Fonterra the first of six companies taking Z Energy's new biodiesel

Fonterra Cooperative Group [NZX: FSF] is one of six cornerstone customers switching to Z Energy's [NZX: ZEL] new biodiesel produced from meat industry tallow.

Wellington-based Z Energy is currently commissioning its $21 million Wiri plant and production is expected to start in mid-July. The plant can produce 20 million litres of biodiesel annually and that can be doubled if the energy company spends another $4 million on the plant.

Half of that annual production will be taken by six large commercial customers including Fonterra, Air New Zealand, TIL (Transports Investment Ltd), Fulton Hogan, Downer, and South Fuels.

Fonterra chief operating officer global operations Robert Spurway said the shift to biodiesel is part of a move towards greater efficiency and sustainability across its operations. It has the potential to reduce emissions for Fonterra's milk tankers using the fuel by up to 4 percent a year, he said.

"Fuel burned for transport contributes up to 20 percent of New Zealand's total greenhouse gas emissions, so given our scale, it's important we play our part to help the environment," Spurway said.

Fonterra will be the first company to adopt the new fuel, with Edegcumbe being the first of five sites to make the switch in its tanker fleet. The fuel will be available from Taupo to Warkworth.

Z Energy said the remainder of its production will be sold through selected service stations in the upper half of the North Island.

The plant ended up costing the company $5 million more than originally thought when the $5 million cost of blending facilities at its Mt Manganui and Wiri fuel terminals is included.

At current production levels the plant will only use 10 percent of the country's available tallow and Z Energy said there is the potential to build more plants in other parts of New Zealand if demand warrants it.

The technology was originally developed by biofuels producer Ecodiesel which later went under. when the government ended the biofuel grants scheme. Z Energy bought the intellectual property and some of the early production four years ago.

(BusinessDesk)