MGT signs MOU with Suzano for biomass supply

By Lisa Gibson | October 07, 2010

U.K.-based MGT Power Ltd. has begun securing a feedstock supply for its 300-megawatt Tees Renewable Energy Plant, signing a non-binding, long-term  memorandum of understanding with Brazilian pulp and paper producer Suzano e Celulose S.A.

The two companies are working toward developing a formal contract for the agreement, but MGT declined to release information on how long Suzano will supply pellets for the facility or the amount it will supply. The MOU is backed by an $800 million investment by Suzano, which will develop three projects in Northeast Brazil for the production of 3 million metric tons of eucalyptus pellets per year. The resulting electricity at Tees REP is expected to deliver more than an 88 percent carbon dioxide reduction compared with fossil fuels, according to MGT.

Tees REP will be constructed in Teesside, England, and is expected to be completed and operational in 2014. Suzano will supply a significant portion of the clean wood fuel for the facility, but MGT is also looking elsewhere, including local sources. The company is limited, however, to 200,000 metric tons per year of road deliveries to avoid impacts on local roads, according to an MGT spokesman. The company will seek to diversify suppliers and geographies to ensure a reliable supply, he added.

Suzano was chosen as a supplier because it is among the largest integrated pulp and paper companies in the world, according to MGT. It will give project lenders comfort as Suzano is a well-established, publicly-traded company with sustainability credentials. Wood pellets from Brazil benefit not only from the country’s sunny conditions, but also from the advanced forestry technology developed by Brazilian universities to increase yields in poor soils, the spokesman said.

MGT Power also is developing a 300 MW facility in Tyneside, England, but a supply for that facility has not been established as it is in very early stages of development, according to the company.