce pas?
ssat - a perpetual motion machine is not beyond climate science.
The Directive 2009/28/EC on renewable energy, implemented by Member States by December 2010, sets ambitious targets for all Member States, such that the EU will reach a 20% share of energy from renewable sources by 2020 and a 10% share of renewable energy specifically in the transport sector.
It also improves the legal framework for promoting renewable electricity, requires national action plans that establish pathways for the development of renewable energy sources including bioenergy, creates cooperation mechanisms to help achieve the targets cost effectively and establishes the sustainability criteria for biofuels.
"exterminate, exterminate............."
The 'daleks' have spoken - we will obey even if it means subsidising, no - dousing in taxpayer monies - a plant that has been mothballed.
Yipes - no worries even though this baleful mess, growing crops converting to ethanol - all to fuel vehicles is morally repugnant, financial idiocy and ethically base - it causes world food shortages and men, women die because of a man made dearth and particularly in the vulnerable groups; older folks and children in 'developing nations'.
Still, onwards and upwards: the 'tractor production figures' will be up again this year and the revived Berlaymont Comintern will be raising the bar yet again in order to ensure all the
slave's effortsjoyful units labours are maximised.Up the EU!
Remembering my basic micro economics, if I was trying to maximise profits (minimise losses):
If I was making gross losses I would close down production.
If I was making gross profits but net losses I would keep producing
They keep producing under gross losses, hence magnifying total losses. Just goes to prove that the green economy exists in a different reality.
9:55 AM | Don Keiller
Dear DECC - have any financial support strategies for biofuels been discussed beyond those already detailed in the public domain?
If only...
The WaterMillBillies of Wiltshire asked the Environment Agency to show them a named EA report which was refused - and the reason given for refusal ? quote "the report contains information that could be used to bring criminal actions against officials"
Where does one go with that???
There's a strong smell of something rotting coming from DECC - and it goes beyond the routine whiff of BS
tomo
That is absolutely outrageous! Are there no honest officials left? Why isn't this headline news in the media?.
This extraordinary set of accounts raises more questions than it answers.
The first relates to the "Exceptional finance income" of £126,626,000, achieved by converting bank debt to worthless B shares. I searched in vain through the accounts for the names of the lucky banks who have, apparently, been forced to take a cold bath that cost them £126.6m (less a £13.5m? cash settlement). Why did they not just enforce administration or bankruptcy on the hapless Ensus? Who prevailed on them to go down this particular route and why?
The generosity of the nameless banks has enabled the new owners, Carlyle Group, to dress up the balance sheet by the simple expedient of transferring £126,626,000 from the column labelled "Accumulated Losses" to the column labelled "Share Premium Account" (see page 11). Now why did the Carlyle group get involved? What is in it for them? Is it a case of repaying past favours (I believe they did exceptionally well out of QinetiQ) or have they been promised future subsidies? I note that the Directors are optimistic that Ensus will "play an important role in the greening of the UK`s road fuels and food supplies as we move towards a lower carbon economy". It looks like a 10 Downing Street/DECC inspired operation to me. But what do I know?
Ed Davey News night, worth watching, sod the poor they can freeze to death.
http://youtu.be/GC1bOK5BWwA
Ed Davey News night.
http://www.youtube.com/watch?v=GC1bOK5BWwA&feature=youtu.be
ssat,
Part of the problem is the high cost of fossil fuel needed to produce bio fuel. Obviously the ultimate answer is to entirely replace fossil fuel and use only bio fuel to make bio fuel, n'est-ce pas?
============
Well it certainly wouldn't be a bio-ethanol scheme such as we've seen in Europe and the USA which one way or another takes a litre of diesel to produce a litre of ethanol, ethanol being a less energetic fuel, especially in internal conbustion engines.
I see the highest paid director pocketed around 250K, not bad for a company in what seems to be dire straits.
"This is the not the end. It is not even the beginning of the end, but it is perhaps the end of the beginning" to misquote another famous Eugenicist/Malthusian.
