Sugar millers seek new revenue streams in power and ethanol

Millers are seeking changes in the regulation that requires the current feed-in tariff to be in force for 15 years.

Come January 2012, Kenyan consumers will hold sweet celebrations because they will finally access sugar at a cheaper price.

The market will open up to sugar imports from the Common Market for Eastern and Southern Africa region (Comesa).

But as that day draws nearer, Kenya’s sugar factory managers are searching for solutions to slash their operating costs and produce sugar that is globally competitive to maintain their relevance in the market.

Kenya’s sugar is double the price of products from Comesa states whose entry has been restricted from this market under a regional trade pact that expires in December 2011.

As factories weigh their options, sector regulator Kenya Sugar Board, is pushing two agendas; co-generation and ethanol production.

KSB says it will offer the millers a soft landing when the market is finally liberalised.

When the two projects are complete, the Board plans to push for the transformation of most millers into entities selling sugar only as a by-product of other larger operations.

“Bagasse which is a residual product from cane milling is raw material for briquettes, charcoal, chipboards, paper, mulch, concrete and most importantly, power generation (co-generation),” notes a new policy by Kenya Sugar Board, “It is estimated that the industry has potential to generate up to 190MW of electricity from this source, which is currently under-exploited.”

Currently, only Mumias Sugar Company produces electricity for commercial use.

Other millers (Nzoia, Miwani, Sony, Chemelil and Muhoroni) are also being prodded towards co-generation.

However, the board said even as it does so, the lack of a supportive pricing mechanism for co-generation remains a hindrance to investment in this promising area.

The industry has developed a proposal for a more progressive feed-in-tariff policy on biomass generated electricity for consideration by the Energy ministry.

This proposal raises the tariff to 11 US cents from the current 8 US cents.

Christine Chesaro, the Corporate Affairs manager of the Kenya Sugar Board says the proposal for tariff increase has been forwarded to the Ministry of Energy.

Attractive prices will mean more investment in co-generation, resulting in higher electricity output and additional income for sugar millers that should trickle down to cane farmers.

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source: businessdailyafrica