Market Development 2011 to 2014

1
Presentation Overview
Page
I. Sales & Market
Market Development 2011-2014
Current Industry Production
Industry Production Projection
RFS2 Mandated Volumes
Market Segments
Gulf Oil Refiners
RFS2 Biodiesel Producers
Tri-State Fuel Distributors
Public Relations Plans
P&L Proforma Analysis @ 12Mgy
P&L Proforma Analysis @ 30Mgy
II. 2nd Generation Biofuels
Technology Evolution
Most Prevalent Feedstocks
Nationwide Woody Biomass
Gulf Area Woodshed Size
5
6
7
8
9
10
11
14
15
16
17
18
19
20
21
22
23
2
Presentation Overview
Page
Existing Competition for Biomass
Future Potential Competition for Biomass
Feedstock Sources
BCAP, USDA Subsidy Program
Ester vs. Cellulosic Biodiesel
Industry Trend Evolution (through 2022)
Plethora of Technologies
National Biofuels Activity Map for U.S.
Louisiana Biofuels Industry
III. 2nd Generation Technology Development
Vanguard Technology Selection
Project Development Overview
Project Development Costs (estimated)
P&L Proforma
24
25
26
27
28
29
30
31
32
33
34
35
36
37
3
Presentation Overview
Page
IV. Business Development
38
Investment Source Options
Developing Relationship Strategies
Investor Relations
Public Relations
JatroDiesel Options
Company Valuation Analysis
39
40
41
42
43
44
4
I. Sales & Marketing
5
Market Development
2011 to 2014
Š Business strategy:
Move to Full Production ASAP
ƒ 12mgy plant to handle animal fats and other high FFA oils
ƒ Start production April 2011
ƒ Establish feedstock agreement (2 yrs.), start Jan. 2011
ƒ Establish sales reps. In market area (Louisiana)
ƒ Develop markets and obtain off-take agreements, start Jan. 2011
ƒ Summer 2011 expand to 30Mgy (reduce processing cost)
ƒ Expand market area to Texas, Miss. And surrounding states
* Projected, not final
6
Market Development
Current Industry Production
Š Biofuels 2010 Production, Aug. to Nov.:
August
September
October
November
RINs
0
0
0
0
Gallons
0
0
0
0
RINs
47,036,210
45,262,210
54,446,724
61,804,117
Volume
31,357,019
30,174,216
36,297,239
41,202,250
RINs
476,540
3,225,469
3,346,845
4,848,874
Gallons
312,800
2,137,764
2,212,636
3,126,238
RINs
986,168,839
1,137,863,591
1,122,083,470
1,075,039,889
Gallons
985,662,471
1,136,508,416
1,118,373,485
1,074,829,277
RINs
0
0
0
0
Volume
0
0
Cellulosic Biofuel (D3)
Ester-Based Biodiesel (D4)
Advanced Biofuel (D5)
Renewable Fuel (D6)
Ethanol (Corn Starch)
Cellulosic Diesel (D7)
* Source: EIA 12/10/10
7
Market Development
Industry Production Projection
Š Biofuels Industry Production Projection thru 2015:
2010
2011
2012
2013
2014
2015
MILLIONS OF GALLONS
Ethanol (Cellulosic)
11.14
34.09
400.43
1012.76
1036.63
1076.63
Renewable Drop In Fuel
(Cellulosic)1
0.61
26.44
197.77
301.77
622.62
622.62
Biobutanol (Cellulosic)
0.01
0.01
10.51
10.51
30.51
30.51
BioDME (Cellulosic)
0.00
0.00
0.00
0.00
0.00
0.00
Biodiesel (Advanced) 2
0.56
1.32
1.81
1.81
1.81
1.81
75.00
75.00
75.00
75.00
75.00
75.00
Renewable diesel (Advanced)3
0.25
0.25
0.25
0.25
0.25
0.25
Renewable oils (Advanced)
0.11
0.19
100.14
100.14
100.14
100.14
Algae (Advanced)
0.32
1.52
101.96
101.96
101.96
101.96
Bio oil (Advanced)
* Source: Biofuels Digest 10/7/10. Red indicates categories applicable to Vanguard
Notes Items in RED(1, 2, 3) include: diesel fuel, ASTM-D975, Jet Fuel D1655, and Gasoline D4814
8
Market Development
RFS2 Mandated Volumes
Š RFS2 - Equivalence Values of RINs
Ethanol (Corn starch)
= 1.0
Biodiesel (Ester)
Cellulosic & Advanced Biodiesel
Butanol (Advanced)
= 1.5
= 1.7
= 1.3
Š Obligated Parties (fuel importers & refiners)
Must meet all four categories of biofuel type or incur
fine of $37,500/day for each category not met.
