BioTherm Energy: Search for Intelligent Energy

The Search for Intelligent Energy

BioTherm Energy Pty, Ltd., an independent energy producer, develops, owns, and operates renewable energy projects in South Africa. It undertakes projects related to heat and power, waste to energy, biomass, and bagasse. The company was incorporated in 2003 and is based in Bryanston, South Africa. BioTherm Energy Pty, Ltd. is a former subsidiary of WSP Group South Africa (Pty) Ltd.

Co-founder and CEO of BioTherm Energy (Pty), Charles Liebenberg, hails from a strong international finance background, with an equally impressive history of start-up energy project experience. He started in investment banking with Standard Bank Group in South Africa. “I started their project finance business then relocated to London and spent four years with them there. Then I left and joined Investec bank, which is also a South African bank listed in the U.K. and started an Energy Project Finance team for them too,” he recalls.

BioTherm was founded by Liebenberg in 2003. “Essentially the basis of the business was the C.D.M (Clean Development Mechanism) market on the one hand and the anticipated electricity deficiency in South Africa. I really thought that was going to hit the market and it did,” he says.

At that time, the Kyoto Protocol was about to be ratified by Russia and Liebenberg started the business a bit before that in anticipation that Kyoto would become effective. However, Lieben­berg’s predictions of electricity deficiency were just the beginning of BioTherm’s work towards capturing what he calls “intelligent energy.”

The South African energy market

On September 28, 2007, the South African Min­ister of Minerals and Energy, Buyelwa Sonjica, opened the BioTherm-developed, owned and operated PetroSA Biogas to Energy Project in PetroSA, Mossel Bay. That same year, the plant received the Construction World’s Best Projects prize for Best Public Private Partnership. But chal­lenges still lay on the road in this time of achieve­ment and recognition.

The concept under the C.D.M. was a very strong driver for the company, as it is in all of their projects, because the electricity tariffs in South Africa remained economically low.

At the time it was quite difficult. There was never a thought in most corporate minds that electricity could become a scarce commodity in South Africa. But BioTherm managed to over­come the challenges and reached commercial operation in October 2007 and they have been in operation for almost two years now and with a high degree of success.

It is Liebenberg’s keen eye for wasted energy potential which really set the ball rolling. “To cut a long story short we were told we could get access to the flared gas—a methane rich gas—which is really just a by product of the cleaning up pro­cess after the liquefaction of the natural gas at the PetroSA gas-to-liquids plant. We negotiated a commercial arrangement with them for how we might obtain the gas, then sell electricity back to them at their prevailing electricity tariffs.”

“Intelligent energy”

In October last year, BioTherm hit industry head­lines with an extraordinary investment agree­ment. “We raised US$150 million (1.5 billion ZAR) in investment from an American private equity fund called Denham Capital and they’re specialised in the resource and energy sector,” Liebenberg says.

“They committed to invest this money into BioTherm for our future progress. That changed the landscape of BioTherm quite significantly be­cause now I have a very well-capitalized business with access to equity. Being where we are with the prevailing global market conditions is very ad­vantageous because we’re currently in a market where having access to capital is quite a scarce commodity. After we built our project at PetroSA (which we will be operating for the next 15 years) we managed to become the lead developer on a number of projects. We have 85 megawatts cur­rently under development, of which two projects have received environmental approval and we hope to financially close four projects this year.”

BioTherm’s various projects in development may vary, but they are all in pursuit of capturing wasted process energy, and converting it into use­able energy. “More importantly for me, it’s intelli­gent energy. It is really capturing the waste which is significant in industry in South Africa because there are a lot of energy intensive users,” Lieben­berg explains.

He believes there is an incredible amount of wasted energy from processors and that’s the company’s niche market.

“We’re generally below the 100 mega watt threshold on a single project. There is massive potential for us and we are negotiating a couple of 100 mega watt projects in the cogeneration sector, in addition to the 85 mega watt project we have under development currently,” he continues.
 
BioTherm are set to work on a number of exciting projects. Liebenberg explains his in­volvement with two ferrochrome smelters. “The one which is in the public domain is a company called Hernic. They are the fourth largest ferro­chrome smelter in the world and of course have been affected by global recession as has every­one else but as was reported in the press re­cently they have started up their furnaces again. We’re doing a 25 megawatt project where we’re using the carbon monoxide, which has been flared since they built the furnaces and we’re putting that through a boiler, running a steam turbine out of the back of it and generating elec­tricity onsite,” Liebenberg reveals.

