Argent Energy turning chip fat into gold
The Sunday Herald
Business section, p. 7
13 March 2005
A Lanarkshire-based bio-fuel company is set to add to the biggest operation of its kind with another two plants. Valerie Darroch reports
A plastic bottle of golden liquid takes pride of place on the desk of Hamish Curran, chief operating officer of Argent Energy, the company behind the creation of the UK's first large-scale biodiesel plant.
As he opens the bottle, it unleashes a surprisingly pleasant scent -- the result of a highly confidential and revolutionary industrial process which turns used cooking oil into a environmentally friendly fuel you can run your car on.
Last week, Curran oversaw the commissioning of the £15 million plant at Newarthill, near Motherwell. It is the largest of its kind in the world and a landmark achievement for Scotland.
Argent, which has its headquarters at Newbridge in Midlothian, received £1.2m from the Scottish Executive in Regional Selective Assistance and additional European Union funding. It is a pioneer in one of the youngest parts of the renewable energy industry. It is also the only company in the UK to focus on turning used cooking oil and tallow (animal fat)
Biodiesel production has been around for more than a decade in Europe and the United States, but on a relatively small scale. Most commercial-scale plants use virgin oils such as soybean or rapeseed oils as their raw material.
A number of policy drivers have sparked fresh interest in biodiesel production, notably a target set by the EU for biofuel to account for 2% of all fuel sales in 2005, rising to 5.75% by 2010.
If the EU is to meet its 2010 target, it will require 18 million tonnes of biodiesel to be produced each year -- vastly exceeding the current total EU capacity of three million tonnes and requiring manufacturing capacity to increase sixfold.
The UK is keen to be at the forefront of the push for cleaner renewable forms of transport fuel and wants to see biofuels account for 0.3% of all road fuel sales by 2005. But, so far, Britain is lagging this target by a significant margin.
In the UK, biodiesel attracts a 20p per litre discount from the normal fuel duty rate of 48.5p. Curran argues that tax concessions are a powerful way to stimulate the industry and adds that in Germany, the biggest consumer of biodiesel in Europe, it is a duty-free fuel.
A growing number of players plan to enter the market and a handful of biodiesel plants are planned in the UK. These include a 250,000 tonne plant to be built at Teesside by Biofuels, a listed company which plans to make biodiesel from virgin oils.
Argent is different in several respects, says managing director Doug Ward. It is the only firm in the UK to employ the latest technology developed in the city of Graz in Austria by local firm BDI in collaboration with two universities, all of which are world leaders in biofuels.
The Scottish plant's annual output of 50 million litres will be double that of the next largest plant, which is in Austria. Ward adds that it doesn't stop there. "We're committed to building another two plants," he says.
"We got such good co-operation and support at national and local level. The Scottish Executive has taken a very forward-thinking approach to biodiesel," he adds.
The Executive supported the venture as part of its strategy to position Scotland at the forefront of the green economy.
The plant only employs 16 staff, but they are highly skilled and all recruited locally.
Argent Energy is part of London-based Argent Group, which is backed by venture capital group Cinven and has debt finance from Bank of Scotland. The parent group, 60% owned by Cinven, had a turnover of £230m last year.
Argent was formed in 1997 following a management buyout from Hillsdown Holdings, a diversified food group led by Andy Hunter and David Gray. The buyout pulled together seven separate businesses, including several meat rendering operations.
Argent Energy is seeking a finance director ahead of plans to float the company this year, providing an exit route for venture capital backers Cinven, and allowing Argent to raise expansion funds.
Argent has an intriguing top rung of management. Ward was a former Hillsdown executive; Curran is a chemical engineer with oil industry experience and a former managing director of green energy company Wavegen; and vice chairman Jim Walker is also chairman of Quality Meat Scotland and ex-president of the National Farmers' Union.
There is a compelling logic behind the formation of this trinity. The emergence of the technology to turn used cooking oil and tallow into biofuel solves an environ mental problem not just for farmers and the meat industry, but also for caterers, hoteliers, and fish and chip shops.
Used cooking oil and tallow formerly went into animal feeds but following health crises caused by BSE, this is no longer allowed. This means that where farmers and caterers used to make money from selling these waste products, they are now faced with a significant cost in getting rid of them.
Walker provides a well-connected link with the farming and meat processing sectors, Curran brings green energy expertise and Ward experience of running manufacturing sites for a major corporate.
Ward says: "We're the only ones to have created a commercial standalone plant which applies the highest standards of commercial corporate rigour."
About 100,000 tonnes of used cooking oil and 230,000 tonnes of tallow are collected in the UK each year. Currently it either has to be incinerated, put in landfill sites or exported.
Argent provides an environmentally friendly alternative and its cost structure gives it the edge over rivals using virgin oils. Walker says rapeseed oil can cost up to £373 per tonne to buy, compared to used cooking oil at just £175. In fact, now that the market for used oil cooking as animal feed no longer exists, Argent can actually charge for taking it off people's hands.
In terms of tallow, Curran says the plant is conveniently located next door to a meat rendering plant owned by Argent Group. "We have a totally integrated production process," he says.
The plant has six gleaming stainless steel storage tanks where the raw material is stored before being processed into biodiesel. It takes just three days to turn abattoir waste into high-quality biodiesel which can be used in any diesel vehicle. Normally the blend is 5% biodiesel to 95% mineral diesel.
Biodiesel is not yet available at every UK forecourt, but its use by key diesel consumers such as haulage fleets is growing, as is its acceptance by motor manufacturers and fuel retailers.
In the US, carmaker Chrysler now fills the tank of every new Liberty Jeep with biodiesel and in the UK Tesco has opted to put more biodiesel pumps on its forecourts.
It is a business still in its infancy, but Curran and his team are convinced that Argent is positioned to be a lead player.
ARDENT BIODIESEL FACTS
ARDENT Energy has created the world's largest plant specialising in producing biodiesel from used cooking oil and animal fat in Scotland.
Based in Lanarkshire, the £15 million plant went into production for the first time last week and can provide nearly 5% of Scotland's diesel needs. Biodiesel demand is forecast to rise as the EU wants biofuel to account for 2%of all fuel sales in 2005, rising to 5.75% in 2010.
Biodiesel is a fuel which can be produced from vegetable oils such as soybean or rapeseed, or from used cooking oil and tallow. It is usually blended with mineral diesel for use as a transport fuel.
Biodiesel is already widely used by major transport fleets in the US, such as the military and postal services, and in several EU countries, notably Germany and France. It is already available at 100 UK filling stations.