Ethiopian Review

ADDIS ABABA, ETHIOPIA — Global Energy Ethiopia Plc. (GEE), a bio-energy company, has exported the first installment of raw castor and jatropha seeds, claiming that it had not been able to process them into crude oil due to the denial of a 75 million Birr loan from the Development Bank of Ethiopia (DBE).

GEE, a subsidiary of a US company (Global Energy Pacific Ltd) based in Nevada was established with a registered capital of 222 million Birr (US$22 million). It started production on more than 30,000hct of land, leased in Wolaita Soddo in the Southern Nations Nationalities and Peoples Regional State (SNNPR). It has also built a factory building at the site which is now serving as an additional warehouse.

The company was unable to procure any of the machinery it needed for the factory because of the DBE’s denial of the credit the company had anticipated, GEE Operation Officer, Yair Oren told Fortune.

Its first export last week was destined to China, where it sent 82Qtls, less than three per cent of the 3,000Qtls of the two seeds which it says it has in stock. It expects that the export of the rest of the stock will follow soon.

The company’s original plan was to produce 40,000tn of crude oil annually from the two seeds if it had got the loan from the DBE according to Yair. He feels that had the company received the loan, they could have built the factory.

“We were to do the processing of the crude oil here”, he told Fortune.

The company collected the seeds from its own farm as well as from local farmers.

GEE is paying the farmers one Birr for a kilogram of seeds. This seems too high a price compared to international prices. India, which is expecting to harvest nearly 1.1 million tonnes of castor seeds, has a futures price of 56.3 dollars for a ton of castor oil for October 20, 2009. This comes down to slightly over 0.70Br per kilo gram conveyed the GEE Operation Officer.

The company has an agreement with 2,500 farmers in Wolaita Sodo so the farmers could deploy up to one third of their farmland to grow castor plants he said. The agreement requires that the farmers have to grow the plants according to the specifications of the company.

The farmers will also be able to grow only peanuts, haricot beans, and onions on the land they have allocated for the company. The company’s obligations include supporting the farmers by providing them with inputs, which have not been specified in the contract, and professional assistance. The seeds that have adhered to this agreement have been sold to the company at one Birr per kilogram indicated Yair.

An environment group, the Forum for Environment, had raised concern on GEE’s farm, calling a conference months ago to sensitize the issue.

Only marginal land was to be used for bio-fuel crop production. It complained that the land given to GEE was where farmers produced sorghum and maize stated the Forum citing government strategy.

While the environmental group’s attempted protest did not bear fruit, the development Bank of Ethiopia chose to withhold credit to this company for a different reason. Melese Maruta, principal officer of Projects Appraisal Sub-Process for DBE, told Fortune that DBE retracted the credit it was to offer to GEE because of the crop’s dependence on rainfall, which may lead to compromise the servicing of the granted debt.

“Having failed to obtain the loan from DBE, the company was unable to assemble its own factory and as such could not process the crude oil locally as it had originally planned,” explained Yair. (Addis Fortune)