I thank the Chairman and other members of the joint committee for their invitation to attend this meeting to discuss the findings of our recent study on the establishment of an integrated bio-refinery plant for the production of sugar and ethanol from sugar beet and grain.
The study's findings show that the project would generate sustainable profitability and positive cash flows. In addition, it would create significant job opportunities and provide new income possibilities for tillage farmers, while eliminating imports of up to €200 million per annum. It would also enhance security of sugar supply for food processors and consumers.
The plant would be located on a new site in the south east, at the centre of the sugar beet growing region. It would have a capital cost of €350 million of which approximately €200 million worth of contracts could be supplied by Irish contractors.
It is envisaged that 30% of the required finance would come from equity investment and the balance of 70% as debt which would be repaid in full over the initial years. The study group is confident that the profitability of the venture would make it attractive to investors, including in particular, participation by sugar beet growers, other farmers and lenders.
The feasibility study was drawn up by the Irish Sugar Beet Bio-Refinery Group. The expert group included former senior executives in Irish Sugar and Greencore, leading scientists in University College Dublin and Teagasc, and farmer representatives. A list is attached. The entire report was reviewed and the financial figures were verified by an international consultancy firm, PwC, which also provided the financial model.
I will now provide an outline of the business. The bio-refinery plant would process 10,000 tonnes of sugar beet per day and have an annual production of 154,000 tonnes of sugar and 50 million litres of ethanol. This would be produced from 1.2 million tonnes of sugar beet, of which 1 million tonnes would be used for sugar production and 0.2 million tonnes for ethanol production. A further 56,000 tonnes of grain - as well as molasses, which is a by-product of sugar processing - would be required to produce the annual target of 50 million litres of ethanol.
Based on a yield of 60 tonnes per ha, or 24 tonnes per acre, there would be a requirement for 20,000 ha, or 50,000 acres, of sugar beet. At an average of 10 ha per grower, this would involve around 2,000 growers. The grain requirement would come from some 7,000 ha of wheat. Our research confirms that available tillage hectares and the commitment of growers in the south-east region could exceed this requirement.
As regards prices, the study states that growers would be paid €40 per tonne for sugar beet at 16.5% sugar content, delivered to the plant. This is based on an ex-factory sugar price of €570 per tonne for bulk sugar which, based on current sugar prices of over €770 per tonne, is a conservative figure.
If average sugar prices are higher than €570 per tonne for bulk sugar, growers would get a 40% share of the increase. If current sugar prices were to apply in the future, this formula would ensure a sugar beet price in excess of €50 per tonne. It should be emphasised that the market price for sugar will be the determinant factor in the price that can be paid to growers for sugar beet. The study proposes that farmers supplying wheat for ethanol production, given current market conditions, would be paid a price of €175 per tonne.
I will now deal with the question of employment. According to the study, the plant could be constructed within two years of EU approval being granted for the revival of sugar production in Ireland. Up to 500 jobs would be created during the construction phase and the plant would directly employ 200 people. There could be approximately 5,000 jobs in total, including those created on farms, in agricultural contracting, haulage and the ancillary service industries.
The study shows that the establishment of a joint sugar-ethanol plant is critical to the financial viability of the project. The proposed annual output of 154,000 tonnes of sugar is close to the total imports into the 32 counties of circa 160,000 tonnes annually.
As Ireland surrendered its sugar quota in 2006, a new Irish sugar plant will require EU approval. The proposal to abolish the EU sugar quota regime in October 2015 opens a real opportunity to re-establish sugar beet processing in Ireland. Planning for the new industry needs to begin immediately as there is a minimum lead-in time of two years.
I will now deal with sugar beet yields. We are confident that with improved technology and a dedicated group of skilled growers, yields well in excess of 60 tonnes per ha, or 24 tonnes per acre, can be achieved. This makes Irish sugar beet production profitable and competitive. Research by Teagasc and Professor Jimmy Burke of University College Dublin has shown that these yields and higher can readily be attained in this country.
The ethanol production component of the project would also make an important contribution to achieving the 10% bio-fuel substitution target by 2020. To be economic, ethanol production must be undertaken on a large scale basis, which necessitates a large capital investment and takes many years to establish. Support measures, therefore, need to be long term if they are to provide the reassurance needed to secure investment in the sector. As with the other transport bio-fuels, an obligation system sensitive to the needs of Irish bio-fuel producers is critical.
There would be several benefits to the development of an integrated sugar and bio-ethanol bio-processing facility based on tillage crops such as sugar beet. In addition to providing the sugar needs of Ireland for the consumers and industry, the ethanol component would aid the security of fuel supply and diversify the market for Irish tillage crops. The construction of a combined bio-processing factory in the south east would facilitate an eventual move to a cellulosic ethanol plant, which could readily be built onto an existing first generation plant, such as that proposed in this study. The construction of a combined sugar beet and bio-ethanol facility would, as outlined, earlier have many advantages in terms of import substitution, employment and rural development.
In summary, this study demonstrates that the plant can generate sustainable significant profits and cash flow; produce sugar and bio-ethanol competitively and replace imports; meet virtually all of Ireland's requirements for sugar; help meet Ireland's bio-fuel targets from indigenous resources; generate significant employment; support the rural economy in a sustainable and environmentally-friendly way; provide export opportunities within three years of production and produce more food and bio-fuels than any other crop. We believe this study, together with the BEET Ireland report, provides the Minister with the necessary mandate to build a sustainable case for the restoration of an Irish sugar quota from October 2015.
We welcome that another group, under the guidance of Michael Hoey, independently found that a viable and profitable sugar industry can be re-established in Ireland. We have expressed our willingness to work and share information with BEET Ireland, while fully recognising that there can be only one production plant ideally located and capable of producing sugar to supply the Irish market. This remains our position to date.
My colleagues and I are pleased to be present here today to partake in this debate and will be happy to answer any questions which members may have on this matter.