Š Volume Requirements in Billion Gallons/Yr
Ethanol (Corn starch)
Biodiesel (FAME)
Cellulosic Biodiesel
Advanced Biodiesel
Cellulosic Ethanol
TOTALS
2011
2012
2013
2014
2015
2022
12.07
12.83
13.42
14.09
14.79
15.00
.72
.10
.22
.08
.92
.20
.17
.15
.92
.41
.12
.31
.85
.71
.39
.54
.85
1.22
.53
.92
.85
6.52
.82
4.92
13.38
14.48
15.61
16.93
18.85
28.11*
* plus imports of 8Mgy
Source: EPA 2010, will be adjusted 3Q 2011 for 2012
based on analysis of industry capability
9
Market Development
Market Segments
Marketing to: LA,
TX, MS, Tolling
& Export
Thru oil company
specialty reps.
with direct contacts.
Comm.: $0.01/g
Thru oil company
specialty reps.
with direct contacts
(w/exclusions).
Comm.: $0.01/g
Oil
Companies
To fulfill RFS2
requirements (B5)
Direct sales to
local market.
Through reps. to
all others
Comm.: $0.01/g
Fuel
Distributors
To service stations,
large commercial
and municipal (B20)
Market
Volumes
50%
25%
15%
EBITDA/g
Potential
$0.22
$0.25
$0.20
(local)
(states)
Tolling &
Export
Contract sales for
tolling. Spot export
sales (B100)
10%
$0.18
10
Market Development
Gulf Oil Refiners
Š Oil Refiners (obligated parties)
Louisiana
Alliance Refinery (ConocoPhillips), Belle Chasse
Baton Rouge Refinery (ExxonMobil), Baton Rouge
Chalmette Refinery oJV w/ ExxonMobil and PDVSA), Chal.
Convent Refinery (Motiva Enterprises), Convent
Cotton Valley Refinery (Calumet Lubricants), Cotton Val.
Garyville Refinery (Marathon Petroleum Company), Gary.
Krotz Springs Refinery (Alon), Krotz Springs
Lake Charles Refinery (Calcasieu Refining), Lake Charles
Lake Charles Refinery (Citgo), Lake Charles
Lake Charles Refinery (ConocoPhillips), Westlake
Meraux Refinery (Murphy Oil), Meraux
Norco Refinery (Motiva Enterprises), Norco
Port Allen Refinery (Placid Refining), Port Allen
Princeton Refinery (Calumet Lubricants), Princeton
Shreveport Refinery (Calumet Lubricants), Shreveport
St. Charles Refinery (Valero), Norco
250,000 bb//d (40,000 m3/d)
503,000 bbl/d (80,000 m3/d)
193,000 bbl/d (30,700 m3/d)
255,000 bbl/d (40,500 m3/d)
13,000 bbl/d (2,100 m3/d)
436,000 bbl/d (69,300 m3/d)
85,000 bbl/d (13,500 m3/d)
30,000 bbl/d (4,800 m3/d)
425,000
247,000
125,000 bbl/d (19,900 m3/d)
242,000 bbl/d (38,500 m3/d)
48,500 bbl/d (7,710 m3/d)
8,300 bbl/d (1,320 m3/d)
35,000 bbl/d (5,600 m3/d)
260,000 bbl/d (41,000 m3/d)
Mississippi
Lumberton Refinery (Hunt Southland Refining), Lumberton 5,800 bbl/d (920 m3/d)
Pascagoula Refinery (Chevron), Pascagoula
325,000 bbl/d (51,700 m3/d)
Vicksburg Refinery (Ergon), Vicksburg
23,000 bbl/d (3,700 m3/d)
Rogerslacy Refinery (Hunt Southland Refining), Sandersv. 11,000 bbl/d (1,700 m3/d)
11
Market Development
Gulf Oil Refiners
Texas
Baytown Refinery (ExxonMobil), Baytown
Big Spring Refinery (Alon USA), Big Spring
Beaumont Refinery (ExxonMobil), Beaumont
Borger Refinery (ConocoPhillips/EnCana), Borger
Corpus Christi Complex (Flint Hills Resources), C. Christi
Corpus Christi Refinery (Citgo), Corpus Christi
Corpus Christi E. & W. West Refineries (Valero), C.Christi
Deer Park Refinery (Shell Oil Company), Deer Park
El Paso Refinery (Western Refining), El Paso
Houston Refinery (Lyondell), Houston
Houston Refinery (Valero), Houston
Independent Refinery (Stratnor), Houston
McKee Refinery (Valero), Sunray
Pasadena Refinery (Petrobras), Pasadena
Port Arthur Refinery (Total), Port Arthur
Port Arthur Refinery (Motiva Enterprises), Port Arthur
Port Arthur Refinery (Valero), Port Arthur
Penreco (Calumet [disambiguation needed]), Houston
San Antonio Refinery (Age Refining), San Antonio
Sweeny Refinery (ConocoPhillips), Sweeny
Texas City Refinery (BP), Texas City
Texas City Refinery (Marathon Petroleum Company), T.C.
