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Borregaard Explores Partner Options for Potential Biorefinery

Borregaard ASA (BRG), the Norwegian maker of wood-based chemicals, is considering potential partners for a biorefinery project that will diversify its raw-material sources, Chief Executive Officer Per Sorlie said.

The company began a demonstration plant in April using enzymes to breakdown farm and forestry waste into lignin and chemicals used in adhesives and coatings, and the unwanted sugars produced in the process could go to a partner for bioethanol, Sorlie said in a telephone interview

Borregaard is “rejuvenated” since separating from Orkla ASA (ORK) and listing shares almost nine months ago, the CEO said. It can use a 1 billion-krone ($162 million) debt facility to finance expansion, including upgrading its trial biomass plant to a commercial one in a raw-material rich area such as North America. Sorlie may also scale up production of a cellulose-based gel that can replace fat in foods.

“We’re approaching a period where we will have to make a decision on capex,” said the the executive, who joined the company in 1990. Both projects are on schedule and a decision on investing in increased capacity will be made in the second half of 2014, he said.

Borregaard, whose origins date back to a wooded country estate owned by Olav the Holy in 1016, is patenting a process whereby fibers are broken down under pressure to form small particles that are then converted into a gel. This gel has water retaining properties and is already being used in Orkla’s range of low-fat dressings. Borregaard hasn’t got the capacity to roll out the product to a wider client base, as scaling up production carries “significant business risk,” Sorlie said.

Niche Business

Shares of the Sarpsborg-based company, which also makes chemicals for car batteries, printing inks and tile adhesives, have increased 31 percent this year, giving it a market value of 2.72 billion kroner. Borregaard competes with Solvay SA (SOLB) in the market for the flavoring vanillin.

Though Borregaard attracted attention from potential buyers once Orkla announced its intention to carve out the business, it’s focus on niche products meant it wasn’t an ideal fit with any company, Sorlie said. It went on to list shares in Oslo on Oct. 18. By contrast, Georgia-Pacific LLC in April agreed to acquire Buckeye Technologies Inc. (BKI), a close competitor of Borregaard in North America, to expand its specialty pulp business.

To contact the reporter on this story: Andrew Noel in London at anoel@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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