When this particular turd hits the fan known as the Telegraph/Mail/Stun and Mugger it will catch fire smearing all the science 'denialists' such as YEO and co with burning bioenergy..
It should rank alongside MP's expenses.
Stand by for fun...
From the "Institute of Science in Society" website (2006):
"George W. Bush has offered biofuels to cure his country’s addiction to oil [1]. A “billion ton vision” was unveiled [2] to make available 1.3 billion tons of dry biomass for the biofuels industry by the middle of this century, to provide 30 percent of US’ fuel use, if all things work out, such as a fifty percent increase in crop yield. Biofuels Corporation plc, the first 250 000 Mt biodiesel processing plant in the UK was opened by Tony Blair at the end of June 2006 [3], and it will be using imported castor oil and palm oil as well as home grown rapeseed oil to make biodiesel. But UK lags far behind other European Union (EU) countries in biofuel use."
I think the biodisel processing company was actually called British Biofuels Ltd. It never produced fuel and went bust after a couple of years.
11:08 AM | Messenger
Ha! I suppose we're all bomb happy with indignation down here and another dose doesn't really register :-) What do you do in the face of a flat refusal to co-operate ? As in Environment Agency officials have actually been instructed not to even talk to us... it's weird for sure.
In terms of honest officials - yes - there unequivocally are honest, diligent, capable and conscientious officials in the system and they are being roundly abused by their polar opposites. The gent who authored the report in question being the calibre of person one is very reassured to find as a public employee. His verbal judgement being that what he'd found was "the worst I've seen in 30 years" . Meanwhile, his EA superiors at Horizon House in Bristol and Millbank Tower in London busy themselves with whitewash, misdirection, obstructiveness and outright fibs on an epic scale.... tactics they have considerable history of deploying in our case.
It's not like we've not tried to garner media interest... The Telegraph was interested for a while but the journo working on the story was laid off in the last tranche of reorganisation..
"ssat - a perpetual motion machine is not beyond climate science.
Apr 4, 2013 at 10:45 AM | GrantB"
Grant, an otherwise intelligent friend of mine once argued that electric cars were viable on the principle that, as with his petrol car, which had an alternator to charge his battery, an electric car fitted with an alternator must, perforce, keep its battery charged! I was lost for words...
Athelstan - yep, I agree. HM Gov is now just a dept. in the EU enterprise struggling to meet its budget numbers. The nature of bureaucracy is such that meeting the numbers is what matters - not whether those numbers serve any useful purpose.
Biofuels in North America and western Europe have never been anything more than an agricultural subsidy. This was pretty well described five or six years ago in a report I used for a client review. [Unfortunately, this was a different job so I don't have the original report.] They raised the price of corn (maize) in the US and Canada and canola in Europe reducing the need for direct farming support.
Ethanol from sugars (sugar cane and some varieties of millet - I don't know if anyone is using beet sugar in Europe) can be done relatively economically and the energy balance is sort of OK, particularly from cane sugar. The eco-political justification at the time was that ethanol from agricultural starch (corn and wheat) - although tough to justify in energy terms - was a "pump-primer" which would be replaced by ethanol from cellulose (intended to be agricultural wastes, but also grasses grown specifically for fuel on poor land). Unfortunately, despite a lot of development money from many sources (all ultimately the consumer since most of it came from taxes, one way or another) no-one is yet producing ethanol from cellulose on any kind of commercial basis.
Similarly, biodiesel was by now supposed to be being produced from algae, but once again this is still a rolling five years away from commercialization - and has been for the last 10 years!
Lastly, the effect of biofuels on food prices in the developing world was extremely small (the food riots were a trade issue and related to rice production not reduced exports from North America and western Europe where the major diversion into fuel crops took place) and to keep bringing this up does our main point no good as it is easily refuted. Biofuels as currently available are a wealth transfer from the poor to the rich in developed countries and really need to be reviewed on this basis alone - we don't need to over-egg this pudding.
