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Biocarburantes de Castilla y Leon informs

September 23, 2007

Biocarburantes de Castilla y Leon S.A., joint venture 50% between Ebro Puleva, S.A. and Abengoa Bioenergia, S.A., has decided to stop bioethanol production temporarily at their facility located in Babilafuente (Salamanca).

This facility whose construction began in 2003 was designed to produce bioethanol for direct blending with petrol on the national market to comply with the European Directive targets on fostering the use of biofuels and the National Renewable Energy Plan. Regulationary uncertainty on bioethanol use as fuel in Spain, has forced Biocarburantes de Castilla y Leon, S.A. to sell their production to other European markets and support a very substantial increase in their logistics costs. Even so, they have been operating like this since they started production in April 2006, in a clear determination to develop the European biofuel market and prompt solution of these kinds of problems.

In the last year this situation has been aggravated with a strong increase in the international cereal price due to a worldwide increase in its demand for food and bad harvests in traditional export countries. This, together with bioethanol prices corresponding neither to said raw material increase or equivalent oil barrel price, today exceeding 80 dollars currently impedes Biocarburantes de Castilla y Leon S.A. from competing on the market, and consequently maintain their Salamanca facility operational.

The Government recently proposed a Law setting the legal obligation to use biofuels approved by Parliament and a Ministerial Order project is currently being revised by the National Energy Commission which drafts the legislative framework for compulsory incorporation of biofuels and blend with those of fossil origin, whose final approval will enable massive development of this industry in Spain. This would translate as replacement of fossil origin fuels and subsequent CO2 emission reduction in the transport sector, likewise the creation and securing of thousands of jobs in rural areas, substantial improvement in our balance of payments and reduction of our dependence on outsourced energy.

Biocarburantes de Castilla y Leon which currently employees 103 workers, indirectly generates over 500 jobs in different service, maintenance and transport companies, will no longer consume over half a million tonnes of barley, chiefly of national origin, nor will they produce almost two hundred thousand tonnes of high protein fodder for animal use which was entirely commercialised on the national market. Operations will resume on conclusion of this period of adverse circumstances. Biocarburantes de Castilla y Leon will continue offering local agriculture the biofuel alternative still with large possibilities of development since it scarcely represents 2% of Spanish cereal production.

Having suffered over two years of regulationary insecurity and stagnation of biofuel use in Spain, goes to show that only the urgent implementation in Spain of measures developing the obligation of differentiated biofuel introduction in petrol and diesel with 5.83% minimal percentage of use, could achieve not only the recovery of the Salamanca facility total operation but also develop an industry which contributes to the sustainable development of our country.

Nevertheless, only measures like those described and resulting sector stability can generate the economic resources necessary to tackle the risk and decision to carry out technological research and development activities on second generation biofuel (cellulosic biomass), decisions like that already taken by Biocarburantes de Castilla y Leon with the construction of the first ethanol production prototype facility using cereal straw as raw material.

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