“We are not excluding conventional renewable energy from our portfolio in South Africa so wind and solar are technologies we may take interest in during the short to medium term. We think that in countries like South Africa, solar will make great sense in the not too distant future too.”

South African investment

Liebenberg’s understanding of the vast potential within South Africa coupled with the exemplary agreement between BioTherm and Denham Capital indicates a bright future for the regions’ industry.

“We’re very positive about the country. That’s why I started BioTherm and moved back from the U.K. We recognise the opportunities which will ex­ist and because of the wealth of resources which still remain here it is an energy intensive economy. That’s what we focus on—capturing wasted en­ergy—and that will continue for a very long time. Overall we’re very positive about South Africa and the environment we operate in,” he says.

Liebenberg recalls the stringent measures with which Denham investigated every nook and cranny of BioTherm prior to investment. “It was an extremely thorough process and I think that the commitment they made of $150 million is not insignificant in a business like ours. Clearly, they have a strong belief in the future of the country and the resource market here. As an objective en­dorsement we feel very positive about Denham’s attitude towards South Africa and the opportuni­ties that lie in the country and in this sector in particular,” he explains.

“South Africa is a very industrialized country. There is a lot of negative press from time to time about the various issues in the country. I can draw comparisons with Europe having lived there and South Africa is generally a very benign business environment with a lot of entrepreneurial spirit in the country with a very strong ‘can-do’ attitude.”

BioTherm investing in South Africa

On November 9, 2008, Denham Capital, a lead­ing energy-focused global private equity firm, announced that it will invest equity of up to R1.5 billion (US$ 150 million, £95 million) in Bio­Therm Energy.

Commenting on Denham Capital’s invest­ment, Buyelwa Sonjica, South Africa Minister of Minerals and Energy said, “Having opened BioTherm’s first plant just over a year ago, we are delighted with this substantial investment by Denham Capital, a major foreign investor, in a business that will generate more electricity in South Africa, contribute to the reduction of greenhouse gasses, and create more jobs in the South African economy.”

The opportunity for small scale, on site gen­eration in South Africa has grown significantly and BioTherm Energy has secured, and is continuing to develop, a substantial pipeline in waste gas co-generation, biomass and combined heat and power projects, many of which qualify for carbon credits under the Kyoto Protocol.

These projects can generate electricity much more rapidly than conventional large-scale power projects, thereby providing needed relief to the South African power system.

People power for BioTherm

The wealth of natural resources is not the only strength Liebenberg recognizes in South Africa. In both the country and BioTherm itself, he places great emphasis on the people. In fact, when you are a part of BioTherm, the business is your own.

“Everyone has ownership of our business. Every employee be it the cleaners or myself has ownership of the business so it’s a very entrepreneurial, very responsible organisation. We all have aligned objectives which is important for success. We’re improving the status quo with regards to emissions, energy waste and avoiding it” he says.

“That’s a key value because people really have to accept responsibility for what they do. It’s not an enormous company where there are 15 other people who can actually do your job. People have to put their hands up which they do all the time for the benefit of the entire company. We’re very unique in the utility-type of markets.”

This people power reaches right through the BioTherm ranks and along with their current capi­tal, bodes for a very bright future indeed.“We’re probably the biggest team in the country and we’re definitely the most experienced in the power sec­tor, well capitalized and I think few competitors really have that advantage.” Liebenberg explains.

And with all of these minds on the job, it is no surprise that despite Liebenberg’s agreement that “in South Africa in particular the enabling en­vironment is still not what it should be,” BioTherm is clear about how to tackle this. “Being in the monopolized regulatory environment has been very challenging for everyone. The real challenge now that the regulator comes to grips with the en­abling environment for private sector investment in the energy sector” he says.

On a positive note, BioTherm has a few pro­grams on the cogen and renewable side which have now been approved where Eskom under a single buyer model,will be buying the power. There are still issues which need to be ironed out, but it has progressed substantially in the last five years.

Liebenberg looks forward to the changing potential for investment in South African Indepen­dent Power Projects (I.P.P.). “I think that for the first time in 15 years there are real opportunities for I.P.P. developers to enter the country in the next three to five years.”

BioTherm continues their quest for “intelligent energy” with an eye for future development. “Our goal in the next five years is to have about 400 megawatts under construction and about half of that to be operational. That’s our five year goal because as you will appreciate, we are building infrastructure, and these projects do take a bit of time,” Liebenberg says.

With their proficient team of experts, unique investment agreements and forward-thinking goals held by each individual member, Bio­Therm’s quest for South African energy efficiency will produce.

www.biothermenergy.com

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