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The Big Interview: Richard Butcher

For most of us, the name ‘Stobart’ evokes an image of uniformed drivers sporting a tie and green jacket while traversing Britain’s motorways in trucks named after girls.

But back in 2010, in the midst of the recession, the company embarked on a transformative new venture by entering the energy world of biomass.

Chief executive of Stobart Energy & Infrastructure Richard Butcher said this was a gamble in the sense that the company was creating a market that did not exist at that time. Nevertheless, Stobart Biomass Products is now the leading supplier of biomass into the UK market.

Butcher has just made the trip to London from Carlisle, reflecting the firm’s continuation of far-reaching endeavours across the UK. Stobart Group now has 2,200 vehicles and more than six million square feet of warehousing, with expansions into ports, rail freight and even aviation with ownership of Southend Airport.

Back in 2010, while working with wood processing company AW Jenkinson Forest Products, which was supplying virgin wood to big energy plants, Stobart identified an opportunity to bring waste wood into the biomass plant mix.

“There were a lot of plants planned to be built at the time and we saw this wall of demand coming,” said Butcher. “Who better to transport it all to the plants than someone with the logistics expertise that we had?”

After joining forces with Jenkinson in 2010, the firm took full control of Stobart Biomass Products in 2011.

“People were a bit sceptical about biomass due to the financial climate and legislative uncertainty at the time,” said Butcher. “Plants that originally were going to get built were delayed for financial reasons. The business plan that we started out with five years ago is not the business plan that we have now, but that is just a natural phenomenon of the economic climate.”

However, now transporting 1.1 million tonnes of biomass material each year, the company sees a clear road ahead.

Butcher is keen to emphasise that Stobart has no connection with the enormous Drax power plant in Yorkshire, which is controversial for its energy- intensive imports of feedstock from North America.

“We are tarred a bit with the Drax brush. People would say that biomass is neutral because the original trees suck carbon out of the atmosphere and, when we burn the wood, it releases the same amount of carbon back out. But if Drax transports from the US, you have all the emissions associated with shipping. That is where they get some negative press around biomass.”

By contrast, all the wood supplied by Stobart annually – 600,000 tonnes of waste wood and 500,000 tonnes of virgin wood – is sourced from the UK. Transport is carried out with a focus on efficiency using the best available vehicles and Stobart’s historical knowledge of logistics and haulage. The group has also invested heavily in driver training to reduce emissions.

The destination of Stobart’s wood supply includes 800,000 tonnes for the UK biomass sector and 300,000 tonnes by ship and road to Europe.

Butcher said: “Our strategy in the early years was to build up a supply and export it to the Benelux countries where their wood, unbelievably, is too wet. We now also export to companies such as Unilin, Spano and Dalkia. It is a mixture of some wood going to plants and some to board mills.” Biomass materials can also go to animal bedding, horticulture and some to landfill.

The company is planning to double its annual supply to two million tonnes in 2017. Butcher says this extra million tonnes will come almost exclusively from waste wood. And with several UK biomass plants in the pipeline for completion by March 2017, Butcher added: “We can turn off the export tap and divert to the home market.”

Landfill tax is likely to remain at around £80 per tonne which, combined with transport costs, is “well over” £100 per tonne. Therefore a market is being created for wood to be diverted for chipping, blending, shredding and processing into the right specifications for use in biomass plants with a gate fee of around £25-30 per tonne.

Wood is graded from A to D, with A the highest quality, and Stobart concentrates on grade C wood for biomass plants. To achieve this, materials must be screened so that small fines and oversized offcuts can be disposed of. Contaminating scrap metal is removed and sold, forming another minor income stream for Stobart.

The company works on various fuel types including tyre-derived fuel. It also exports small quantities of refuse-derived fuel and solid-recovered fuel. While this may be an increasing opportunity, Butcher said the company’s focus remains waste wood for the moment.

He believes that one of Stobart’s unique selling points is its reliability as a supplier, covering transport and right-size specifications as well as moisture, ash and chemical contents. Getting these areas wrong is a major hindrance to any biomass plant.

“It is all about having the right type of vehicles, and a large fleet capable of delivering the material to a plant every 15-20 minutes for the next 15 or 20 years,” says Butcher.

For the past three or four years, every load delivered by Stobart has been sampled, giving it an extensive database of the chemical composition of materials going into the plants. “Problems can only ever be caused by the plant operator or the fuel supplier. That’s why we have to work closely with the operators,” Butcher said.

Trucks typically deliver to biomass plants ranging from 15-20MW, requiring around 150,000 tonnes of wood to supply electricity for 35,000 homes.

