38 Bioenergy International No 79, 3-2015 Last year two Swedish companies, Neova and Lantmännen Agroenergi, announced a merger of their respective pellet manufacturing businesses to form Agroenergi Neova Pel- MFUT*O+VOFUIF4XFEJTI$PNQFUJUJPO"VUIPSJUZHBWF the green light for the joint-venture allowing it to retain all pellet plants, eight in Sweden and one in Latvia. WITH AN ESTIMATED TURNOVER OF AROUND SEK 1 billion and an annual production volume of around 640 000 tonnes, Agroenergi Neova Pellets is suddenly poised as one of the largest pellet producers in Scandinavian. – The market for solid biofuels is growing and the merger provides us with a stronger platform to further develop our products and services while improving profitability. We expect to reach 20 percent of the Swedish market, with strong positions in all applications, said Henrik Arfwidsson, Marketing Agroenergi Neova Pellets revealing that the new company will eventually change its name. The company has a plant in Latvia and Arfwidsson admits considering expansion in the region. – Right now, we’ll look at the Baltic Sea area. For logistical reasons, the mills need to be close to the raw material, otherwise it isn’t profitable. But we are also trying to find new transport solutions, such as railways, in order to expand, he said. – Due to distance and higher transportation costs it is less profitable to export Swedish pellets. Instead this production stays mostly on the Swedish market whereas our Latvian plant supplies a small but growing Latvian market, and our overseas clients, said Arfwidsson. The new company would certainly have a strong position in all market segments, but it is mainly the light industrial and commercial sectors that are targeted. In particular, any space heating or process heat where fuel oil is currently used including district heating peak load plants. – Many manufacturing and processing industries, in Sweden and elsewhere, are switching to using renewables for process and space heating. It is the major growth sector and is where we will invest, revealed Arfwidsson. Unlike Italy the pellet stove market in Sweden has not been a success. Arfwidsson is hopeful suggesting that more and better marketing of the stoves, as either an alternative or complementary to heat pumps, is needed. Falling demand and consumer prices is a challenge for Scandinavian producers. Arfwidsson highlights a lack of flexibility as a major problem. – There is a gap in the pellet supply chain. Pellet demand is weather dependent and means that customers do not always need all the fuel that they ordered from us. Many treat the contracts as “soft”, reneging on the agreement to purchase a certain amount. However the contracts that we producers sign with raw material suppliers are “hard”, which means that we have to run production though the demand does not justify it. This leads to large volumes of pellets going into inventory with capital tied up. To free up storage space and generate cash flow prices are cut, margins are weakened while instability is created in the market, Arfwidsson explained. Text: Rebecka Ramstedt BI79/4830/AS Maintenance New contract types needed to stabilise pellet market Photo: Alan Sherrard
Bioenergy no 3 May 2015
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