Proof that Biodiesel Can Be Profitable BusinessWed, 02/24/2016 - 13:51
Q: How have opportunities within the bioenergy sector evolved in the fallout of the Energy Reform?
A: The Energy Reform has awoken interest in the market but it is still unclear where the exact opportunities for biofuels lie. These will come after international companies start fully operating here, most likely through alliances or joint ventures with local companies. We can use our branding and awareness to convince international companies to customize their products for the local market. Another area of opportunity will come as these players realize the potential that lies in replicating Mexican renewable technologies and solutions around the world. We just inaugurated a biodiesel facility in France, we were in Singapore last year to access the Asian market, and this was all achieved from companies realizing the potential of our Mexican technology. Innovative Mexican companies will certainly be able to grow internationally due to the exposure provided by the Energy Reform.
Q: How does the international market for biofuels compare to that in Mexico?
A: Argentina’s nationalization of Repsol’s interests in the country led to the EU blocking Argentinean biodiesel imports into Europe. This led to an opportunity to import that biodiesel into Mexico, and then export it to the EU but this led to certain disposal challenges. We are currently not seeking to buy biodiesel, but to buy feedstock instead, processing it in Mexico or Central America, and selling the resulting biodiesel to the Mexican market. In 2015, we will be able to sell biodiesel at diesel prices, which should lead to strong growth in the domestic biodiesel market. This used to be a problem since we were selling biodiesel at higher prices than diesel, and companies like PEMEX refused to pay a higher price only to achieve sustainability. The next challenges that the Mexican market will face concern logistics, feedstock, and the infrastructure needed to process that feedstock. As the market grows, we will also have to ensure that the quality of our biodiesel product stays high.
Q: Who is your traditional client base, and what new segments are you planning to target?
A: Solben started as a technology company in 2007, at which point we spotted a niche in biodiesel production, but there was no local technology to cater to that. We already owned the patents for the technologies used to transform feedstock into biodiesel. About a year ago, we had 15 facilities and our equipment was producing more than 80% of all the biodiesel in Mexico. However, being a company with a focus on technology meant it was hard to sustain the growth of a market we were essentially stimulating by ourselves. We then changed our strategy to start building infrastructure to directly produce biodiesel. We also began developing other products such as lubricants and additives for petroleum extraction, meaning we could show clients that replacing diesel with biodiesel was more profitable. We also saw that these value-added products could be sold at two or three times the price of the pure biodiesel alternative. That allowed us to buy even the most expensive feedstock, since the margin on our products was also high.
After we started developing these products, we realized the Mexican market was not that big. This is when we began increasing our interest in substitutes for the petroleum industry, as large volumes of are required. In this way, we integrated with a commercialization company, a production company, and a feedstock company. By integrating the whole value chain, we produce our own biodiesel, we sell our own technology, and our R&D unit allows us to bring new technologies straight to the market. We are also innovating in terms of feedstock. From the outset, we had no desire to compete with food crops. This led us to developing a new feedstock from animal fats, so we are building a new facility dedicated to that. We obtain the oil from animal fats, turn it into biodiesel, and use this to make water treatment plants self-sustainable.
Q: In 2013, you were awarded the Innovator of the Year Award by MIT. What was the fallout from that?
A: For us, it was very important to demonstrate to the market that such MIT awards rarely go to such young entrepreneurs. Solben’s founders were just 22 years old when we won, and that changed the entire market perspective on our company. We had received entrepreneurship awards before that that accolade from MIT showed that our technology was deserving of market attention.