Good morning, ladies and gentlemen. Welcome to the Ence 2024 results presentation. I will now hand over to Mr. Ignacio Colmenares, Executive Chairman, and Alfredo Avello, CFO. Gentlemen, please go ahead.
Good afternoon, ladies and gentlemen. Thank you for joining Ence's 2024 Results Conference Call. Our CFO, Alfredo Avello, and our Head of IR, Alberto Valdés, are also connected to this call. After the presentation, we will be pleased to answer any questions you may have. Pulp prices bottomed out in the fourth quarter, as you can see on slide six. Hardwood pulp demand reached a new record high in the fourth quarter, and producers' inventories ended the year at low levels. On the supply side, the bankruptcy in November 2024 of a major integrated Chinese pulp and paper producer is now generating a pulp supply gap of over 200,000 tons per month. Additionally, there are hardwood pulp conversions and significant downtimes scheduled for the first quarter. This tight pulp supply-demand balance is driving pulp prices higher.
The European pulp price recovered by $100 per ton for orders placed in January and delivered in February. In February, we implemented a second price increase of $60 per ton for March deliveries, and we are now implementing a third price increase of another $60 per ton for April deliveries, up to $1,220 per ton. I expect further pulp price increases in the short term. In the midterm, pulp demand growth is expected to continue at healthy rates, boosted by tissue and packaging segments. Furthermore, there are no significant market pulp capacity additions expected in Latin America until 2028, supporting a positive outlook for pulp prices in the coming years. Industry experts have increased their pulp price forecasts for the next three years, up to an average of over $1,450 per ton in 2027.
The record price gap with softwood pulp is strengthening demand for our Ence Advanced Pulp, which accounted for 23% of total pulp sales in 2024, as you can see on the next slide, number seven. These products deliver higher margins than our standard pulp, as they substitute softwood pulp, which is far more expensive. We achieved an extra margin on these products of close to EUR 30 per ton during 2024, improving our average sales price by EUR 7 per ton. This extra margin increased the pulp business EBITDA by over EUR 7 million in 2024. We expect these products to continue gaining market share, reaching 30% of total pulp sales in 2025 and 50% by 2028, without including our expected fluff pulp sales.
Our first line to produce up to 125,000 tons of fluff pulp at Navia is on track to deliver higher operating margins as from the fourth quarter 2025, as you can see on slide eight. This is an innovative project that has generated a lot of interest among our clients in Europe, who are currently importing fluff pulp from North America based on softwoods, which is more expensive. Our fluff pulp will be based on eucalyptus and will be very competitive. On the basis of today's fluff pulp prices, it would deliver an extra margin of around EUR 60 per ton compared to our standard pulp. This extra margin should allow us to improve the pulp business EBITDA by over EUR 7 million per year when fully ramped up.
The estimated CapEx amounts to EUR 30 million in 2024 and 2025, and we expect to achieve a return on capital employed of above 15%. As part of our diversification strategy, we have developed a portfolio of renewable packaging solutions capable of replacing plastic food trays. We have already homologated a food tray with a number of important clients in Spain, and we plan to commission a first line in Navia during the third quarter 2025, capable of producing up to 12 million trays per year. We want to start serving the market as soon as possible while building an independent plant elsewhere with an initial production capacity of 40 million units and with the possibility of scaling it up in the future. We expect this new plant will be ready by the end of 2026. The total estimated investment amounts to EUR 12 million.
This project has a huge growth potential and very attractive returns. The expected return on capital employed on this project is well over 15%. Continuing with slide nine, let me update you on our efficiency and growth in the pulp business. Firstly, we plan to reduce the cost of our pulp mills by replacing fossil fuel at the lime kilns with cheaper recovered methanol and biomass. We are already using recovered methanol in Navia, and we have launched a project to use biomass. This project will allow us to reduce Navia's cash cost by EUR 13 per ton, one three, and reduce its Scope 1 emissions by close to 60%. Note that all our sustainability projects entail a significant improvement in competitiveness. The expected cash cost reduction in Navia should improve the pulp business EBITDA by EUR 8 million.
