Bulgarian heating equipment producer Erato Holding is seeking a partner that will help it capitalize on the huge potential of biomass fuel in Bulgaria, the company’s executive director Krassimir Stanchev said.
Erato will be looking for a partner - a strategic one, a financial institution or a fund - to back up the development of its biomass business, Stanchev told SeeNews in a recent interview.
The group designs and produces biofuel-fired boilers, fireplaces and burners under a strategy based on wood biomass. Its activity is in line with Bulgarian government plans to raise the share of power generation from renewable sources to 11% of the country's total energy production by 2010, from around 8.0% now. The European Union, which Bulgaria joined in January this year, has targeted a 12% share of renewables in its total energy output by 2012.
Renewable energy sources include biomass, geothermal energy, solar photovoltaic, small hydropower, solar thermal units and wind farms.
“We have the feeling that there is potential, but actually there is no structured renewables market in Bulgaria,” Stanchev said. “At the moment we are the only company which successfully sells this kind of equipment for the mere reason that we secure the fuel.”
THE GROUP
Erato has 13 subsidiaries. In 1997 it started the production of electric and pyrolysis boilers. The production of pellet burners, pellet stoves and boilers started in 2004. However, to support the sales of biomass-fired boilers the group has had to supply the fuel to its customers. Initially it imported wood pellets and recently it has started manufacturing machines for the production of wood pellets and wood chips.
Erato has already set up two production lines for pellets, in the towns of Haskovo and Stara Zagora, both in southern Bulgaria.
“We plan to install another three lines over the next three years,” Stanchev said, adding that each production line costs around one million euro.
The group has two factories for wooden chips and plans to set up another three in the near future.
“There should be around 30 such facilities across the country,” Stanchev said. “This is an investment of around 3.0 million levs in the medium term.
Last year the group opened a 2.0 million lev ($1.46 million/1.0 million euro) plant for boilers, fireplaces and burners which use wood chips and wood pellets as fuel. It also has a woodworking factory, a transport firm, a large distribution network and a leasing unit.
Erato finances its investments from its own funds. Last year it issued a five-year 4.5 million euro bond to back its projects. The group has recently increased the registered capital of some of its units to secure fresh financing for its investments. Erato Holding raised its capital by 40% to 840,000 levs, woodworking factory ZMM Haskovo tripled its capital to 1.072 million levs and heating and air-conditioning equipment wholesaler Erato AD increased its capital by 70% to 2.72 million levs.
The capital increase is also aimed at strengthening Erato's bargaining power prior to possible entering into partnership negotiations.
“For the time being we don’t plan to raise funds via the capital market,” Stanchev said. He believes that going public will not help Erato achieve its strategic goal.
“Which means that we will inevitably seek financing from partners – financial institutions, funds, or strategic partners,” Stanchev said. “We have been working in this field for seven years now but without a partner we will not be able to implement our strategy on a larger scale.”
The group ended last year with a consolidated turnover of some 33 million levs and expects a 25% rise this year.
THE POTENTIAL
By the end of 2006 the combined capacity of all pyrolysis boilers installed by Erato in the country exceeded 430 MW, which almost is equivalent to the generation capacity of one of the closed reactors at the country’s sole nuclear plant Kozloduy, Stanchev said. Bulgaria closed down early a pair of 440-MW reactors at Kozloduy at the end of 2006 under pressure from the EU. The closure left the EU newcomer operating two reactors of 1,000 MW each, reducing its electricity exports to a trickle.
Bulgaria has potential to produce 6,000 ktoe (kilotonnes oil equivalent) of energy from renewable sources a year by 2015, which is more than half of its current annual domestic consumption. Of these, 2,300 ktoe are from water resources and biomass potential accounts for 2,700 ktoe, Stanchev said.
Bulgaria, however, has yet to draft concrete measures to back its own production of renewable energy, Stanchev said. The public sector - schools, hospitals, kindergartens - have the biggest potential for using biomass as fuel.
(1 euro = 1.95583 Bulgarian levs)
Choose your newsletter by Renewables Now. Join for free!
