It all started with the aim of advancing in the sustainability of the business, reducing the environmental impact and reducing energy costs. Now Ence Energía y Celulosa, formerly the Spanish National Pulp Company, presents a balance sheet in which its lifelong business as a pulp producer maintains a balance, almost 50%, with its new role as an energy generator, according to the latest data presented by the company this week.
“From an environmental point of view, Ence's evolution is an example of a circular economy. In their main business, which is the production of cellulose, they have implemented sustainable practices that have nothing to do with the public management Ence that many may have in mind," explains Pablo Fernández, business analyst at Renta 4.
The transformation of the company began a decade ago, shortly after the privatization that took place in June 2011. Since then, in addition to being the largest producer of pulp and the main manager of forest mass in Spain, it has also become the largest biomass producer in the country. To such an extent, that its energy production plants with this fuel are under the control of Red Eléctrica de España to be managed as an electrical stabilization system when demand requires it. In other words, when there is not enough sun or wind, this energy enters before other more polluting ones such as combined gas cycles to stabilize the system.
“Cellulose, like all raw materials, has a very volatile price. Its energy commitment provides it with stability, to the extent that the regulatory impact allows it. In the long run there is value in this bet; the question is whether it will materialize in the short term. For now, this year will be difficult”, says Alfredo del Cerro, an analyst at Banc Sabadell. The first half of 2023 has brought the company losses of 4.2 million euros, compared to the 44.7 million it earned in the same period of the previous year. It has hurt him above all the price of pulp on this occasion. But that business is very volatile, and analysts see no risk in this leg of the business. A security that Ence saw confirmed in March with a court ruling that clears the risk of closing its pulp mill in As Pontes (Pontevedra), which it will be able to continue managing until 2073.
"His success will be to manage the profits from the pulp business in good years and allocate them to the energy leg so that it can compensate for bad years," analyzes Pablo Fernández.
In the last 10 years, Ence's energy commitment has pivoted, although not only, on the generation of electricity with local biomass. “We are the largest buyer of biomass in Spain. More than 70% of the biomass consumed in Spain in the logistics chain is made by us. Our bet is on the territory, we generate local employment and manage waste that is a problem for farmers and ranchers. Before you were going through the national 4 and you saw smoke on one side and on the other. They were the farmers burning the branches. Our Puertollano plant now avoids that because we buy it from them and give value to that waste”, explained the president of Ence, Ignacio Colmenares, during his speech at an energy sector event held by the newspaper Cinco Días, a few weeks ago in Madrid.
The company has also done business in the world of photovoltaics. Already in 2020, it sold 49% of its solar energy business to the investment fund Ancala Partners for 359 million euros, and at the end of 2021 it closed an agreement with Naturgy for the sale, for 62 million euros, of five photovoltaic plants located in Andalusia with a joint capacity of about 373 MW.
The complexity of the energy leg of the business has resulted in an adapted corporate structure. To do this, what at first was Ence Energía was transformed into a new subsidiary, Magnon Green Energy. Its assets include its eight biomass production plants and a joint installed capacity of 266 MW. Magnon is also starting with the development of 300 photovoltaic MW.
In turn, Ence has launched new lines of business to reinforce its commitment to renewables. Ence Biogás stands out, a subsidiary dedicated to the management of organic waste (agricultural, livestock and industrial) with which biogas will be produced that will serve as a base to produce biomethane and ecological fertilizers. Currently there are 15 plants under development and it is expected to reach 20 in 2027.
Through Magnon Servicios Energéticos, Ence will become an industrial heat supplier in the coming months. Colmenares assures that this subsidiary has already signed agreements with a brewery and a food company, whose identity "cannot confirm", for which it will design a comprehensive solution to decarbonise their production. Finally, it is working on a new line of business to market the carbon emission rights that the company generates from the management of its 66,000 hectares of forest in Spain.
