BorsodChem told the press yesterday that it is considering participating in the tender announced by MOL to supply biofuel components. The press reports that BorsodChem could use production at its recently-acquired Polish unit Petrochemia-Blachownia. Petrochemia-Blachownia produces 12,000 tons of bioethanol a year, which is less than 10% of MOL’s bioethanol needs.
In our view, delivery costs would make Polish bioethanol less competitive in Hungary than those produced domestically. However, the relatively larger Polish capacity (compared to the usually much smaller capacity of domestic producers) might attract MOL’s interest. Given our doubts about margins on bioethanol deliveries from Poland, we do not think that a potential deal should have significant impact on BorsodChem’s P&L. Therefore, we see the news as neutral for the share price.