Z Energy plans to make biodiesel from beef fat
Z Energy has announced plans for a $21 million biodiesel plant that will produce fuel from inedible tallow feedstock.
The listed company said the investment would be made over the 2015 financial year and would produce 20 million litres of sustainable biodiesel a year.
It would be manufactured from inedible tallow feedstock, essentially beef fat, and satisfy New Zealand and European fuel specifications.
The plant would be built in Auckland.
Chief executive Mike Bennetts said the Z board had approved the project.
It was still subject to regulatory and resource consents, which included approvals from competitors to construct the blending facility at the Wiri fuel terminal.
"We appreciate that others have tried and failed to bring domestically produced biodiesel at this sort of scale to the New Zealand market," he said.
The project had been refined over four years, he said, and several commercial customers had committed to take fuel from the initial production.
It would be manufactured from a byproduct of the domestic agricultural industry, rather than through Z growing a feedstock supply.
"The economics around biofuels remain very challenging and we have worked this project non-stop for four years to get to this point," Bennetts said.
"We believe we have the knowledge and capability to manage the various operating and financial risks while offering our customers a quality product at a similar price to mineral diesel."
The biodiesel would initially be blended with mineral diesel, at ratios of between 5 per cent to 20 per cent, to be used in heavy vehicles.
An option existed to double the plant's production to 40 million litres quickly if consumer demand and economics supported it.
Construction would begin once the final conditions had been satisfied, he said.
Z Energy made the announcement this morning, along with its market update, which confirmed earnings guidance of between $205m and $215m for the year ending March 31, 2014.
Its annual result will be released on May 8.