Local company considers new plant for China deal Leader-Post January 29, 2011 Regina-based Clean Power Concepts announced Friday the signing of a memorandum of understanding (MOU) with a Chinese company to study the feasibility of building a 600,000-tonne per year canola crushing plant in Western Canada.
The agreement was signed in China on Jan. 15 with Chongqing Grain Group Co. Ltd., a stated-owned enterprise in the municipality of Chongqing in southwestern China. Chongqing Grain Group has 21,500 employees, 51 subsidiary companies and $925 million US in assets.
Mike Shenher, CEO of Clean Power, who signed the deal with Chongqing, said China's capacity to produce rapeseed has been diminished by poor growing conditions and rural depopulation.
"The (rapeseed) crop has been reduced almost in half from 20 million metric tons per year to 10 million metric tons per year. So we think there's a real opportunity to supply both canola oil (to China) and do a joint venture project here.''
Last month, Clean Power signed a letter of intent to supply Chongqing Grain Group with crude canola oil valued at $400 million US over 10 years. The agreement calls for Chongqing Grain Group to purchase 3,000 tonnes per month of crude canola oil from Clean Power.
Shenher said the supply agreement could take effect immediately, while the proposed canola crushing plant will take several years to complete.
"This is a two or three-year process to build this (proposed plant),'' Shenher said.
In the meantime, Clean Power will source canola oil from its Regina plant and other plants in North America and elsewhere to supply the contract with Chongqing Grain Group.
Shenher said Clean Power and its operating company General Bio Energy (formerly Canadian Green Fuels) had proposed building a canola crushing plant in McLean, east of Regina, several years ago.
That project ran aground when the compay's financing "vaporized" after financial criis of 2008, Shenher said.
But the same project, located in McLean or some other location in Western Canada, could be resurrected for the Chinese company.
"McLean's definitely on our list, but we couldn't come to terms with them last time, so there's no guarantee that we would build there this time."
And while are some similarities between the proposed McLean plant and the new project, there are some differences as well, he added.
"This would process 1,500 to 1,700 metric tons per day. That's just an estimate. And this is food oil, it's not for biodiesel feedstock."
Shenher said the proposed McLean project was projected to cost $50 million to $60 million, while the new plant could cost $70 million to $90 million, he said.
"I know this sounds like a lot for a relatively small company, like ours. But we've been planning on this for a long time.''
Chongqing would put up most of the money for the project and would be the majority shareholder, while Clean Power would operate the plant, he added. "We haven't worked out the definitive ownership structure, but we will be the only two partners.''
Shenher said the company has 60 days to reach a final agreement with Chongqing Grain Group.
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