Texas City Refinery (Valero), Texas City
Three Rivers Refinery (Valero), Three Rivers
Tyler Refinery (Delek Refining Ltd.), Tyler
557,000 bbl/d (88,600 m3/d)
61,000 bbl/d (9,700 m3/d)
348,500 bbl/d (55,410 m3/d)
146,000 bbl/d (23,200 m3/d)
288,000 bbl/d (45,800 m3/d)
156,000 bbl/d (24,800 m3/d)
257,000 bbl/d (40,000 m3/d)
333,700 bbl/d (53,050 m3/d)
120,000 bbl/d (19,000 m3/d)
270,200 bbl/d (42,960 m3/d)
83,000 bbl/d (13,200 m3/d)
100,000 bbl/d (16,000 m3/d)
158,300 bbl/d (25,170 m3/d)
100,000 bbl/d (16,000 m3/d)
174,000 bbl/d (27,700 m3/d)
285,000 bbl/d (45,300 m3/d)
325,000 bbl/d (51,700 m3/d)
10,300 bbl/d (1,640 m3/d)
229,000 bbl/d (36,400 m3/d)
460,000 bbl/d (73,000 m3/d)
72,000 bbl/d (11,400 m3/d)
210,000 bbl/d (33,000 m3/d)
90,000 bbl/d (14,000 m3/d)
55,000 bbl/d (8,700 m3/d)
12
Market Development
Gulf Oil Refiners
Alabama
Tuscaloosa Refinery (Hunt Refining Company), Tuscaloosa 52,000 bbl/d (8,300 m3/d)
Saraland Refinery (Shell Oil Company), Saraland
80,000 bbl/d (13,000 m3/d)
Mobile Refinery (Gulf Atlantic Refining & Marketing), Mo. 16,700 bbl/d (2,660 m3/d)
Oklahoma
Ardmore Refinery (Valero), Ardmore
Ponca City Refinery (ConocoPhillips), Ponca City
Tulsa Refinery (Sinclair Oil), Tulsa
Tulsa Refinery (Holly Corporation), Tulsa
Wynnewood Refinery, Wynnewood
Ventura Refining and Transmission, Thomas
74,700 bbl/d (11,880 m3/d)
194,000 bbl/d (30,800 m3/d)
70,300 bbl/d (11,180 m3/d)
83,200 bbl/d (13,230 m3/d)
71,700 bbl/d (11,400 m3/d)
14,000 bbl/d (2,200 m3/d)
Arkansas
El Dorado Refinery (Lion Oil), El Dorado
Smackover Refinery (Cross Oil), Smackover
70,000 bbl/d (11,000 m3/d)
6,800 bbl/d (1,080 m3/d)
Tennessee
Memphis Refinery (Valero), Memphis
180,000 bbl/d (29,000 m3/d)
Total Production
Required Obligation under RFS2
* Southern Oil Companies’ approx. 65% of total fuel production nationwide,
and share of 850M gallons required for ester-Biodiesel under RFS2 for 2011
** Total U.S. daily consumption is 21,000,000bbbl/d
8,962,100 bbl/day**
376,408,200 gallons/day
525,500,000 gallons/year*
13
Market Development
RFS2 Biodiesel Producers
Texas
Agribiofuels, LLC
12,000,000
Beacon Energy
12,000,000
Direct Fuels
10,000,000
Green Earth Fuels of Houston
90,000,000
RBF Port Neches, LLC
180,000,000
Texas Green Manufacturing, LLC
1,250,000
The Sun Products Corp
15,000,000
Oklahoma
High Plains Bioenergy
130,000,000
Total Production
Total Req. under RFS2 for
ALL southern oil companies
Vanguard Market Share
@ 26.2Mgy
@ 10.7Mgy
Alabama
Eagle Biodiesel, Inc.
