By Macharia Kamau and Reuters

Mumias Sugar Company is constructing a Sh3.5 billion ethanol distillery plant to diversify its revenue base.

The miller will also spend another Sh23.4 billion in acquisition of other sugar millers in the region over the next five years.

The company yesterday signed an agreement with Indian engineering company, Avant Garde, which will undertake the design, construction and procurement management of the Mumias Ethanol Distillery Project at the sugar miller’s complex in Mumias.

Revenue inflows

Managing Director Evans Kidero said the construction would take 18 months.

"We expect to start production and sale of ethanol by July 2011," he said. The plant will see the company up its revenue streams, coming seven months after the commissioning of a 38 megawatts power generation plant that has seen the company save on energy costs and feed extra capacity from the power plant to the national grid.

Kidero said the ethanol plant is expected to earn the company in excess of Sh1 billion annually by selling the product to beverage makers and pharmaceutical companies in the region.

"There is demand for ethanol in Kenya and regional markets of East African Community and Comesa," he said.

He noted that the demand for ethanol is expected to grow, following a recent issuance of a legal notice by the Ministry of Energy requiring the blending of fossil fuels with ethanol at a ratio of 85 to 15 starting next year.

The plant will use molasses, a by-product of the sugar milling process to produce ethanol.

By-product

The company produces 80,000 tonnes of molasses every year, from which it expects to produce 20 million litres of ethanol every year. Other companies producing ethanol include Spectre International.

Kidero said the company would spend Sh23.4 billion over the next five years to buy milling factories in Kenya and in neighbouring countries.

"We are looking at acquisitions in Kenya, Uganda and Tanzania," he told Reuters.

Forays into nearby countries would allow the miller to start growing sugarcane by irrigation and cut the maturity period from 18 months to 12 months, Kidero added.

Mumias has been keen on buying Nzoia Sugar Factory subject to the terms of sale by the Privatisation Commission.

Kidero said Mumias was exploring various modes of financing, from venture capital to borrowing, for its acquisitions.