Rob Potter - 'Biofuels as currently available are a wealth transfer from the poor to the rich...'
ANY 'renewables' scheme is a wealth transfer from the poor to the rich..!
Having read (oh, alright - flicked through apart from the juicy bits) the Ensus accounts, my reaction, if I were an investor/director, would be:
'Where's the nearest exit..?'
P.S. The Carlyle group that's mentioned - that's not by any chance the one featured in 'Ice Road Truckers', is it..? Well - they are of course contractors to Prudoe Bay...
...that's not by any chance the one featured in 'Ice Road Truckers', is it..? Nope, this one is a big private finance company in which one John major has a directorship which eke's out his prime ministerial pension.
http://en.wikipedia.org/wiki/Carlyle_Group
what if anything produced deserves a subsidy? I can only think of certain services, but as a produced item I can think of nothing. All I can see is tariffs on essentials.
There have been sporadic comments and questions about the economics of the bio-fuel industry (such as it is) in this and other recent threads. I ran across this report a month or so ago, and I thought it was a very thorough, clear discussion of the energy return on energy invested, which sets a ceiling on what can be expected. The author concludes... well, you can't do much better than quote the sub-title of the report: "Why the United States Should Reject Biofuels as Part of a Rational National Security Energy Strategy"
Oh darn - I've just given it away, haven't I?
www.au.af.mil/au/ssq/digital/pdf/spring_13/Kiefer_Long_Version.pdf
Cheers,
Dean
Peter Whale,
You could argue that there are strategic, social or cultural reasons for keeping certain industries alive in the country, and that inevitabley involves subsidies.
These might be defence, agriculture or energy production which might prove to be advantageous if the global scene changes.
The Common Agricultural Policy is widely thought to have been about avoiding social problems in France, in Japan there's a feeling that industrial strength doesn't count for much if they are not self sufficient in rice.
However, it's a dangerous way to travel. The UK has recently built two aircraft carriers, (jobs when they were being built) but with no aircraft or support vessels, (probably the same cost again plus other problems), one's been mothballed and the other leased to the French. They never fitted into a coherent cost-assessed, risk-assessed defence plan.
As for biofuels based on grains used as politically acceptable way of delivering agricultural subsidies as Rob Potter explained, it seems like an incredibly complicated scheme involving distorting the economic infrastructure and causing further complications. Band Aid slapped on failing Band Aid, with the basic dishonesty of passing thiis lot off as saving the planet, a running sore.
Nice work getting those accounts, your Grace.
Basically the lenders seem to have taken about an 80% writedown. I can also confirm that Carlyle Riverstone Renewable Energy Infrastructure Fund 1 wrote it's share of the equity down to zero in December 2011.
Biofuels are great for farmers, but have generally been terrible investments. I work for an Australian Pension Fund and one of our managers made two biofuel investments, in Australia. They lost 100% in one, and about 70% in the other.
I am not in favour of biofuels for many reasons such as (i) on burning, there is no significant reduction in CO2 (any slight saving is off-set by the fact that mpg is reduced), (ii) substantial amounts of energy in the form of fertilizers and in conversion is used which adds to the CO2 equation, and (iii) it is reducing the availability of food grain and is pushing up food prices to the detriment of the consumer (the third world is suffering in this regard with less grain aid cargoes and unaffordable food - some say that the increase in grain is partly responsible for the Arab Srpring that has cost many lives),
If one wants to off-set carbon emissions from burning petrol/diesel, just plant some trees or grass. Heck, nature is doing this for us; the planet is greening despite our assault on the rain forests due to the higher levels of CO2 in the atmosphere which is plant food. In summary, it appears to me that biofuels, just like wind, fail in their primary goal namely they do not result in a signifcant reduction in CO2 emissions, and they have a number of adverse consequences. Since they do not reduce CO2 output, what is their point?
