Dong Energy to expand biomass power generation, Inbicon plant

By Erin Voegele | March 08, 2013

Denmark-based Dong Energy has released its 2012 financial results, along with a business strategy through 2020. Notably, the company intends to increase the share of biomass from Danish power stations through the end of the decade. Dong Energy also announced it will no longer invest in liquid national gas (LNG), gas storage, onshore wind power, hydropower, gas-fired power stations, waste-based power stations and electric cars. On day prior to the release of the financial report, Dong Energy also announced the expansion of the Inbicon cellulosic ethanol plant.

Dong Energy reported EBITDA of DKK 8.6 billion ($1.5 billion), down DKK 5.1 billion from 2011. The company’s Energy Markets business fell by DKK 6.6 billion, to a loss of DKK 4.6 billion. In 2011, the company posted an EBITDA for the unit of DKK 2 billion. Dong Energy’s other four business units posted a combined EBITDA increase of DKK 1.5 million.

According to Dong Energy, the loss in the Energy Market segment was due in part to onerous contracts for gas storage capacity and capacity in a LNG terminal. The remainder of the decline is attributed to non-recurring income of approximately DKK 1 billion in 2011 from the renegotiation of gas contracts, lower earnings from gas-fired power stations abroad a wider spread between oil and gas prices. Overall, the company reported a loss of DKK 4 billion, compared to a profit of DKK 2.9 billion in 2011.

“DONG Energy’s financial statements for 2012 are not satisfactory, primarily due to heavy losses and provisions for our gas activities,” said CEO Henrik Poulsen. “Our other business activities delivered largely in line with expectations. To restore a robust financial platform for our continued growth, we have initiated an extensive action plan that includes divestment of non-core assets, cost cuts and injection of additional equity of at least DKK 6-8 billion.”

The company’s 2020 business plan includes several strategic objectives. According to Dong Energy, its return on invested capital must be at least 10 percent by 2016 and 12 percent in 2020. In 2012, it was -7.4 percent. In 2016, the key metrics for adjusted net debt relative to EBITDA must be lower than 2.5. In 2012, the figure was 4.1. The company also intends to reduce CO2 emission level per KWh to 260 grams in 2020, from the 443 g level emitted in 2012. By 2020, Dong Energy also said biomass must constitute at least 50 percent of its Danish heat and power production.  In 2012, biomass constituted 21 percent.

Regarding the Inbicon plant, Dong Energy said it is now ready to extend and further develop the plant. The expansion is attributed to a larger market for second-generation ethanol technology. The expansion will involve an investment of approximately DKK 15 million.

"It’s particularly in the markets outside the EU where we’re seeing a rise in demand for our technology for producing second-generation bioethanol," says Henrik Maimann, Vice President in New Bio Solutions and in charge of bio-based technologies. "This is why we’ve decided to expand our plant in Kalundborg, as we see a growing role for this plant in demonstration and development activities."

According to Dong Energy, the retrofit, along with a genetically modified yeast, will enable the plant to manufacture 50 percent more ethanol from each bale of straw, making the technology more cost-competitive.