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tate plantation firm PT Perkebunan Nusantara (PTPN) X, in tandem with Japan’s New Energy and Industrial Technology Development Organization (NEDO), will begin construction of a bio-ethanol plant in Mojokerto, East Java, in May with a total investment of around US$25.5 million.

PTPN X president director Subiyono said his company would allocate some $9.5 million for the project, while NEDO would provide the remainder in form of a grant.

“We want to give added value to molasses, which so far we have not used,” he said after signing an implementation document with Japanese counterparts in Jakarta on
Thursday.

He said the price of molasses, a liquid by-product from the sugar manufacturing process, was presently valued at only around Rp 1,100 (12.8 US cents) per kilogram. After being processed into fuel grade bio-ethanol, the price could reach up to $1,000 per metric ton.

Subiyono added that the Gempolkrep mill in Mojokerto, which will provide the raw material, annually produced around 250,000 tons of molasses and sold it to other companies, such as mono-sodium glutamate producer Miwon and bio-ethanol maker Molindo Raya
Industrial.

“We have enough raw material supply. We will use about 100,000 tons of our total output and sell the rest,” he said.

Subiyono expected the construction of the plant to be completed in early 2012.

Bio-ethanol project manager Nur Iswanto said that NEDO, through three appointed Japanese companies — Tsukishima Kikai Co. Ltd., Sapporo Engineering Ltd. and Marubeni Corporation — would provide the main processing equipment, such as distillation towers and fermentation tanks, as well as technical assistance, while PTPN would be responsible for all civil works.

Subiyono said that the plant, set to commence commercial operations at the end of 2012, would be able to produce around 30 million liters of 99.5 percent fuel grade ethanol per year.

The ethanol, which can be blended with fuel or used as feedstock for downstream chemical industry to make, for example, acetic acid, would be sold both domestically and exported.

“If the government’s program of renewable energy works, we will sell it to Pertamina,” he said, adding that the negotiations with the state oil and gas firm were ongoing.