But, as a classic car owner, biofuels concern me from a usage perspective. I have a car that I do not presently use on the road and which I only start 3 or 4 times a year. Biofuels degrade and are meant to give rise to corrosion. Whilst one may drain a fuel tank, it is not practical to fully drain the fuel lines, carburetors etc. Further, a drained fuel line may well corrode internally from humidy/water in the atmosphere etc leading to particulates (rust particles) getting into the fuel when next used. I can foresee the possibility of blocked jets and sticking carburetor valves if biofuel has to be used. This adds to the problem of the change from leaded fuels.
Slightly off topic, yesterday I read an article that recogned on average PV solar takes about 8 years (or so) to payback the CO2 emitted in their construction. This is an average figure for the world as a whole. For those in cloudy climates or high northern latitutes where sun light is weak (particularly for 6 months of the year) the pay back time is even longer. It may be that in places like the UK and Germany the pay back time is nearer 20 years especially if one adds weakening efficiency over time and dirt etc accumulating on the panels. It would appear that PV solar is nowhere near as effective at achieving the reduction in CO2 emissions as claimed. But for subsidies, the financial pay back time would exceed the life expectancy of the panel.
Re: Apr 4, 2013 at 3:14 PM | Rob Potter
Rob, A Report by a senior economist at the World Bank, Donaldi Mitchell, 1.7.2008 would seem to disagree -
"Summary: The rapid rise in food prices has been a burden on the poor in developing countries, who spend roughly half of their household incomes on food. This paper examines the factors behind the rapid increase in internationally traded food prices since 2002 and estimates the contribution of various factors such as the increased production of biofuels from food grains and oilseeds, the weak dollar, and the increase in food production costs due to higher energy prices. It concludes that the most important factor was the large increase in biofuels production in the U.S. and the EU. Without these increases, global wheat and maize stocks would not have declined appreciably, oilseed prices would not have tripled, and price increases due to other factors, such as droughts, would have been more moderate. Recent export bans and speculative activities would probably not have occurred because they were largely responses to rising prices. While it is difficult to compare the results of this study with those of other studies due to differences in methodologies, time periods and prices considered, many other studies have also recognized biofuels production as a major driver of food prices. The contribution of biofuels to the rise in food prices raises an important policy issue, since much of the increase was due to EU and U.S. government policies that provided incentives to biofuels production, and biofuels policies which subsidize production need to be reconsidered in light of their impact on food prices."
http://econ.worldbank.org/external/default/main?pagePK=64165259&piPK=64165421&theSitePK=469372&menuPK=64166093&entityID=000020439_20080728103002
And an interesting summaried analysis here
http://grist.org/article/biofuel-bombshell/
Biofuels was promoted by the UN as an "Opportunity for Developing Countries"
"The production of biofuels - clean-burning, carbon-neutral fuels derived from sustainable agricultural practices - provides an opportunity for developing countries not only to use their own natural resources but also to attract the necessary foreign and domestic investment to achieve sustainable development goals. Widespread use of biofuels would provide greater energy security, improved quality of life, economic development, job creation and poverty alleviation, especially in rural areas."
http://unctad.org/es/Paginas/DITC/ClimateChange/UNCTAD-Biofuels-Initiative.aspx
But as so often where the UN is concerned the reality was very different -
"Biofuels - A Failure for Africa"
http://www.africanbiodiversity.org/sites/default/files/PDFs/Biofuels%20-%20A%20Failure%20for%20Africa%20(ABN,%20Dec%202010).pdf
richard verney - why not send your carefully reasoned rejection of bio-fuels to Baroness Worthington - seeing as how she only sees this 'industry' (I use the term loosely) in terms of 'investment and jobs'..?
sherlock1 - I suspect Baroness Worthington has the economic understanding of those who think paying one group to dig holes and anther group to fill them in is "a worthwhile scheme to create jobs and investment." It's worth a try, but I'd not hold my breath waiting for a coherent response, or even an indication of comprehension.