Later this year, the arid coastline of north-west Peru will set the scene for the start of an ethanol production project that could transform the profitability of its AIM listed operator. For integrated energy group Maple Energy (LON:MPLE) , several years of major engineering work will come to an end and ethanol will begin flowing from what promises to be one of the lowest cost production operations of its type in the world.

Maple came to AIM in July 2007 with a portfolio of Peruvian oil and gas exploration, production and processing assets, together with plans to develop its new ethanol project. Since then, the $254m project has risen in stature and is now fully funded to completion in the second half of this year. The economics of the new facility are impressive, not least because Peru’s coastline offers ideal conditions to grow the most efficient feedstock for ethanol production – sugar cane. Starting on just over half of a land bank totalling 13,500 hectares, Maple has designed an environmentally conscious operation that is expected to produce up to 35m gallons of ethanol per year for export, together with 37 MW of electricity from a co-generation power plant.

In the six months to June 30, 2010, Maple delivered revenues of US$35.0m, up from US$28.3m year-on-year, with pre-tax profits coming in at US$0.1m against a loss of US$15.5m. Ebitda rose to US$5.3m from US$2.4m. Over the last 12 months, the Maple Energy share price on AIM (they also trade in Lima) has fallen from a high of 84.75 in January 2010 to a low of 41p last August and are currently trading at 69.5p. Maple’s peers include AIM listed Gold Oil (LON:GOO) and Toronto listed Petrominerales (TSX: PMG), both of which have oil assets in Peru. Meanwhile, AIM groups Gtl Resources (LON:GTL) and Clean Energy Brazil (LON:CEB) have ethanol interests in California and Brazil respectively.

Production will mark a major turning point for Maple, which last year sold its 14.3% stake in its first major project in the country – the Aguaytia gas and electric power project – for $28m to Duke Energy. That deal streamlined its portfolio down to a modest oil production arm, a refining and marketing business based from…

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