Investing in polish bio-fuels sector the characteristics of the business

environment

Doing business in C.E.E. Henry Sichel Wirtschaftuniversitaet - Wien

Doing business in C.E.E. Henry Sichel

Front-runners products for climate change issue

Bio-ethanol – substitute of gasoline

Bio-diesel - blended with mineral fuel

First generations – food-crops derived

Second generation – non-food crops; better environmental potential

The bio-fuels generations…

100 agricultural refineries and few big players, but lack of incentives

Huge fossil fuel competition, but interesting growth

1. The business sector

Doing business in C.E.E. Henry Sichel

Large agricultural surface for specifical energy crops

Liberalization of energy market

Kyoto Protocol and European engagement (10% in 2020)

Biofuel Promotion Plan, 2007

Availability of projects and market attractiveness

Confusing government decisions and enforcement of law

Possibility to export profits

Grants for investments and training and Special Economic Zones

Easy termination of employment

2. Why investing here?

Production

• Pattern equally split between bio-diesel and bio-ethanol

• Potential plenty of raw materials

• Distribution problems (blending)

Prices

• Bio-fuels are not competitive

• Bio-fule Promo Program 2008/14: excise exemption;

• -19% surplus costs over the production of fossil fuels

• 45€/ha. of subsidization for farmers

• Fines for below-the-bar blended fuels producers

Consumers

• German market

• Poland: bio-ethanol ¼ gasoline share, bio-diesel 1/9 diesel one

• Lack of awareness

• Opposition of car manufacturers

Players • 400 SMEs interested in producing biocomponents

• few big players with high capacity and investment plans

3. The market environment

Doing business in C.E.E. Henry Sichel

Europe • D. 2003/96/EC (excise exemptions are accepted)

• An E.U. strategy for Bio-fuel (mandatory bio-fuel targets)

National legislation

• supportive measure for plants producing equipment for the generation of bio-fuels/bio-components

• Bio-fuel Support Program 2008-14

• Bio-components and Liquid Biofuels Act (2006)

Financing • National private and public

• International private and public (E.U. structural cohesion fund)

Popularity • Of low environmental pollution solutions

Fossil fules • The variable of fossil fuels prices and availability

NIMC • Not-In-My-Car syndrome

Land-use • Natural, food or bio-fuel destination

4. The non-market environment

Hierarchy, authority, formalities

Polarization between We (workers) and They (managers)

Hofstede index

High Power Distance: weak work ethic, no ask for suggestions, temptation to «fight against the common enemy»

High Uncertainty Avoidance: lack of control about personal destiny

Low Individualism: engagement is important, but leadership is accepted

High Masculinity: personal success is not always welcome

5. Economic culture of polish managers and workers

Doing business in C.E.E. Henry Sichel

Main problems: • Bio-fuels are expensive; • Confusing regulation and many «stops-and-go» • Technical barriers (specially for second generation bio-fuels) • R&D barriers (needs for improvement in ethanol production

techs) • Distortive role of personal connections

Prospects • Perspectives are interesting, because of European and national

interest; • The game will be played on the field of different crops varieties,

increased productivity and consisten policy-making

6. Main problems and perspectives

Doing business in C.E.E. Henry Sichel