The factory at the village of Telagasari, is expected to be operational by the end of this year after the process of revitalization, head of the Cooperatives, Small Scale Enterprises and Industry office of Kotabaru Zainal Arifin said here on Sunday.
The district administration is still awaiting a grant from the central government to finance the revitalization of the factory, Zainal said.
The factory still needs additional machine, therefore, it will take five to six months for completion, he said.
"Hopefully the grant would be available from the research and technology ministry this month that a memorandum of understanding could be signed between the district administration and the investor PT Bio Mitra Energi," he said.
After the signing of the MoU, the investors would soon finish the process of revitalization, he said.
He said under the cooperation agreement, the investor is to install additional machines and provide working capital of Rp6 billion.
The fund would include Rp4 billion for the procurement of additional machine and Rp2 billion for working capital to buy basic material and operating cost .
The present factory, which is not yet completed, is worth around Rp3 billion with buildings and the land worth around Rp2 billion or a total value of Rp5 billion.
The district administration and PT Bio Mitra Energi will name an operator of the factory, Koperasi Gajah Mada, which is based in the village of Telagasari, in the Kelumpang Hilir sub-district .
Zainal said the factory will have a production capacity of 10 tons of bio-diesel per day using waste of crude palm oil (CPO) as the feedstock.
"Unlike the original plan, the project , an assistance from the Research and Technology Ministry, was to use CPO as the basic material, but now we use CPO waste," he said.
The end product would not be competitive in price if CPO was to be used as the basic material, he said.
"The production cost will be much lower by using CPO waste for feedstock," he added.
The biodiesel to be produced by factory is expected to be enough for fuel requirement of local small and medium industries and fishermen.
The factory built with a grant from the research and technology ministry was built at a cost of Rp16 billion in 2007, but it failed to come on stream and the value has depreciated to Rp3 billion at present.
"Apart from some of the machines not yet installed, many of the components of the factory have damaged by rust Zainal said.