ITOCHU and JGC launch large-scale bio-ethanol production and power plant businesses in the Philippines

April 8, 2010

ITOCHU Corporation (headquartered in Tokyo; President & CEO: Masahiro Okafuji) and JGC Corporation (headquartered in Yokohama; President & CEO: Keisuke Takeuchi), a leading Japanese engineering company, jointly announced today that they have agreed to participate in large-scale bio-ethanol production and power supply businesses in the Philippines together with other local partners.

The newly formed joint venture, GREEN FUTURE INNOVATIONS, Inc. (“GFII”), will become a new operating company for the business. GFII will produce and sale ethanol produced from sugarcane feedstock (54,000kl/year), and also sale electricity generated by a power plant (maximum of 19 MW) fueled by sugarcane residuals (bagasse). The business location is in Province of Isabela, about 400km north from Metro Manila, the capital city of the Philippines. Starting of the ethanol production and electricity supply will be slated in February 2012.

In the Philippines, a new law, the Bio-fuel Act, enacted in February 2009 requires that gasoline produced for automobile fuel contain a minimum 5% ethanol by volume, today, and 10% starting in 2011. Regarding the bio-ethanol used, the law mandates that locally-produced bio-ethanol be favored over imported bio-ethanol. However, the locally-produced volume falls far short of demand.

ITOCHU and JGC began preparing a basic scheme for a bio-ethanol business in the country a few years ago. Studies were conducted on the details of the business, including securing agricultural fields for growing sugarcane (area: 11,000 hectares) with a plan for harvesting, constructing ethanol production plant facilities, financing, and finding buyers. The final decision to invest in the business was made with the launch of GFII.

The project will create the country’s largest ethanol production facility. Meanwhile, the government intends to enact a new law during 2010 concerned with renewable energy–fueled power generation. Under the law, an incentive program will be created which provides favorable treatment for the supply of electricity generated by renewable energy resources. As bagasse-fueled electricity production is regarded as renewable energy, a power generation plant will be built in the ethanol production plant complex and excess electricity will be sold to outside users.

The cultivation of sugarcane used for the business is expected to create about 3,000 continual local jobs. Moreover, bagasse-fueled power generation is expected to reduce the environmental impact, while helping to alleviate electricity shortages.