Estimated investment amounts to EUR 35 million, with an expected return on capital employed above 15%. We have already been awarded grants of EUR 13 million for this project, which have been deducted from the estimated CapEx figure and which will be collected once the project has been finalized by the second half of 2026. Secondly, we have an integral project to boost Pontevedra's efficiency and flexibility. We envisage a very competitive biomill specialized in high-margin products. We will finish the engineering for Pontevedra Avanza project this year that will allow us to close the budget, confirm our cash cost reduction targets, and take an investment decision.
This project should allow us to improve the pulp business EBITDA by EUR 20 million by reducing Pontevedra's cash cost by EUR 50 per ton, by improving its flexibility to use different wood species, and by continuing to upgrade its production from standard pulp to Ence Advanced Pulp. The initially estimated CapEx in this project amounts to EUR 120 million over the next five years, with a required return on capital employed of over 12%. Finally, we continue to make good progress with the engineering and permitting of the As Pontes project for the production of bleached recycled pulp for paper, textiles, and bio products. We have recently reached a historic milestone. We've been able to recover cotton fibers in blended garments using an innovative technology from our Swedish partner, ShareTex. As Pontes will be a fully circular plant based on the recovery of paper, board, and textile fibers.
It will be 100% decarbonized, with no waste generation and minimal water consumption. It also avoids a new mill invading a natural space since the project will be located on industrial land previously occupied by a thermal coal plant. For all these reasons, the project completed the public information process without any social opposition. We have presented it to the Decarbonization Program for Greenfield Projects under the European Next Generation Funds, and we are expecting a grant of up to a maximum of EUR 30 million. Note that none of the investments I have described will require more wood. The Iberian pulp industry is already importing over 2 million tons of wood annually from Latin America, which is an increasingly scarce resource both here and there. Turning to slide ten, I'm glad to announce that this month we sold energy-saving certificates equivalent to 191 GWh for EUR 30 million net.
They are expected to be cashed and registered as revenue in the first quarter 2025. This sale is a result of our continued efforts to create shareholder value through efficiency improvements at all our plants. We are working on further energy efficiency actions to achieve more certificates during 2025 and beyond, though we do not expect them to be as substantial as those already achieved. Turning now to slide eleven, I would like to highlight the acquisition of a conventional biomethane plant in December at a price of EUR 17 million. We signed a 15-year agreement with one of the largest oil and gas companies in the world for the sale of the biomethane produced by the plant with its corresponding sustainability certificates. In January, we signed a project financing for the acquisition and plant investments in the plant.
As part of the plant business plan, we aim to invest EUR 7 million in 2025 and 2026 to adapt the plant to our unique business model to transform local agricultural biomass and livestock manure into a biofertilizer with multiple benefits and without disturbing the local communities. Firstly, we are eliminating odors and adapting the biomass transportation routes to avoid the trucks passing through nearby villages. Secondly, we want to upgrade the plant's waste, the digestate, into a high-organic fertilizer, which will not nitrify the soil. Finally, we will boost the plant biomethane production up to the targeted 50 GWh per year, improving the process and eliminating production bottlenecks. These investments will allow us to improve the plant's annual EBITDA from close to EUR 2 million expected in 2025 to over EUR 4 million expected in 2027.
The acquisition of this plant is an important and strategic milestone that enables us to fast-track the development of a large biofertilizer and biomethane platform in Spain and to showcase the added value by our respectful and circular business model. This plant will be our shop window to the communities where we are developing other projects. As you can see on the following slide, number twelve, Ence Biogas already has a portfolio of 28 biofertilizer and biomethane projects in Spain, which already have land secured and feasibility studies. Sixteen of these projects are already advanced in the permitting phase, and we expect five of them to be ready to build during 2025. On top of these, we are working on another 12 projects, which are at an earlier stage of development.
