Sweetman scores 20-year biomass supply deal with Japanese customer
Sweetman Renewables has underscored how lucrative the biomass sector is with the signing of a binding 20-year supply agreement with a leading Japanese conglomerate.
Sweetman, which is planning an ASX listing later this year, will export 60,000 tonnes of green woodchip (biomass) per annum to a power plant near Kitakyushu, Japan, generating about US$4.5m in recurring revenue each year.
Biomass sourced from wood waste is seen as a form of baseload renewable energy that provides a viable alternative to coal and is an industry that was already worth US$50bn in 2020.
Garry Millar, a director of the company’s subsidiary Sweetman Biomass, noted that the groundbreaking deal highlights the company’s potential to be a long-term provider of alternative fuels.
“SBM expects to sign up many more coal to biomass conversion projects, particularly in Japan, within the next few years. This is the first of many to come,” he added.
“The Japanese market is switching away from nuclear and coal very quickly. Over the next five years, there will be a huge push for alternative energy sources such as biomass and hydrogen. SBM sits at the intersection of that energy conversion.”
Securing the binding agreement is also a vote of confidence as Japanese companies typically forward sell their power and demand certainty over stock and price.
With the push away from fossil fuels, sustainably sourced biomass has emerged as one of several options that promise to reduce fossil fuel emissions.
This is highlighted by the company’s Japanese customer noting that its planned 15 megawatt biomass power station near Nagasaki will be one of many that it intends to build.
“Decentralising power production into regional prefectures is part of our national energy strategy to make our power grid more resilient and less reliant on nuclear or coal as a fuel source,” a spokesman for the power company added.
Earlier this year, Japan’s Ministry of Economy, Trade and Industry approved nearly eight gigawatts of woody biomass capacity under the country’s renewable energy Feed-In Tariff scheme.
While not all projects are expected to make it into production, Biomass Magazine noted that about half are already under construction or financed.
Biomass may also be used to extend the life of low-efficiency coal plants that would otherwise be phased out by 2030 by increasing their apparent efficiency.
“The global push is on in earnest to convert away from using traditional fossil fuels to using alternative sources of fuel and Sweetman Biomass is perfectly placed to capitalise on this growing trend,” Millar noted.
“We have an abundant fuel stock locked in and the distribution capability to deliver this biomass-for-fuel into the Asia Pacific market.”
This article was developed in collaboration with Sweetman Biomass, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.