The Chinese government is set to provide project financing to Lestari Pasifik for the construction of bio-refinery plants in Malaysia and Indonesia.
Lestari is a joint venture between Russian technology system provider Arter Group and Malaysian investors, including companies, private equity funds and individuals.
The financing will be used to build 616 bio-refinery plants over the next five years.
While the total amount of the loan is undisclosed, the estimated cost of building the plants is RM2bn (US$666,900), according to Lestari CEO Clement Tan Wei Loon.
“China has great demand as they are coming up with a mandate to use bio-ethanol as biofuel by end of this year; that is why the Chinese government is willing to finance our project,” he says. “China will be the main market for the moment because locally we do not have any mandate for all cars to use bio-ethanol fuel.”
The company hopes to garner a 45% market share in Malaysia and Indonesia when all the plants have begun operations.
It is also planning an IPO by the first quarter of next year to raise RM2.7bn.
The first plant, which will be operational by November 2011, will be Malaysia’s first bio-ethanol plant.
Lestari is currently in talks to identify locations for all future plants, it says, while three other plants will be set up this year in Johor, Sabah and Sarawak, Malaysia.
As part of the project, Lestari has agreed a construction and setup contract with palm oil trader Kilang Minyak Sawit Meru.
Bioethanol is a form of renewable energy that can be produced from agricultural feedstocks.
However, there are concerns regarding its production and how it will increase food prices due to the large amount of land required for crops, as well as the energy and pollution created by ethanol production, especially from corn.
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