Metro Pacific Investments Corp. (MPIC), the local unit of Hong Kong-based conglomerate First Pacific Co. Ltd., said yesterday that its memorandum of understanding with Basic Energy Corp. on the formation of a joint venture company that will engage in bioethanol production has been terminated.

“After an evaluation by MPIC of the biofuels project of BEC and BBC, a decision has been arrived to discontinue the consideration of a possible investment or participation in such biofuels project of BEC,” MPIC said in a disclosure to the Philippine Stock Exchange.

MPIC said it has served a formal notice terminating the MOU following the completion of the due diligence study on Basic Energy’s proposed ethanol projects in Zamboanga del Norte and South Bukidnon.

Basic Energy, through unit Basic Bioefuels Corp., owns and operates a P2.8-billion greenfield project in Zamboanga del Norte, consisting of a dedicated sugarcane farm and a fully integrated ethanol facility. The plant is expected to produce 200,000 liters of ethanol per day or around 41 to 50 million liters per year.

Had the deal pushed through, MPIC would have taken a controlling stake in the joint venture.

Basic Energy executive vice-president and treasurer Jose Reyes Jr., for his part, said while the company was disappointed over MPIC’s decision, they are still pursuing the project with a foreign “strategic operating and financial partner”.

Reyes said with the termination of the MOU with MPIC, Basic Energy can entertain other entities that have signified interest in the project. “ There have been a few which have expressed interest in the project and we’re hoping we could close a deal with any of these parties,” he said.

He said the foreign strategic partner may take in 40 percent of the joint venture project depending on the outcome of negotiations.
The rest of the project will be funded by debt and private placement, Reyes said.

The company’s entry into green energy is in anticipation of the huge demand for cleaner fuel as mandated by the Biofuels Act, which requires a five percent blending of bioethanol with gasoline by May 2009.

The push for cleaner energy is part of a global effort spearheaded by the European Commission which will raise the required share of biofuel in the continent’s fuel requirements to 10 percent in 2020 and 25 percent in 2030. The study estimated that Asia’s biofuels consumption could hit 100 billion liters by 2020, a market value of around $60 billion.

MPIC earlier said it planned to venture into bioethanol production as part of its strategy “to create long term value for its shareholders by actively and carefully considering opportunities in the vital sectors of the Philippine economy, which include mining and port operations.”

The company is engaged in real estate development through Landco, health care services through Makati Medical Center and Davao Doctors, and the water business through Maynilad Water Services Inc.

Source: http://www.philstar.com/business/398552/metro-pacific-terminates-mou-basic-energy