We plan to build these plants with EPC contracts using non-recourse project financing, but by long-term PPAs, like we did at La Galera. Our initial goal is to generate over 1 TWh per year and to contribute over EUR 60 million to EBITDA by 2030. However, if we consider all the projects that we are developing, we could reach up to 4 TWh per year. Let's continue with the progress of our biomass thermal energy business on slide thirteen. There is an opportunity to generate more competitive renewable thermal energy with biomass to help decarbonize the Spanish industry and get an attractive return for both our customers and us. Through our subsidiary, Magnus Servicios Energéticos, we signed our first OIM contract last year with a major industrial company in the food and beverage sector in Spain.
At the end of 2024, we signed a second contract with a leading company in the brewing sector in Spain for the installation of two boilers at one of their facilities and for the supply of 85 GWh of biomass thermal energy per year with a 15-year term. The commissioning of these boilers is expected during the first half of 2026, with a planned investment of EUR 12 million and an expected contribution to EBITDA of over EUR 2 million. This investment already excludes a EUR 4 million subsidiary granted by the European Next Generation Fund already cashed. We are working on another 13 projects with important industrial companies in the food and beverage and chemical industries in Spain to provide them with renewable thermal energy. We are negotiating in exclusivity in four of these projects, and we expect three of them to be ready to build during 2025.
As in the biomethane business, we plan to build these biomass thermal plants using EPC contracts and non-recourse project financing backed by long-term PPA, like we are doing. The aim of Magnus Servicios Energéticos is to produce 2 terawatt-hour per year of renewable thermal energy by 2030 and to contribute over EUR 40 million to EBITDA. I now invite Alfredo to elaborate further on our 2024 results financial results.
Thank you, Ignacio. Let's continue with the financial performance of our pulp business in slide fifteen. The pulp business EBITDA increased in 2024 by three times, up to EUR 138 million, pushed by higher pulp prices and lower cash cost. The average sale price improved by EUR 69 per ton, up to EUR 647, while the average cash cost improved by EUR 32, down to EUR 493 per ton, despite its increase in the fourth quarter due to temporary factors.
These temporary factors were mainly related to a smaller contribution from the sale of surplus energy after the acquisition of the necessary one at market prices following the shutdown of the Ecogen turbine in Navia, the unexpected lower grants received from the Ministry of Industry related to offsetting CO2 emissions, and to higher chemical costs following a temporary force majeure stoppage ended within the fourth quarter at one of Spain's largest caustic soda producers. Having said that, now that chemical costs are already normalizing during the first quarter, we also expect normalized grant levels in 2025, and Navia's Ecogen turbine will restart in mid-May 2025. Altogether, our operating margin reached a solid over EUR 154 per ton in 2024, which is almost doubling that of 2023. Finally, pulp production reached 997,000 tons in 2024 compared to 975,000 in 2023, driven by the strong operating performance of Pontevedra.
The new water recovery solution at Pontevedra resulted in a close to 50% reduction in its water consumption during the summer, allowing it to operate normally during dry seasons. This is a very important milestone that significantly improves the resiliency of our biomills during dry periods. Turning now to slide sixteen, EBITDA came from the electricity generation of our biomass energy business, increased by 50% in 2024, up to EUR 32 million, pushed by higher generation volumes and lower operating costs. The volume of electricity sold in 2024 reached almost 1.2 teras, an increase of 23% from the previous year, which was affected by lower pulp prices under the former regulation. Remember that a new methodology for updating quarterly the remuneration of biomass plants was published back in June 2024, with retroactive effects as of the first of January of that year.
The average sale price recognized for biomass plants is approximately EUR 115 per megawatt-hour and has two main components: a regulatory pull price, which is estimated by the regulator using a basket of forward prices for the following quarters, and an RO for the difference up to the set EUR 115 per megawatt-hour price. On top of these components, we still receive the remaining RI. It may happen that the real market pull price in each quarter may differ from that estimated by the regulator to the basket of forward prices. Under the old methodology, this difference was compensated through the regulatory collar, but this collar has now been eliminated. Therefore, in order to mitigate such risk, we're establishing a hedging policy that basically replicates the formula used by the regulator to estimate the regulatory pull price, now covering up to 40% of our estimated energy sales.
