Alter Energy Group plans to purchase, expand N.C. pellet plant

On June 10, Zurich, Switzerland-based Alter Energy Group AG announced it has signed a letter of intent (LOI) to acquire a pellet plant located in North Carolina. According to Edward Klaeger, CEO of AEG, the acquisition is expected to close by early August.

Production at the facility will occur in two phases, Klaeger said. During the first phase, the facility will produce at a capacity of at least 110,000-metric-tons-per year, with operations beginning as soon as October. “Our business plan is to increase capacity to 250,000-280,000 [metric tons per year] in phase two during the spring and summer of 2015 to be ready for market during the 2015 heating season,” he said. “The plant has both the areas and logistics capacity to meet this increase in production and there is more than ample supply of readily available processed feedstock in our wood basket.” The company is currently preparing to conduct the feasibility study and cost analysis for the phase two expansion, Klaeger said.

AEG plans to export all of the pellets produced during phase one production to Europe for sale in the retail market. However, the company may serve utility markets in the future. “We are currently in active discussions with several large utilities such as Drax Power and RWE Trading for the purchase of industrial pellets from the North Carolina plant,” Klaeger said. “Though we are able to supply utilities, and both our off-take and production capabilities are flexible to meet demand for both markets, ultimately this will be decided by economies of scale and investment returns to yield the highest margins.”

The South Carolina plant will be the first U.S. pellet plant owned by AEG. The company, however, may expand its presence in the U.S. pellet industry. “We are currently researching other potential wood pellet plant acquisitions in 2015 and have several in due diligence,” Klaeger said.

AEG has also been active in the Ukrainian pellet industry. According to Klaeger, the company is involved with two operating pellet mils in western Ukraine and owns a biomass logistics and processing company in northern Ukraine, where the company also targets additional production. Those operations, however, are on hold at this time due to uncertain geo-political and economic conditions. “Ukraine is too risky at the moment and nothing is getting done as a result but we are prepared to re-engage when the situation stabilizes and the market opens up for investment,” he continued.

Klaeger noted that AEG has an aggressive expansion strategy and is considering investments in torrefaction in both Europe and the U.S. “While all indicators are that the traditional wood pellet market will continue to grow significantly in the next 10-15 years, especially for the retail sector, we also believe torrefaction is a strong potential growth market for solid bio-fuels because of its higher energy values and stronger composition,” he said. “Torrefaction requires less external energy to make, can be stored outside like coal, because it has 25 percent more energy per ton it is 25 percent cheaper to transport, and is more economical for utilities to convert to energy than traditional biomass.”