Manila OKs foreign firm to plant biofuel coconut

Reuters 18 Jun 09;

TOKYO (Reuters) - Pacific Bio-Fields Holdings Plc said it has received approval to use 400,000 hectares of land to plant coconut trees in the Philippines to make alternative auto fuel, which it aims to sell to Japanese users in five years.

The company, which plans to list on the London Stock Exchange's Alternative Investment Market (AIM) later this year, said on Thursday the agreement allows it exclusively to cultivate unused public land on the northern main island of Luzon for free for up to 50 years.

The project will provide local jobs and involve the construction of local refinery infrastructure.

"It is the first time the Philippines' government has allowed any local or foreign company to use land for a coconut oil-made biodiesel project," Yuji Taniguchi, head of the U.K.-based holding company with its main operations in Japan and the Philippines, told a group of reporters.

In the Philippines, the world's biggest coconut oil exporter, local biodiesel producers have increasingly been using coconut oil as feedstock now that a 2 percent mixture of plant-origin fuel in diesel for auto use is mandatory.

Coconut and coconut oil production have been centered in the southern part of the Southeast Asian island nation.

Coconut oil is traditionally used in food and cosmetics.

Competition with food is not an issue for this project, whose location is in the northern part of Luzon, where fields are largely abandoned after once-dominant tobacco production receded, Taniguchi said.

Also, coconut trees do not require particularly fertile land, like palm trees do, he said.

"Coconut trees can grow on wasteland, and we rely on DENR where to plant them," he said, referring to the role of Department of Environment and Natural Resources of the Philippines, which gives approval of areas to plant after environmental assessment by another government agency.

The IPO in the second half of 2009, arranged by Arbuthnot Securities of Britain, is set to raise an estimated 5 billion yen ($52 million), the proceeds to be used for investment in coconut tree planting.

The company, now with capital of 30 million yen, plans to start operations at its first crushing plant with capacity of 2,000 metric tons of oil per month in northern Luzon by August, with oil initially for sales to local biodiesel makers.

By 2014, the company plans to build five other crushing plants with similar capacity each as well as a refinery plant to turn the feedstock into 300,000 metric tons of biodiesel a year, part of which is targeted at exports to Japan, Taniguchi said.

The project of building these facilities and needed infrastructure is partly financed by loans from government-backed Japan Bank for International Cooperation, he added.

($1=95.73 Yen)

(Reporting by Risa Maeda; Editing by Keiron Henderson)