INTERVIEW-Hungarian plans for biofuel expansion shelved

By Gergely Szakacs

BUDAPEST, March 18 (Reuters) - Investors are rolling back ambitious plans for bioethanol plants in Hungary as the cost of feedstock rises, industry officials say.

A series of bumper crops and European Union plans for a 10 percent blend of biofuels by 2020 gave birth to a raft of bioethanol projects in Hungary last year with investors betting on low input costs and rising demand.

More than 30 new distilleries were on the drawing board at one stage, but Hungary's bioethanol sector is now in a state of paralysis with only two units online.

A severe drought, which halved Hungary's maize crop, coupled with an increase in global grains prices and fears that the EU's plans for a higher biofuel mix may be watered down are scaring away investors. Sweden's SEKAB, which had planned to invest 380 million euros ($600.9 million) in Hungary to build four new bioethanol plants, has suspended the projects due to lack of financing and for the time being it sees no tangible signs of a sea change.

"Of all the projects that were announced, and I've lost count at 32, only one has been realised, the extension of an existing plant," Laszlo Zsemberi, Chief Executive of SEKAB's Hungarian unit told Reuters in an interview.

"Today, banks just roll on the floor laughing when somebody walks in telling them they plan to launch a bioethanol plant in Hungary," Zsemberi, who is also Chairman of the Hungarian Bioethanol Association, said.

He said besides the two existing distilleries, with combined capacity of 200 million litres of bioethanol, there were just four new plants in the licensing phase in Hungary and none under construction.

Hungarian oil and gas group MOL MOLB.BU, which controls about 40 percent of the retail and most of the wholesale petrol market, covers its bioethanol needs from a distillery in Slovakia.