Biomass operating costs were EUR 24 per megawatt-hour lower in 2024 than in 2023 due to lower biomass costs and a higher fixed cost dilution on the back of the higher energy generation. This cost reduction trend should continue in 2025. We expect lower operating costs this year as a result of higher biomass availability at lower prices and higher fixed cost dilution. Finally, the renewable business-concentrated EBITDA was EUR 26 million in 2024. This is lower than in 2023, which included a positive contribution from other renewable businesses of EUR 20 million, mainly related to the sale of two PV projects during the first half of that year. Also, as you know, we are starting to develop other renewable businesses, which reduced 2024 EBITDA by EUR 6 million. This figure includes a EUR 2 million impairment of our PV projects during the fourth quarter.
We expect the contribution from the new businesses to improve in 2025 following the acquisition of La Galera plant in December. Let's continue in slide seventeen with the solid performance of our consolidated results in 2024. Group revenue grew by EUR 47 million year-on-year, up to EUR 876 million, and our consolidated EBITDA improved by EUR 76 million up to a solid EUR 165 million. This is almost two times higher than in the previous year. Finally, the group profit increased by EUR 57 million up to EUR 32 million. Turning now to slide eighteen, consolidated free cash flow before changes in working capital and growth CapEx reached EUR 101 million in 2024. Changes in working capital implied a cash flow of EUR 66 million in 2024.
Thirty-seven of this was due to higher power prices and inventories, and twenty-nine was related mainly to a higher RO of our biomass plants as a result of the new methodology approved back in 2024. Growth and sustainability CapEx reached EUR 64 million in 2024, with half in each of our two businesses. As our Chairman highlighted earlier, we acquired a conventional biomethane plant in December 2024 for EUR 70 million, which we aim to adapt to our unique business model, transforming local agrobiomass and livestock manure into a viable fertilizer without disturbing the local communities. On top of this, we're developing another up to 40 biofertilizer and biomethane projects and other 14 renewable industry thermal energy projects, with the aim of more than doubling the renewable business EBITDA over the next five years.
In the pulp business, we are building our first line to produce fluff pulp in Navia, which will be commissioned in the fourth quarter 2025. We also expect to start the first line to produce pulp-based food trays in the third quarter 2025. All the investments in 2024 were mainly related to the engineering of Navia's cash cost reduction and decarbonization project, which has already been launched, and to the engineering of Pontevedra Avanza and As Pontes projects. Continuing with slide nineteen, our consolidated net debt was EUR 321 million at the end of 2024, including IFRS 16 lease liabilities. This figure implies a low leverage ratio of just 1.8x the group's average cycle EBITDA. The small year-on-year net debt increase includes a payment of EUR 34 million to our shareholders, which implied a 5% dividend yield.
Remember that our dividend policy is based on the cash generated in each business and takes into account the leverage level and our CapEx plans and commitments. Our strong balance sheet and expected cash flow generation should allow us to achieve our growth and diversification goals while maintaining a prudent leverage and an attractive shareholder remuneration. As you can see on slide number twenty, we closed the year with a strong equity position. This amounted to a consolidated EUR 287 million with long-term maturities in both businesses and no components in the pulp business. Note that this liquidity position does not include the revolving credit facilities, which amount up to EUR 130 million in the pulp business and EUR 20 million in the renewable business, and which remain fully available.
In July 2024, we refinanced Magnon through a EUR 170 million seven-and-a-half-year term loan facility, including this EUR 20 million RCF, among 14 banks and institutional investors, extending its final maturity until January 2032. This is a new facility, is ring-fenced to Magnon, and has no recourse to the parent company of the renewables business. The proceeds were used to refinance the previous facility to repay certain shareholder loans and for other CapEx and general corporate purposes. We reached this important milestone thanks to our prudent leverage policy, which allowed us to cope with the temporary cash imbalances created by the former regulation. It is also evidence of the financial community's confidence in the operation and development of Ence and our biomass energy business. Finally, in January 2025, Ence Biogas signed a green project financing loan for the acquisition of La Galera conventional biomethane plant for a total of EUR 20 million.