30,000,000
Arkansas
Delta American Fuel, LLC
40,000,000
Louisiana
Vanguard Synfuel, LLC
12,000,000
Mississippi
Delta Biofuels, Inc.
80,000,000
Scott Petroleum Corporation
20,000,000
632Mgy (8.3% over-production
meeting RFS2)
525Mgy
4.9%
2.0%
14
Market Development
Tri-State Fuel Distributors
Texas
H & W Petroleum Co Inc Houston
Koenning Inc San Antonio
Beacon Energy Cleburne
Petroleum Wholesale LP Spring
Allstar Fuel Graham
Brenco Marketing Corp Bryan
Brotherhood Investments LP Dallas
Brotherhood Investments LP Red Oak
Derrick Oil & Supply Inc of Port Arthur
Devon Inc Houston
Dfw Biodiesel Inc Fort Worth
Dixie Oil Co San Antonio
Dunhill Products, LP Houston
Fuelone Inc Houston
Goodin Fuels Inc Hereford
H & W Petroleum Co Inc Longview
H & W Petroleum Co Inc Lufkin
Landers Oil Co Higgins
North Texas Locomotive Service Burleson
On Site Fuels Helotes
Louisiana
Richard Oil & Fuel Holding
Co Donaldsonville
Amar Oil Co Inc Hammond
Siarc Inc Gramercy
Breaux Petroleum Products
Inc Lockport
E & S Inc Kentwood
James R Drummond Inc Alexandria
John W Stone Oil Distributor Gretna
Lacassine Fuel LLC Lacassine
Lard Oil Co Inc Denham Springs
Leake Oil Co Inc Saint Francisville
Martin Midstream Partners
LP Amelia
Robertson Oil Co Inc Bogalusa
Russell Daniel Oil Co Inc Saint
Francisville
Wilcox Oil Co Inc--Lm Saint
Francisville
Rpl Oil Distributor & Supply
Mississippi
Buffalo Services Inc McComb
Lard Oil Co Inc Laurel, MS
Southland Oil Co Jackson, MS
15
Market Development
Public Relations
Š Local & Statewide
Press Release written & adapted for each group listed below.
Continued contact describing and creating awareness for green
technologies and their benefits to local area and society at large:
ƒ Personal letters to Mayor, City Council, County Board
ƒ Local new organizations (daily, weekly, newsletters)
ƒ Letters to Chamber of Commerce
ƒ Education program for School Districts (K-12th grades)
ƒ City, County and local State government
ƒ Local businesses (oil, chemicals, forestry etc.).
16
Market Development
P&L Analysis @12Mgy
17
17
Market Development
P&L Analysis @30Mgy
18
18
II. 2nd Generation Biofuels
19
Technology Evolution
Feedstock Yield Comparison
Š Ester-Biodiesel Future is Limited
(i) Max. availability of animal fats (USA) =
(ii) Soy, canola, palm - low yields
=
(Latter groups have food vs. fuel issues)
(iii) Jatropha, non-food, also limited yield =
(iv) Future optimization maybe 2 x above
(v) Algae has excellent yields
=
(Contamination issues could slow progress)
2 Bgy
45 g/ac
170 g/ac
2k-3k g/ac
Š Cellulosic Biomass” Preferred for Biofuels
Massive amounts of low cost feestocks
(i)
Waste biomass (agri, animal, MSW)
2011
2030
=
Approx. 300Mt/y
(ii) Forest waste, 5 tons dry/acre
=
300g
1,500/ac*
(iii) Grasses, up to 16 tons/acre
=
600g
2,000/ac*
(iv) Certain so. hardwoods, 28 tons/acre
=
900g
3,000/ac*
(v) Algae
=
(vi) Sugar Cane
=
400g
700/ac
(vii) Jatropha
=
170g
300/ac
15,000/ac?
