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Abengoa reinforces their biofuel strategy

September 24, 2007

Madrid, September, 24 of 2007. Abengoa, a technological company applying innovative solutions for sustainable development in: infrastructures, environment and energy sectors, has announced their growth and investment plans in their subsidiary Abengoa Bioenergía remain intact despite announcement of a temporary stoppage in the Salamanca facility which they have with Ebro Puleva SA.

Although the Salamanca facility was designed to supply the Iberian Peninsula with biofuels through direct blend, the truth is that until today production has been entirely designated to attending the central European market. Delay in compulsory objectives becoming effective and currently undergoing legislative development plus the current price situation of cereals recommend the temporary stoppage. On 3rd June an amendment of the Hydrocarbon Law was approved establishing blending biofuels in Spain was compulsory coupled with compulsory targets of 3.4% in 2009 and 5.83% in 2010. The Ministry of Industry has sent the National Energy Commission a Ministerial Order draft establishing compulsory ethanol blends in petrol commercialised in Spain. This stoppage will not affect contracts signed by Abengoa Bioenergía, which will be fully complied with and enable optimisation of results forecast in 2007.

Abengoa considers the current cereal market situation temporary and due mainly climate factors, increases in demand from emerging countries plus the entry of speculative funds. This situation will be normalised in 2008 with the entry of new crop areas providing an increase between 10 to 17 million additional tm. As the Agricultural Commissioner pointed out (CAP future, London 27/03/07) the 10% biofuel target set by the EU in 2020 should not imply any pressure on food markets. In this context, for Abengoa Bioenergía the geographical diversification with presence in the USA, Europe and now Brazil, flexibility in the use of different raw materials on their production facilities, together with long term contracts, enable partial mitigation of the impact on raw material cost increase.

As to biofuel viability, for Javier Salgado (Abengoa Bioenergía Chairman and CEO), "biofuels appear as the most promising alternative to reduce transport sector environment impact, likewise reducing the almost total dependence on hydrocarbons. In fact, experts conclude there is no viable alternative capable of generating similar benefits within 20 to 30 years". Furthermore, in relation to ethanol life cycle, the most recent studies performed by independent bodies, confirm that unlike petrol, in the production of biofuels, fossil energy consumption is lower and also saves petrol consumption (product it replaces), thus reducing greenhouse effect emissions. In addition, Javier Salgado concludes "the potential of new technologies to produce bioethanol from lignocellulose biomass will enable more significative reductions boosting the use of ethanol as a tool to combat climate change".

Abengoa Bioenergia continues strengthening their leadership position in the development of second generation biofuel technologies. In 2007, Abengoa announced they had obtained 76 million dollars from the US Energy Department (DOE) through an aid programme to design and build a second generation commercial scale biomass facility, likewise development of a 36 million euro project under the CENIT Programme with the Spanish Government enabling advancement in bioethanol production technology through biomass gasification and catalytical synthesis.

Abengoa Bioenergia is the first European producer, fifth in the US and sole bioethanol global actor with over 1200 million litres per annum of total installed capacity. They are currently operating three bioethanol facilities in Europe, whose capacity exceeds 500 million litres per annum and four ethanol facilities in the US, whose capacity exceeds 750 million litres on reaching phase 1 reception of their new Nebraska facility with 335 million litres. Moreover, once their acquisition in Brazil has been confirmed, Abengoa Bioenergía will become the sole company worldwide present in the three large bioethanol world markets: USA, Brazil and Europe.

Furthermore Abengoa Bioenergía continues with their investment plant with 4 facilities under construction: Lacq (France) with capacity for 250 million litres and closed financing, whose cereal facility will start operating at the end of next year. This facility is licensed to produce and commercialise a large part of their capacity in France. In addition, building has started on the port of Rotterdam (Holland) facility with a capacity of 480 million litres, set in a privileged location to supply the growing ethanol demand in Europe.

In the US, Abengoa Bioenergía has successfully completed the Ravenna (Nebraska) facility start-up process and recently successfully closed the financing necessary to build two facilities in Indiana and Illinois with a joint capacity of 670 million litres.

Finally, in August Abengoa Bioenergía announced the acquisition of Dedini Agro, one of the largest Brazilian companies in sugar cane processing and growing. Dedini Agro produces bioethanol and sugar, and has two production facilities in the state of Sao Paulo currently operating with some of the most competitive production costs in Brazil and the world, thanks to the excellent location of the facilities, human team experience and direct control of large part of the crop lands through long term contracts.

With this acquisition, Abengoa Bioenergía enters the Brazilian ethanol market with great growth potential both for internal demand supply and sales on world markets where Abengoa Bioenergía has commercialisation capacity. Furthermore, Abengoa Bioenergía will be able to apply the cellulosic ethanol technology they are developing on the bagasse.

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