Natural Fuel signs 12-year agreement for CoGen facility

Subiaco-based Natural Fuel Ltd has signed a 12 year agreement with Singapore-based Federal International Ltd subsidiary Banyan Utilities for a Co-Generation facility on the site of its biodiesel plant.

Natural Fuel will own the facility when the contract expires, after Banyan builds and operates it for the duration, with the parties having an option for a "five plus five" year maintenance and service contract.

Surplus energy will be sold into the grid and revenues shared on a pre-determined formula.

The full text of a company announcement is pasted below

Natural Fuel Limited (ASX: NFL) wholly owned subsidiary Natural Fuel Pte Ltd has signed a 12 year agreement with Banyan Utilities for a Co-Generation ("cogen") facility on the site of its Singapore biodiesel plant. The agreement is for the supply of power and steam for NFL's 600,000 metric tonne per annum plant. The plant and its operating methods deliver significant benefits to both organisations with the substantial reduction in plant utility operating costs, surety of energy production and flexibility in fuel used for the cogen plant.

Banyan Utilities will build, operate and ultimately transfer the plant to Natural Fuel. At the end of the 12 years NFL will own the facility with the parties having an option for a "five plus five" year maintenance and service contract. Surplus energy will be sold into the grid and revenues shared on a pre-determined formula. The cogen plant delivers surety of power 24/7 to NFL's operations with back-up being provided by the main grid.

To supply the electricity and steam Banyan Utilities will construct and finance the Co- Generation facility at an estimated cost of S$20.5 million. Construction of the 5 megawatt plant will commence immediately and will be operational by the second quarter of 2008.

In making the announcement, Mr. Richard Selwood, Managing Director, said, "The Banyan plant will deliver significant savings across a number of areas. The plant will reduce our cost of power & steam by up to 5%, which represents an important improvement in our operating margins. Another benefit includes a better waste water recycling program with more than 70% of our biodiesel plants waste water being capable of being re-used for steam
generation."

"Further the plant is a dual fuel plant which means Banyan can use a combination of natural gas, biodiesel and economically apply by-products from Natural Fuel's plant. This use of renewable resources will contribute to the exceptionally high energy efficiency of this plant."

Co-Generation refers to a process whereby primary energy such as natural gas is transformed simultaneously into both electrical and thermal energy. Because of the efficient energy production and low emissions involved in the process, Co-Generation is considered an environmentally friendly solution for energy production.