ERB Energias: Huge Potential in the Biomass to Energy Business in Brazil

Interview with Emilio Rietmann, President of ERB (Energias Renováveis do Brasil)

Could you please give us an overview of the biomass sector in Brazil?

Biomass to energy is our business. Brazil has a huge potential for these developments and there are basically two main issues. First of all, the cost of fossil fuels is much higher than the US, for instance, and other regions; therefore, there is an opportunity to develop biomass as a source of energy. Also, Brazil has a very good capability of producing biomass at a low cost.

Let’s look at two examples. For instance, if you look at sugar cane, we are probably the most productive and low-cost sugar cane producer in the world. As well, we have eucalyptus; both can be sources of energy for biomass. We are also very good at producing it. We can produce high yields at a very low cost. This means that on one side you have very high-priced fossil fuels and on the other side you have very good yields and costs of producing biomass. That gives us the possibility of replacing fossil fuels for biomass in many energy proposals. This is the aim of this company. We are much less focused on biofuels, as is the case of the sugar cane business in Brazil, but we are much more focused on power and heat solutions from biomass.

Could you please tell us about ERB’s history and the areas you are involved in?

ERB was founded five years ago. Paulo Vasconcellos and I founded the company and today we are the two main executives of the company. It was really a challenge because it was a mess in 2008 but we were able to progress and I think today the company is one of the most important in its area of expertise. We have a pipeline of investment worth about 600 million dollars which is quite a huge amount considering that five years ago we had just two or three people working in the company.

The main success of ERB is we focus on supplying good solutions for customers, basically industrial customers who need steam and power. Our proposal is to generate steam and power from biomass which means that we are talking about renewable energy replacing fossil fuels, such as natural gas or oil depending on what the customer is using. Two main issues for the company are the fact that we are not dependent on any kind of subsidy or help which means our economics are very good for us and the customers, and as well, we have an integrated model. This means we can take care of things from the plantation, crop care and harvesting, until the industrial facility, the investments and the operation of the industrial facility. We can give a complete turn-key solution to our customers.

Because we need to add value to our business, we are also focused on the chemical and petrochemical sectors which are very demanding in terms of standards, safety operations, and all those issues. It means that we really have very skilled people who can take care of those solutions. Our main customers today are Dow Chemical, which everybody knows, and Mitsui – we have a good business relationship with them.

How many employees do you have in your company?

This is very interesting. Today in ERB, we have about 100 employees. More than half of those people have at least a university degree and three of them have a PhD in their areas of expertise. It’s very remarkable in this sense. The company has this concern about having skilled people. Being a very young startup company, you are very dependent on your skilled people so we invested a lot into having very experienced and capable people to deal with our customers and our operation.

What are the challenges facing ERB?

I believe the main challenge is to continue growing. Our shareholders and our investors expect us to continue to grow the company. I think today in one way it is easier because we are now becoming an operational company. Two of our projects started producing revenue in 2013 so it gives us the possibility of showing the people that we are a real solution with good performance. That can make the challenge easier.

Then you have the fact that you have to again convince new customers that we are a good solution. Growing in the country will be a challenge. We hope that we can grow in the country. We are also trying to start discussing taking our business overseas. It is very remarkable that we can identify markets outside of Brazil where the conditions and the situations can give us the possibility of making the same investment and replacing fossil fuels with biomass. That is our main aim.

How did you start this type of company from scratch?

It took two years of work to convince Dow to give us the possibility of supplying steam for one facility. Can you imagine this is a petrochemical facility and if we stop the supply of steam, it makes a mess in the factory and creates huge complications for them? As a result, it was a big discussion with the technological center of Dow in Houston. I think it took more than seven months to convince people that we would be able to generate steam.

The other question was to convince them that we are also able to produce the fuel. Remember that I said that we are integrated so we take care of our fuel and our industrial operation. This means that the company must be very strong in both those skills to guarantee to customers that we are able to supply a solution. At Dow, it was remarkable in the sense that they are also in the agro business; they have Dow Agro Science which is a very important component of inputs for our agricultural area. They also validated our forest model to Dow to say that yes, we would be able to produce the wood that we said we could and also to validate what we said at the technological center in Houston.

Since we have developed this project and we have this successful business to show others, it makes things easier for developing new business and new customers. I think basically that the history was that to convince Dow was very important. That is why we have a very strong relationship with that company because we care a lot about them and they are a part of the company, in a way.

What is your outlook of the biomass sector for 2014 and onward?

Brazil is somehow tricky and strange; we like to challenge the limits. Ethanol is facing a very bad period right now; the price of ethanol in Brazil is very, very low and this is complicating the sector. I firmly believe that we are on the bottom of the problem. We hope that from now on things will improve greatly in the ethanol sector.

In our area of work, we can see a good outlook in two ways. First of all, as ERB is developing and new projects are starting operation, it means that it’s easier for us to convince customers that we can develop new projects. Also, the price of power in Brazil has improved from last year until now. In 2013, we reached the bottom of the prices and now prices are rising a little bit. I am hoping that with these better prices we can make better investments and progress compared to previous years. We are very confident that business is developing in a good way for us for the coming years.

What is your vision for the future of ERB?

We strongly believe in what we are doing and we love what we are doing. First of all, I think we are really working to make a better world and to leave a better world for our descendants. At the same time, we are making money so it makes it very good and very funny. It’s funny with the work here; we love what we do and we believe that we can multiply this in Brazil and in other areas. It’s quite complicated, for instance, to talk about biomass energy in Europe where you have a very limited area where you have to compete against food.

A lot of issues can be raised about this business. But here in Brazil, we are occupying marginal areas that are basically very poor where you cannot produce food, so the only other alternative they have is to raise cattle. It is also very complicated in Brazil. So in Brazil and some areas in the world, it can be a very good alternative to generate power or energy from biomass, in the modern sense, using the technologies that we are using.

We believe that we can develop this business in other parts of the world. Because of that, we are really interested in developing it more and more. Also, new technologies are coming and those new technologies will be a new breakthrough in this business. Today people are talking about jet fuel from biomass and chemicals from biomass. The main issue in all of these processes is to master the process of producing a biomass in a very low-cost and effective manner. We are very good at that; that is our main advantage and it will enable us to reproduce our model in other parts of the world and also try to add new business to our current business, mainly in chemicals and biofuels.

What is your message to international investors?

Invest in ERB. It’s a good business and you can do a good thing at the same time. We are growing very quickly and we have a very strong and reliable business plan. We can also replicate this business overseas and we are looking for those opportunities. Continue reading…

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