Uganda’s Kakira Sugar Plans to Produce Ethanol Fuel by 2016

Jul 25, 2014 9:59 am ET

(Updates with sugar prices in final paragraph.)

July 25 (Bloomberg) -- Kakira Sugar Works Ltd., Uganda’s biggest processor of the sweetener, plans to build an ethanol plant by the end of 2016 after it spent $75 million expanding cane-crushing and power operations over the past two years.

The ethanol from the facility that will have capacity to produce 20 million liters (5.3 million gallons) annually will be distilled from 85,000 metric tons of molasses, the result of processing 2 million tons of cane, Kenneth Musinga Barungi, an assistant to the company’s general manager, said by e-mail yesterday.

“Directors are discussing the design, possible equipment suppliers and costs, with plans for production to start by mid- December 2015,” he said. Officials visited India and China for advice on feasibility studies, Barungi said.

Kakira and other producers currently sell molasses cheaply to distillers of a local gin. The landlocked nation may produce a surplus of sugar this year, with output rising 32 percent to 442,550 tons from a year earlier, according to its manufacturers’ association. Domestic demand is about 320,000 tons annually. Uganda consumed 17,000 barrels of petroleum products daily in 2012, according to the U.S. Energy Information Administration.

The ethanol will be blended with gasoline to cut fuel costs and the mixture will range from 8 percent to 15 percent, Barungi said. Kakira and other processors of the sweetener are lobbying the East African nation’s government to pass policy before production starts, he said.

Electricity Investment

The company is owned by the Kakira-based Madhvani Group, one of the nation’s leading industrial groups, which is classified by Forbes magazine among the 10 biggest family companies in Africa.

The group invested $75 million since 2012 in Kakira’s cane- crushing facilities and in generating electricity from bagasse, a cane fiber, Barungi said. It uses 16 megawatts of its 50 megawatts of capacity, selling the remainder to the national grid, he said.

Uganda’s installed power capacity is 810 megawatts, according to the Electricity Regulatory Authority. Eskom Holdings Ltd., the utility that generates about 95 percent of South Africa’s power, had installed capacity of 41,995 megawatts at the end of March, it said on July 11.

Kakira may boost its sugar production this year to 180,000 tons from 152,204 tons last year, according to the Uganda Sugar Manufacturers’ Association, of which the company is a member. Other members of the body are Mauritius-based Rai Group’s Kinyara Sugar Ltd., Sugar Corporation of Uganda Ltd., owned by the India-based Mehta Group, and Kaliro Sugar Ltd., part of Alam Group of Uganda.

White sugar for delivery in October was little changed at $447.80 a ton at 2:50 p.m. in London while raw sugar for the same month rose for a second day, adding 0.4 percent to 17.12 cents a pound on ICE Futures.