Gay & Robinson hopes to turn its trash into treasure with a couple of brand new ethanol facilities
In June, when Gov. Linda Lingle signed Bill SB3207, establishing a tax credit for the construction of ethanol production facilities in Hawaii, Alan Kennett let out a huge sigh of relief. Kennett, president of Kauai's lone sugar plantation, Gay & Robinson Inc., had been anxiously awaiting the governor's ratification so that the company could move forward with its plan to build an ethanol production facility on the west side of Kauai.
"Under the new act, the first 40 million gallons of ethanol produced will qualify for the tax credits, and each individual producer qualifies for a maximum of 15 million gallons," says Kennett, which explains his eagerness to get moving on the buildout.
But it doesn't explain his reasoning. Worldwide, more than 60 percent of all ethanol (an alcohol-based alternative fuel made by fermenting and distilling starch crops) is produced using sugar cane as feedstock. That, combined with mounting pressures from state and federal governments for utility companies to use alternative, renewable energy resources, positioned Gay & Robinson, one of two remaining sugar operations in Hawaii, as an early front-runner in the race to supply Hawaii's ethanol needs.
"Ethanol's been getting a lot of national attention as a fuel that can lessen our dependence on imported oils. And locally, the state's got these new, renewable portfolio standards that require the use of 10 percent renewable energy by 2010, 15 percent by 2015 and 20 percent by 2020," says Kennett. "It makes sense for us to build a facility, because we have all this molasses that we can convert into ethanol."
After years of subjection to the volatile, world sugar market, the timing couldn't be better for an appendage to support Gay & Robinson's 124-year-old sugar operation. "Our main business, sugar, brings in the largest [gross] revenues for the company by far. But sugar prices haven't changed much [in 20 years]," says Kennett. "We're just not making enough money from sugar, so we've got to think out of the box. We've got to start thinking about how to convert our byproducts into value-added products."
In 2003, Gay & Robinson earned $24.1 million in gross annual revenues. A little more than 2 percent came from its cattle ranch, an even lesser amount from its ecotour subsidiary (Gay & Robinson Tours LLC). The remaining bulk came from the 57,000 tons of sugar it processed last year. If all goes as planned with the ethanol facility, the company could double its annual revenues. Assuming a market price of $1.50 per gallon (the current average rate for ethanol), the company could add $12 million to $22.5 million in annual sales, depending on the size of the facility. Kennett says the company will build a facility capable of producing anywhere from 8 million to 15 million gallons per day.
In addition to its own ethanol facility, Gay & Robinson is allowing another company, World Wide Energy Group (WWEG), to build on its land, a demonstration plant designed to produce ethanol from bagasse (the fibrous residue when sugar is squeezed out of cane).
"In 2002, we sold 36,000 tons of bagasse to Amfac, but they shut down their boiler at the end of 2002, so last year I had a lot of extra bagasse," says Kennett. "[Working with WWEG] will be another way for us to make use of our byproducts. And any time we can work with other companies to support the business we're in, the better chance we have of staying in our core business - sugar."
Do you like what you read? Subscribe to Hawaii Business Magazine »