However, Stobart recently signed a 14-year contract worth £110m to supply 250,000 tonnes of waste wood fuel a year for a 40MW biomass plant in Port Talbot, south Wales. This long-term supply agreement with Glennmont Partners was Stobart’s largest ever supply contract by volume.

In November it also reached financial close on a combined heat and power (CHP) plant in Widnes requiring 146,000 tonnes of feedstock, after financial backing from the Green Investment Bank.

And to help it reach that two million tonnes a year target, Butcher said the company is expecting to reach financial close on two plants to be finished by March 2017, which will be of a similar size to the Welsh one, adding another half a million tonnes of supply annually.

Stobart already supplies Chilton Energy Centre in the north-east, and the Iggesund Paperboard Biomass Power Station in West Cumbria, among others.

“There is more than sufficient material available in the UK to enable us to achieve our target,” said Butcher. The latest surveys by the Wood Recycling Association and WRAP in 2010-11 show there were 4.7 million tonnes of waste wood in the UK. This survey was carried out at “a low point in the economic cycle”, and figures in 2006-7 were as high as seven to eight million tonnes.

Meanwhile the group is also trying to find UK plants that can accept fines as well as grade C wood. Such plants tend to be found on the continent, and Butcher said that some companies are looking to bring that technology to the UK.

Stobart wants to supply plants that are geographically spread across the UK, although the sourcing of material is greatest where the population is densest. Such areas have the largest construction activity and demolition waste, with London and the south-east accounting for 25% of the 4.7 million tonnes of waste wood in the UK.

The construction industry, along with people throwing out second-hand furniture and pallets, provide the largest feedstock.

“The big cities are where it is all being generated,” said Butcher. “We want to supply the big plants that are located correctly from that point of view, and put processing capabilities either on-site or close by.”

For example, the company is building a wood drying facility next door to the Widnes CHP plant. The 140,000-plus tonnes of wood, which come in at around 50% moisture content, is dried down to 25-30% moisture. This means that 140,000 tonnes becomes 90,000 tonnes after the water extraction.

In other waste-related projects, Stobart has a 25% investment in an anaerobic digestion plant run by Biogen at Teesside, but Butcher said it was unlikely to expand into any more waste and recycling schemes for the moment.

Nevertheless, its operations handle a vast part of the supply chain. For the Widnes plant, Stobart’s infrastructure departments were involved in selling the land and Stobart Biomass will be supplying the material and then transporting it. Finally, a construction sector of its rail division is working with £10m of infrastructure works for power plant developer BWSC, which is building the Widnes plant and dryer.

With the general election in May fast approaching, Butcher reflected on the current Government’s policy around subsidies: “It has provided as much certainty around Contracts for Difference (CfDs) as it can – it is up to the market to settle down, really.”

CfDs take over from the Renewable Obligation Certificates (ROCs) in April 2017 under the Electricity Market Reform. Once a plant is commissioned under ROCs, it gets a 20-year period called a grandfathering right. Once that is in place, the subsidy, which is indexlinked on an inflationary basis, is un- affected by any change in Government. Because it takes two years for a biomass plant to be built, Butcher said there was now a short window of opportunity before the ROC regime finishes.

He added: “The current level of support under the Renewable Heat Incentive (RHI) is known. It won’t be scrapped because it is very popular, but there is uncertainty around what level is going to be carried on.”

Looking ahead to a new Government after the election, Butcher said he would like to see “the old chestnut” of fuel duty being frozen again to help with the transport side of the business, as well as more certainty around future RHI support.

He is optimistic about the future of biomass given the large availability of waste wood and the UK’s target of having 15% of its energy coming from renewables by 2020, in which biomass has a role to play.

He also forecasts steady business ahead: “Gate fees are driven by supply and demand in the long-term, and we expect them to remain relatively stable, especially if landfill tax is maintained at £80 per tonne.”    

CV: Richard Butcher

Butcher worked in corporate banking at HSBC for 14 years. He joined Stobart Group in 1997.

After his role as managing director of Eddie Stobart Ltd, he now leads the Stobart infrastructure and energy divisions, with additional responsibilities for identifying investment opportunities for Stobart Investments.

More recently he helped to develop and leverage the company’s property assets.

BEST MOMENT OF MY CAREER SO FAR: Getting Stobart to the stock market in 2007, enabling the group to diversify and expand.

AND THE WORST? The company nearly going bust in 2003. But he said that having come through it was a positive experience, adding: “A lot of people say they have 20 years’ experience, but all they have is one year’s experience 20 times.”

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