This facility will be used to finance the acquisition of the plant, as well as the planned CapEx investments aimed to adapt it to our previously explained business model. Let's turn now to slide twenty-one. I would like to conclude my section emphasizing once again Ence's continued and exceptional sustainability performance. We are leaders in sustainable forestry, circular economy, social commitment, gender equality, and corporate governance. Our best practices have been recognized by independent ESG agencies and indexes. In 2024, Sustainalytics confirmed Ence for the fourth consecutive year as the most sustainable player in the global pulp market, having raised our overall ESG performance score up to 93 points out of 100. We have also been awarded the EcoVadis Platinum Medal, the highest rating awarded by this platform, and we remain members of the prestigious FTSE4Good Index since 2021 and the IBEX ESG and IBEX Gender Equality indexes.
Let me hand back now the floor to our Chairman and CEO.
Thank you, Alfredo. Let me conclude with our outlook for 2025 and some closing remarks. Regarding the outlook for 2025 on slide twenty-three, I would like to highlight the following: pulp prices bottomed out in the fourth quarter. The European pulp price has already increased by $160 in January and February, and we are now implementing a third price increase of $60 up to $1,220 per ton. I expect further price increases. We are working, and we expect a cash cost reduction in pulp during 2025, already starting in the first quarter. As the temporary factors which affected negatively our cash cost in the fourth quarter 2024 are the mismatching. The sale of energy saving certificates for EUR 30 million is expected to be cashed in the next weeks and registered as revenue in the first quarter 2025.
We expect a higher energy generation in 2025 at Magnon, supported by the restart of our 16 MW plant in Ciudad Real. We expect lower operating costs at our biomass plants, supported by higher biomass availability and higher fixed cost dilution. Finally, we expect an improvement in the contribution from new renewable businesses following the acquisition of La Galera biomethane plant in December. Let me finish now with some closing remarks on slide twenty-six before we move to the Q&A session. We are building a large biofertilizer and biomethane platform in Spain, which aims to produce over 1 TWh by 2030 and contribute over EUR 60 million to EBITDA. Our thermal energy business is developing well. It aims to produce 2 TWh by 2030 and contribute over EUR 40 million to EBITDA.
Our Ence Advanced Pulp sales are expected to reach 50% of the total BHKP sales by 2028, with an operating margin approximately EUR 30 per ton higher than our standard pulp. We forecast 30% for this year. On top of this, our first 125,000 tons fluff pulp line in Navia will be commissioned in the fourth quarter 2025, with an expected operating margin approximately EUR 60 per ton higher than our standard pulp. We expect to start the production and sale of our renewable packaging solutions in 2025. Navia's cost reduction and decarbonization project has been launched, and we are making good progress with engineering at the Pontevedra Avanza and As Pontes projects. Reaching these goals should allow us to more than double the renewable business EBITDA over the next five years, while the transformation of Ence into a producer of special pulp products will significantly improve the business operating margin.
Remember that the execution of these projects will be adapted and aligned to our cash flow generation to maintain a prudent leverage and an attractive remuneration for shareholders. Thank you for your attention. We would be pleased now to hear any questions you may have.
Thank you. Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press star one on your telephone keypad. You will have the opportunity to ask all the questions that you may have. We kindly ask you to ask only one question at a time to our speakers instead of asking multiple questions at the beginning. Once again, that is star one should you wish to ask a question. Thank you. Your first question is from Cole Hathorn from Jefferies. Your line is now open.
Morning. Thanks for taking the questions. Can I start with the pulp cash costs?
You've been very clear that there were some one-off disruptions that raised cash costs into the fourth quarter, but I'm just wondering, what is the profile of the cash cost decline in 2025? Is there a kind of broad level of cash costs that you're thinking about into 2025?
