Kenya's biggest sugar miller, Mumias Sugar Company on Monday forecast it could earn 2 billion shillings from a new ethanol distillation plant once it is in production next year.

We think we could earn about 2 billion shillings from ethanol which will double our turnover, Jonah Omuyoma, the company's head of factory operations, told Reuters on the sidelines of a green energy conference.

Mumias Sugar reported a 22 percent drop in first half pretax profits on Friday to 1.18 billion shillings as heavy rains hampered cane delivery.

Omuyoma said low international sugar prices were the main reason for the establishment of the ethanol plant.

The reason we are trying to make ethanol is to help us hedge against international sugar prices... it is the biggest driver...if the price of sugar goes too low then we switch to ethanol as an alternative source of revenue, he said.

The total cost of the plant is estimated at 4 billion shillings. Omuyoma said two Kenyan commercial banks were providing the funding.

Mumias plans to produce 22 million litres of ethanol annually, some of which will be exported to the region while the rest will be mixed with petrol for fuel consumption.

The government has already put in a policy for oil companies to mix 10 percent of ethanol in petrol... We are looking at markets in Uganda, Zambia, Mozambique, Tanzania and Rwanda, we have a huge market there, he said.

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