What is jatropha? It is a non-edible oil and one of the second-generation biofuels which does not compete with food requirements. The crop gained prominence years ago when D1 Oil was floated.

Regulation  boost.  The  EU  is  imposing  carbon  tax  on  all  airlines  flying  into  Europe, using  2009  as  a  baseline  for  carbon  emission.  This  has  led  to  a  number  of  airlines, including  Lufthansa,  Japan  Airlines,  Air  New  Zealand,  Thai  Airways  and  several  other airlines  testing  green  jet  fuel  derived  from  jatropha.  The  tests  were  conducted  in collaboration  with  aircraft  makers  Boeing,  jet  engine  maker  Rolls  Royce  and  refinery technology provider, UOP Honeywell.

The  benefits.  We  understand  that  even  without  regulations  driving  demand,  'jat  fuel' has its allure. It freezes at lower temperatures than regular jet fuel, thus allowing jets to fly higher; hence lowering resistance and consuming less fuel.

Improvement  in  technology.  The  use  of  domesticated  seeds  provided  by  science providers (versus using wild jatropha seeds) has resulted in more consistent as well as higher  yields  due  to  better  tree  architecture.  Two  of  the  key  mistakes  made  by  past jatropha  ventures  were:  i)  using  wild  seeds  with  unpredictable  yields,  ii)  engaging outgrowers schemes without proper plantation management.

Comparison with palm oil. It is a common misperception that since jatropha can grow in  arid  land,  it  should  grow  well  in  oil  palm  territory.  This  is  not  so,  as  jatropha  needs distinct  dry  weather  to  shock  it  into  flowering  and  fruiting.  Jatropha  also  thrives  on porous soil such as sandy soil where the water table is low since the plant does not like 'wet feet'. Hence, it does appear that  within  South  East  Asia,  jatropha  will  do  well  in Thailand,  Cambodia  and  Vietnam.  Moreover,  the plant's carbon  footprint  also  tends  to be  smaller,  especially  in  Africa,  as  the  natural  vegetation  in  these  areas  consists  of shrubs  rather  than  tropical  jungle,  where  the  felling  of  trees  will  result  in  much  larger carbon footprint.

Shorter  gestation  period.  Jatropha  trees  start  to  flower  and  produce  fruits  within  six months of field planting and reach peak production in four years. This means that it has a shorter gestation period than oil palm. Its economic lifespan is also much longer at 45 years although technological improvements may hasten the feasibility of replanting.

Genting  Plant  a  potential  jatropha  play.  Among  the  companies  under  our  coverage, Genting  Plant  is  the  only  one  with  a  toehold  in  jatropha  via  its  completed  genome sequencing, which could potentially be used to enhance jatropha's oil yield. We have not incorporated any contribution from its biotech division into our earnings forecast.