Yeah. Yeah. First of all, because it's important dilution-wise, we expect to produce around one million tons in 2025. I would like to insist that we expect an annual cash cost reduction in 2025. As temporary factors which affected the cash cost in the fourth quarter 2024 are approximately ending during this first half of 2025. Lower sales of surplus energy due to the failure of Navia's turbine alternator we held in May. CO2 emissions runs were normalized since January 2025.
Chemical costs, which increased in the fourth quarter 2024 due to temporary stoppage of one of Spain's largest soda producers, are progressively normalizing in the first quarter 2025. The price today is $100 below the fourth quarter. We also expect stable wood prices in 2025, January and February. We have been buying at the same price than last year, that at the end of last year. Additionally, there will be a higher fixed cost dilution after Navia's maintenance shutdown at the end of the first quarter 2025. By all those reasons, I now see an average cash cost of around $510 per ton in the first quarter 2025 and below EUR 485 per ton for the full year 2025.
Thank you. Maybe just following up onto your key projects like the fluff project, which is well timed considering closures from IP on the softwood side.
As we go into 2025, you're improving your mix, but you're also going to get further cost reduction per ton. That is quite clear on the Navia side. On Pontevedra, when will you be making the decision for your project there? When could we start to see the benefit of the cost reduction? I know you've said over time that you'll do more work each annual maintenance, but I'm just wondering how quickly we could see the benefits.
Yeah. Your first question, the fluff, we plan to commission the installation by summer this year and then to start to be able to homologate the product in our customers. We expect to start selling fluff pulp at a good price with an extra margin of at least EUR 60 per ton from just the beginning of 2026. We are quite positive on that.
The market is supporting, and all our customers are expecting and want the product to come to them as soon as possible. That is the first line. We plan to build a second line as soon as we are on the finish, as soon as we will have finished the ramp-up of this first line of 125,000 tons. We still do not know if we are going to do that at Navia or at Pontevedra, the second line. Continuing with Pontevedra, the Pontevedra Avanza project is now on the first 3 phase of engineering. We did last year phase 1 and phase 2. Now we are finishing phase 3.
Phase 3 engineering guarantees you with more than 99% of probability that you are going to have the cost you expect, that the time required for the installation is going to be what you expect, and therefore you will have a guarantee on the return, I mentioned before, over 12%. It is a full transformation of the mill. We are going to reduce all the inefficiencies of this mill, which are very much linked to the thermal energy of the mill. We are going to flexibilize the mill in order to be able to buy different species of eucalyptus and pine, not decreasing production capacity. We are going to increase some parts of the mill capacities in order to be able to increase the percentage of special products we sell.
We think the final investment decision is going to be finalized in the third quarter of this year, and we will decide when to start by the end of this year. As I mentioned before, it is a five-year investment. We do not want to stop the mill during several months because we will lose customers and market share, and because we are prudent. As I mentioned many times, we like phased investments. If something happens in the market you do not expect, and there is a strong reduction in prices, you can stop the investment, and you are not burning cash at the same time from the day-to-day business and from the CapEx. That is why we are going to do these investments in five years. We will not change that.
Even if from a just financial point of view, it would be better to do that only in two years. As a conclusion, final investment decision at the end of this year, and it is going to take five years to transform the mill.
Thank you. Maybe just one for Alfredo, which is on the EUR 30 million energy sales. Where will that be recognized? Can we assume that revenue and profit will be the same number? Kind of EUR 30 million benefits to revenue and profits in Q1.
That is what we are expecting, recorded as revenue in first Q2025. The cash is definitely or should definitely come in, and that is the way we are proceeding.
Thank you.
Yeah. What is important is that the cash is going to be in our hands in a few days because the process is quite complicated.
We first did an auction at the end of the third quarter. The company won the auction. They did due diligence. With all this data, we went to the minister to register those certificates. They were approved finally by the ministry. We invoiced all these gigawatts at this price three weeks ago now, and we should collect the bill in a few days. What is important is cash is going to be on our hands very, very soon.
Thank you.
Thank you.
Thank you once again. Please press star one should you wish to ask a question. Your next question is from Manuel Lorente Ortega from Santander. Your line is now open.
