Guatemala - 2009 - Agro and cogeneration - Pantaleon

Producing renewable energy from mills sugar in Guatemala

 

Start project : 2009
Financing : US$ 14 M senior loan
Partner : Pantaleon Sugar / BioEtanol SA
 
Context
 
As one of the country’s main exports, sugar is a sector of vital importance to the Guatemalan economy. On top of its weight in terms of employment, it significantly contributes to the balance of payments and public revenues. Also, during the crop season, a significant part of the country’s electricity needs are met thanks to renewable electricity produced by sugar mills through cogeneration.
Founded over 100 years ago by the Herrera family, Pantaleón is an agro-industrial company dedicated to the processing of sugar cane for the production of sugar, ethanol, and electricity. Currently, Pantaleón is the largest sugar producer in Central America, and is positioned among the top sugar producing groups in Latin America.
 
Project objectives
 
PROPARCO’s financing aims at supporting the development and diversification of a key player in the Guatemalan sugar industry, which not only provides staple foods to local markets (sugar), but also successfully enhance the value of its products by producing renewable energy from bagasse (electricity) and molasses (ethanol).
Pantaleón is also exemplary in terms of corporate social responsibility and created in 1993 the Fundación Pantaleón, financed via a contribution per metric ton of sugar produced by its sugar mills, which supports education and health projects.
 
Project description
 
In collaboration with the IFC (Mandated Lead Arranger), the Inter-American Investment Corporation (IIC) and two other European Development Institutions (DEG and FMO), PROPARCO financed part of Pantaleón‘s US$ 130 million investment program for 2008-2010, which aims at:
·         expanding the company’s sugar production in Guatemala;
·         expanding ethanol production capacity in Guatemala and building an ethanol distillery in Nicaragua;
·         expanding electricity co-generation capacity in Guatemala.
 
This program will allow to the company to reduce its cash cost of production through economies of scale and increasing productivity. It will also further improve its profitability and develop a significant source of revenue not correlated to sugar prices.
 
Impacts
 
The mandate of PROPARCO in South America is to support a green and inclusive growth.
The Pantaleón project perfectly fits within this strategy:
·       it supports a key sector for Guatemala in terms of employment and public revenues;
·       the use of molasses to produce ethanol, and of bagasse to generate electricity will significantly contribute to climate change mitigation. Reduction of CO2 emissions are estimated to 372 000 tons/year .
 
The project is also expected to have a significant impact on local communities as it will help maintaining employment levels in areas highly dependent on cane-growing and milling for income, and will increase volume of cane purchased from independent growers of cane.
 

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