Celanese Moves Forward Somewhat On Ethanol
Celanese and the White House have made announcements regarding ethanol capacity Celanese is planning to build in China using its new technology. I’ve written about this on the blog before. The latest news on the topic is a little baffling, hopefully I’m sorting all that out in this post.
Here’s an excerpt from Celanese’s announcement:
DALLAS, Texas; NANJING and ZHUHAI, China (January 19, 2011) – Celanese Corporation (NYSE: CE), a global technology and specialty materials company, today announced that its wholly owned subsidiary, Celanese Far East Limited, has signed letters of intent to construct and operate industrial ethanol production facilities in Nanjing, China, at the Nanjing Chemical Industrial Park and in Zhuhai, China, at the Gaolan Port Economic Zone.
Pending project approvals, Celanese could begin industrial ethanol production within the next 30 months with an initial nameplate capacity of 400,000 tons per year per plant with an initial investment of approximately USD$300 million per plant. The company is pursuing approval at two locations to ensure its ability to effectively grow with future demand.
Earlier, Celanese had been saying that it was planning to build one or two 400,000 plants for $300 million apiece. It then would then have the choice of doubling capacity at one plant at a cost of less than the original investment. Or, it could build both plants and then expand both of them.
It would seem from this release that it was moving forward with both of them. Not so. As the last sentence above alludes, with the interpretational help of a Celanese spokesman, one or two plants is still the plan. The MOU’s with the industrial parks still leaves open that possibility. In other words, Celanese can move forward at either Nanjing or Zhuhai or at both locations.
It turns out the Chinese projects are among those deals being highlighted to coincide with Chinese president Hu Jintao’s visit. Here’s an excerpt from the White House press release:
Celanese -- Wison Group Memorandum of Understanding for Ethanol Production: Celanese Far East Co., a subsidiary of Celanese Corporation headquartered in Dallas, Texas (Celanese), and Wison Group Holding Limited (Wison), will conclude a Memorandum of Understanding for the construction and operation of an industrial ethanol production facility in China. Wison plans to invest in a coal gasification unit based on clean coal technology to produce synthesis gas per Celanese specs, and Celanese plans to invest approximately $650 million in an Ethanol Complex using the output from Wison as feed stock, and Celanese proprietary technology, to produce ethanol for industrial use, and potentially for fuel ethanol. This transaction is valued at approximately $815 million, with $50-80 million in U.S. export content. Celanese estimates project implementation will support an estimated 200-250 U.S. jobs.
Huh? This doesn’t seem to square with the Celanese release. That is due to errors and omitted information. The Celanese spokesman cleared these up. He told me investors have also been confused.
Let’s start from the top and work our way down:
1) This is a memorandum of understanding with Wison. It is different than the letters of intent with the industrial park authorities. Incidentally, Wison supplies carbon monoxide to Celanese’s new acetic acid facility in Nanjing.
2) Wasn’t each plant supposed to be $300 million? Is this $650 million figure a number for both plants combined? No. According to the Celanese spokesman, the $650 million figure is the combined investment of BOTH Wison and Celanese. The White House misattributed the figures to Celanese.
3) Now where does $815 million come from if THAT number isn’t the combined Celanese/Wison investment? That number comes, in part, from something that isn’t directly connected to the Chinese deal at all. Celanese is building a smaller, 40,000-metric-ton ethanol plant in Clear Lake Texas. This $815 million encompasses is that plant plus the $650 million for the Wison/Celanese contributions to the Chinese facility.
This morning, Celanese put out another press release about the project. It talks about the MOU with Wison, but it doesn’t correct the White House’s numbers. The Celanese release even links to the still erroneous White House release.