Yes. Hello. Good morning. My first question probably is a follow-up on Pontevedra's Avanza project.
I don't know if I'm right, but looking at your previous presentations, it looks like there have been some delays on the investment decisions that initially were contemplated at some point in Q1, and now you are mentioning at some point late this year. I was wondering, is this because of any engineering issue that you are facing on that mill, or is it just the combination of other projects that are getting faster traction, like the fluff or the packaging?
Yeah, Manuel, no, it has nothing to do with the fluff or with the packaging. Nothing to do with all the other projects we are doing. It's just, as I mentioned, a question of the engineering. We want to have the first 3 phase of engineering 100% finished before the final investment decision. That is going to happen by summer.
The decision is going to be taken on the last quarter of this year.
Okay. My second question then, it will be on the growth CapEx needed for the different diversification or transformation plans that you are currently taking place. In 2024, they amounted roughly EUR 66 million. It will be great if you can give us some indication regarding what we should expect for this year and eventually for the following years. Thank you.
Yeah. I would like to insist that in all the plans we have on the strategic roadmap from last year till 2028, we are financing the growth with our cash flow. At the same time, we will be able to pay normal dividends to our shareholders, and we will keep a low level of leverage.
As I have already always mentioned, below 2.5x the EBITDA on the pulp business and below 5x on the energy business. Regarding the CapEx we require for this year for growth, we have EUR 25 million. EUR 15 million is for the fluff. We already paid some money last year. EUR 10 million is for the first line of packaging and the beginning of the second line of the packaging. EUR 10 million. That is EUR 25 million on the pulp business. It is not a growth project, but it is a transformation project. The decarbonization cost reduction in Navia is EUR 15 million and is going to be paid this year. This EUR 15 million. The balance of the total project will be paid next year, and next year we will collect the grants.
Going back to the renewable business CapEx, biofertilizers and biomethane growth, we are planning EUR 20 million this year without any new M&A, just greenfield projects. We would like to start the construction of two biomethane plants by the end of the year. Regarding the renewable thermal energy growth, we are planning EUR 20 million for this year because we have the contract we signed last year with this large brewer close to Madrid, and we have almost signed two other contracts with a milk producer, and we will start this year the works. EUR 40 million on the renewable business. EUR 40 million renewable and EUR 25 million on pulp business for growth.
Okay. Just my final question, and again, a qualitative question, so I might be wrong.
I remember the first time you presented all these transformation programs in order to build up your biomethane and your thermal platforms. I remember that you kind of pointed out that you would expect a faster pace of growth in the biomethane than in the thermal platform. However, when I see your current pipeline, it looks like benefits from thermal are coming on a faster pace than on the biomethane, or at least is what I see from the pipelines that you are pointing out on the different slides. Is this correct first, and or?
Let me give you some information. Today, the parties are boosting the possibility of signing thermal contracts with the food and beverage sector. It is not happening on the biomethane business.
Secondly, it is easier in terms of permitting to do a new installation of a biomass boiler on a factory already existing than starting from zero with the permitting for the biomethane business. Thirdly, the biomass required in these thermal units we are installing in terms of biomass is quite small. It is 30,000-40,000 tons per year. On the other hand, on the biomethane and biofertilizer business, where you require up to 100,000 tons of biomass and manure per mill, and you have to securize that before starting on the process, it takes longer. I would say that by all these factors I mentioned, in 2025 and 2026, we are going to see more results from the industrial heating business.
Once we have started and we already have in the pipeline the permits for the biomethane plants and they are ready to build, it will go faster. Is that clear?
Yeah. Okay. Thank you. It is a matter that is, let's say, easier to implement at the first stage. Yeah. Okay. Thank you.
Thank you, Manuel. Are there any other questions?
No more questions at this time. Please proceed with a closer. Oh, sorry. We have a follow-up from Cole Hathorn from Jefferies.
Thanks for taking the follow-up. I'd just like to follow up on the biomethane business. I mean, you've just taken it over now. You've just got the keys. How do you think about that business to de-risk growth? Are you using this acquisition now to kind of look at the business, how it works, and better plan for growth in that business?
