Equatorial Palm Oil (LON:PAL) is set to accelerate the development of its169,000 hectare land position and palm oil operations in Liberia after agreeing a deal to set up a US$60m 50:50 joint venture company with Biopalm Energy Ltd. Under the terms of the MOU, which is legally non-binding, Biopalm Energy will invest an initial US$22.5m in cash plus arrange and guarantee a US$30m loan facility to the JV. In return, EPO will contribute US$7.5m in cash to the JV which will, on completion, hold all of the company’s current land position in Liberia. The establishment of the JV will be subject to EPO shareholder and necessary regulatory approvals. Biopalm Energy subscribed for £5m of new equity in AIM listed EPO in May of this year and is a wholly owned subsidiary of Siva Ventures Ltd, part of the Indian conglomerate Siva Group.

EPO has a strategic development plan to plant 50,000 hectares of oil palm plantation within 10 years, targeting crude palm oil (CPO) production of 250,000 tpa (current palm oil price US$925 per tonne CIF Rotterdam), increasing to 100,000 hectares planted. Initial production of CPO is planned to commence in the fourth quarter of 2010 with the company's first palm oil processing mill already under construction. It is envisaged that the additional finance will enable all operations across the three plantation areas of Palm Bay, Butaw and River Cess, as well as the active out grower programme, to be fast tracked. Investment in associated and downstream infrastructure will also be accelerated.

Michael Frayne, EPO’s chairman, said: “This funding agreement with the Siva Group is fantastic news for the company as it will significantly mitigate the financial risk attached to the project. Importantly it will allow us to focus on our strategic objectives in developing our 169,000 hectare land position which is located between leading oil palm plantation developers Sime Derby and Golden Agri, in what is emerging as a prime oil palm development region. The Siva Group has an excellent track record of working with investment partners to unlock value to the benefit of shareholders and this JV solidifies our relationship as we work together to achieve our longer term objectives.” Click here to read a Stockopedia interview with Michael Frayne.

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