The Spanish pulp leader, Ence, lives waiting for the Supreme Court to rule on the continuity of one of its two factories, the one in Pontevedra. The sentence will put an end to almost six years of uncertainty and the future of the company will depend on it. At the moment there is no date for its publication, but there is a plan B in case the resolution is unfavorable.
Ence is a sui generis company, among other things because it is the largest private forest manager in Spain. Privatized in 2001, its main shareholder, Juan Luis Arregui, came up with the idea of ??complementing the pulp business with that of renewables, especially biomass. The company, based in Madrid, capitalizes more than 700 million euros and came to appear for a few months on the Ibex.
It has two factories: the Galician one in Pontevedra, with a capacity of 515,000 tons per year, and the Asturian one in Navia, with 685,000 tons. Ence identifies the first one in its last annual audit as the company’s main asset.
The problems affect precisely that plant in Pontevedra and begin in 2016. That year, the previous government extended the concession to operate the factory, located next to the coast, for 60 years. The ministerial order was appealed by several environmental associations and by the Pontevedra City Council, which began a long dispute that has been jumping until it reached the Supreme Court.
Ence won some legal battle, but in 2019 their plans began to go wrong. The new coalition government decided to accept the case, that is, its lawyers stopped defending the 2016 ministerial order adopted by the previous popular executive. Ence convinced the judges to let him exercise the defense in a dispute directed against the administration.
The National Court annulled the extension last year in three different judgments because the coastal law only allows for the extension of concessions on the maritime-terrestrial public domain when the facilities, by their nature, cannot have another location. This aspect, he indicates, was not accredited in the 2016 ministerial order.
The match point is now played in the Supreme Court. Ence appealed at the beginning of this year the three sentences of the Court, of which two were admitted for processing. The initial forecast was that the final decision of the Supreme Court would be known before the end of the year, but the vote has been postponed and now there is no date. “It is foreseeable that the corresponding sentence will be published in the coming months,” says Ence.
The truth is that the company has already prepared for eventual defeat. In his 2021 accounts, a provision of 200 million euros was noted and he has announced that the 250 million he planned to invest in Pontevedra will go to Navia as soon as necessary.
What happens now will come at a good time for Ence because the pulp price has skyrocketed after several years of decline. Until September, its two factories produced 637,421 tons, 16% less, but the group sold each ton at an average of 732 euros, 42% more. The result is a gross operating profit (ebitda) from the pulp business of 111 million euros, 55% more.
In the other business, that of renewables, the situation is very similar. Production increased by 18%, but also the average sale price per megawatt hour increased by 56%. Ebitda stood at 96 million, when a year earlier it barely amounted to 14 million euros. Traditionally, fluctuations in the pulp business were offset by the more stable contribution of energy.
This year the group has revised its strategic plan to take advantage of the changes in trend. Now he is confident of generating a strong cash flow and is preparing investments of 335 million until 2026 in new projects. Of course, the greatest effort in cellulose will go to the Navia plant because, for the moment, it still does not know what will happen to the Pontevedra plant.