How are you kind of using this acquisition to de-risk future growth? I'd just like your thoughts there.
Yeah. Yeah. It's an important question. Thank you. For us, this acquisition was strategic by two reasons. The first reason is that the biomethane produced in Germany or produced in Denmark at a larger scale than in France or Spain has mostly a unique feedstock, corn, and then it's a stable process quite easily to be dominated. In Spain, the raw material we are using is a mixture of manure coming from cows, from pigs, biomass coming from the agriculture, residues, and I don't know very well the name in English, caducados. Of date. Yeah. Of date. Yeah. Past dates from the supermarkets. It's a mixed. It's a digestion without oxygen.
It takes 40 days, and you need to know very well and to dominate the process, which is absolutely different from the process done in Germany and Denmark. That is why we decided to acquire these plants. Just for your information, this plant was producing between 20 and 25 MW per day, and two months after, we are between 60 and 70, just installing all our knowledge of processing biomass and processing pulp we have in our mills. That is the first thing. The second thing, which is even more important, is that our business model is absolutely different from the business model of our competitors in Spain. Our competitors are developing biomethane plants close to villages, no matter the order, no matter the transport of this manure through the villages, and they are producing two products, biomethane and digestate. The plant we bought has a terrible odor.
The board was there at the end of last year, and it was terrible. They wanted to have the board there in order to understand what we are doing. We have already got the permits and got the contracts, and zero odor will be there by mid-February, sorry, by mid-April. We want this plant to be a showroom where we are going to invite the habitants and the mayors of all the other areas where we are developing our biofertilizers and biomethane plants. In order they realize that with our model, there are no damages for the population nearby. The third thing is that all our competitors are producing, as I mentioned before, unlike these plants today, biomethane and digestate. The digestate is the output. It's a liquid product. You have to put that on the fields.
It's a low-quality fertilizer, but it's terrible because it nitrificates the soil. That is why Greenpeace, Ecologistas en Acción, are against this business model. What we are doing, and we are just now with the permitting, but we have already the contract with the technology producer, we are going to transform this digestate into an organic fertilizer. The main difference is that it's quite difficult to explain in two minutes, is that the nitrogen, when it is ammoniacal, like on the digestate or like on the manure, it is dissolved very, very quickly on the soil. It goes to the soil and from the soil to the rivers or to the water below. It has a strong effect of pollution.
While this organic fertilizer has an organic nitrogen which is diluted very, very slowly, and it does not affect nor the soil nor the water below the soil. What we want is to have a showroom for showing to all the stakeholders what is our business model and to be able to replicate that quickly around Spain. That is the three reasons why we decided to buy this conventional biomethane plant.
If you'll allow me, just one follow-up on demand trends in pulp. It might be too early to give any color what you are seeing from customers on pulp in Europe, but from the outside looking in, 2025, we have seen inventory levels kind of restated lower. Qianming in China is still down, and that has tightened the market. I am wondering if you are seeing anything from your European customers.
Are there any kind of improvements in demand, less competition from any Chinese exports on paper or boxboard products that's pulling in a bit of pulp into your customers, or not really? I'm just wondering if you're seeing anything.
Yeah. Yeah. To be frank, demand for pulp in Europe has been good on the third and fourth quarter last year. Prices dropped because of the prices in China, not because of a reduction on the demand. The demand today is good. I think from now till summer, we are going to have two demands: the normal demand and a recovery of the stocks on the supply chain. I would like to insist that the demand has been good at the end of last year and the second half of last year, and we expect a good demand in all the sectors.
In tissue, the market continues to grow in Europe. In writing paper, the demand is stable. In specialties, the demand is good. In packaging, the demand is good. What we expect is a normal year in terms of demand with new stocks being built at the beginning of the year and until the half of the year.
Thank you.
Thank you.
Thank you. There are no further questions at this time. Please proceed with the closing remarks.
Yeah. Thank you very much.
Thank you.