Walfredo Linhares is Chief Executive of Bioenergy, a subsidiary of Colombia’s national oil company Ecopetrol focused on the production of ethanol as an additive for gasoline and power co-generation. Walfredo is a Brazilian and was previously President of Solazyme Bunge in Brazil, a joint venture between Nasdaq-listed biotech firm Solazyme and New York Stock Exchange listed global agribusiness Bunge focused on renewable oils. Walfredo led that JV’s facility in São Paulo, home to the largest aerobic fermentation vessels in the world, before joining Bioenergy in 2017.
HC: First, can you tell us a bit more about Bioenergy and what it does?
WL: Bioenergy is the first agribusiness company in the Orinoquía region of Colombia, producing ethanol and energy from sugar cane. The company was founded in 2005 and has since developed the largest plant for ethanol fuel in the country, including the fully mechanised planting of 20,000 hectares of sugar cane and the construction of a fuel ethanol plant with a production capacity of 510,000 litres per day.
The company uses the very latest advances in biologic control, including addressing pest control affecting cane crops using wasps developed at the company’s biological control factory.
Once the cane is mature, it is mechanically harvested and transported to the plant, where it is transformed into ethanol and dispatched to customers across Colombia. Bioenergy is extremely environmentally-friendly because the company reuses water, recycles its waste and produces, from the sugar cane residue bagasse, energy for its own consumption, while exporting equivalent of three quarters of its production to the national grid.
HC: What is your role at Bioenergy? You joined the business nearly three years ago – what have been your biggest highs and lows since then?
WL: I joined Bioenergy three years ago as CEO/President and since then I have been focused on establishing and stabilising the company’s agricultural and manufacturing operations. Bioenergy is located in the eastern Colombian plains, an agricultural frontier, and a territory that has historically been dedicated to cattle. So, the company has made great efforts to recover and adapt the land for development and the testing of sugar cane varieties, to validate what behaves better in the region.
Colombia has a great deal of land available to agriculture, from the Andes to the rainforest, that has never been exploited, and the country is trying to increase its production. Bioenergy is part of that goal and part of the effort to support peace to the region after many years of conflicts.
We play an important role in the rural communities, employing local people, and we also work with the sector to promote the improvement in national market conditions that have been directly impacted by competition from ethanol imports from the United States.
HC: What are your strategic priorities for the business going forward? Where do you see opportunities and challenges?
WL: At the moment, Bioenergy’s focus is the stabilisation of its operation to reach its installed capacity of producing 100 million litres of ethanol and 35MW per year. To achieve that, the priority is to increase sugar cane production by using the best agricultural technology available, including digital and artificial intelligence. We also need to attract new suppliers and increase industrial efficiency, all of which is only possible through the continuous intensive training of local human talent.
There is a challenge in the shape of regulation, regarding the approval of mechanisms to impose countervailing duties on imports of subsidised US ethanol to ensure the competitiveness of domestic ethanol for customers. In January last year, Colombia’s Ministry of Commerce, Industry and Tourism began an investigation that resulted in a four-month countervailing duty of 9.36% on US ethanol, but that decision was a temporary one and we are awaiting approval of those duties long term.
HC: How do ethanol and other biofuels fit into Colombia’s long-term strategy for energy transition? What is the political backdrop?
WL: The Colombian government has put biofuels high on the agenda and energy transition is an important commitment in line with the improvement of air quality and health in the country, as well as the mitigation of climate change. There is a legal framework that promotes the rational and efficient use of energy and the introduction of the biofuels programme. Even so, the Colombian economy faces challenges in integrating non-conventional sources of renewable energy into the energy matrix.
The current government is leading a mission for energy and the modernisation of the electricity sector in the country, working with a panel of 20 national and international experts who will build the roadmap for the country’s future energy plans. The focus will be on efficient, reliable and sustainable energy for all Colombians.
The development of non-conventional renewable energy is one of the main challenges for the government, which has set an ambitious goal to increase those from 0.5% of total generation to almost 10% within 10 years.
HC: What opportunities do you currently see for foreign investors looking at Colombia’s energy and commodities markets?
WL: The Colombian economy is likely to maintain its steady growth of 2.5% to 3% annually achieved over the last 10 years, and is in fact predicted to reach 3.4% growth in 2020, despite the negative international context. There is a huge appetite for foreign direct investment, which is expected to grow by around 30% this year according to experts, after decades during which multinational companies kept away from the country.
Colombia offers attractive tax incentives and return on investment, and there are many successful high-growth family businesses that at some point will prove attractive to international buyers.
Also, Colombia ranks number 11 on Climatescope’s list of the emerging markets that are most attractive for clean energy investment, with that publication noting that most investment in non-hydro renewable energy so far has come from international development banks. From 2010 to 2018, Colombia attracted $1 billion in clean energy investment, while in 2018 there was a substantial increase in solar investment, which hit $200 million that year – the most recent covered by the report. Colombia is now working on concrete initiatives to guarantee a real change in its use of renewable energy generation resources.
HC: How do you see the market for biofuels developing in Latin America more generally?
WL: Biofuels is a consolidating sector. Considering climate change, bioethanol is one of the few ready-to-use economically scalable alternatives available today as part of the complex matrix to bridge to a carbon-free economy. Particularly in Colombia, significant investments have been made to respond to the internal demand for bioethanol, allowing the country to achieve a 10% blend from March 2018.
Colombia has seven bioethanol producing plants, which have brought development along the sugar cane agribusiness chain. Investments in these distilleries amount to more than US$1.5 billion, making available a production capacity of 700 million litres of bioethanol annually and generating more than 250,000 direct and indirect jobs.
Although the increase of the bioethanol blend has been slow, it is expected that in the medium term it can gradually increase until it reaches the limit established by law of 20%. Nevertheless, there are challenges that remain for the industry, particularly in relation to regulation and logistics.