20
* Goal by 2030 through optimization will substantially increase out-puts including minimum reliance on water and fertilization
Technology Evolution
Most Prevalent Feedstocks
Š Feedstock Sources For Next Twenty Years
(in order of availability) *
(i) Waste Biomass (Agri, Animal, MSW, scrap wood)
(ii) Grasses (Miscanthus, Sorghum, Switchgrass)
(iii) Algae
(iv) Forest Residue (Pre-thinnings, Commercial
thinnings, Harvesting waste, Plant waste)
(v) Sugar Cane (approx. 15% from USA)
(vi) Jatropha (Less than 10% from USA)
(vii) Crop food for ethanol (sugar beets, cavassa)
(viii) Crop food for biodiesel (castor, palm oil)
(ix) Corn
(x) Soy
* Industry survey conducted 6/2010, Biofuels Digest
21
Technology Evolution
Nationwide Woody Biomass
Š Sources of Woody Biomass
(Advanced Biofuel)*
Southeast
= 49.8%
Northeast
= 2.0%
Northwest
= 4.6%
West
= <0.3%
Central East
= 43.3%
To meet 2022 production goal of 21bgy = 527 plants x 40mgy
In Southeast to produce 10.5bgy
= 263 plants x 40mgy
* Source: USDA Biofuels Strategic Production Report, June 2010
22
Technology Evolution
Woodshed Size (Gulf area)
Š Biomass Availability
Within 120 and 180
Miles from
Alexandria, LA
# of Suppliers
Whole Tree Chip
Forest Residue
2-hrs 3-hrs
221 570
$27
$23
$31
$28
Pricing projections CIF Vanguard
on an annual contract basis
Source: Ecostrat , General Biofuel, Ontario, CANADA
23
Technology Evolution
Competitors for Biomass
Š Existing
Competitors
(for biomass)
Source: Ecostrat , General Biofuel,
Ontario, CANADA
24
24
Technology Evolution
Competitors for Biomass
Š Potential
Future
Competitors
(for biomass)
Source: Ecostrat General Biofuel, Ontario, CANADA
25
Technology Evolution
Feedstock Sources
Š Feedstock Acquisition Strategy
- Purchase through aggregator
- Through local sources
- Long term supply agreements
of woody biomass – 5 yrs
- Warranted through a credit wrap
with major international financial
institutions (Noble Group)
www.thisisnoble.com
•.
- Latter cost adds about $3/ton
- Current price about $29/ton delivered
- Logistics assessments – transport by
barge, rail and truck
- Access to the latest government regulatory and subsidy programs information
(e.g. USDA’s BCAP Program to provide up to $45/ton incentive to foresters)
- Assurance all products meet sustainability and renewable energy standards
26
Technology Evolution
USDA Subsidy Program
Š USDA, Biomass Crop Assistance
Program (BCAP)
- BCAP provides matching payments
- Up to $45/dry ton to forester only
- Material must be an approved type
- Must be sold to qualified biomass
conversion facilities
- Qualified facilities: Those that convert biomass to heat,
for power biobased products (electricity) and for advanced biofuels
- Two year program (to be extended to 5-Year)
- New program under final USDA review
27
Technology Evolution
Ester vs. Cellulosic Biodiesel
Š Technology Comparison:
Ester-Biodiesel
Ethanol
(FAME-based)
Cellulosic
Biodiesel
Carbon Reduction (2010)
60%
20-30%
80%
Scalability (by 2030)
gallons per acre
n/a
2,500
2,500
Sustainability Pot. (by 2030)
Poor
High
High
Product Quality
Poor
Good
Good
Unsubsidized 10 year Market
Competitiveness Potential
Poor
@$45/bbl oil
Good
@$45/bbl oil
Very Good
@$45/bbl oil
Production Cost (excl. feed.)
High ($0.50/g)
Med-Low ($0.35)
Med-Low ($0.35)
Static
Active Development
Technology
Active Development
Specifications:
Cloud Point (C)
-5 to +15
-20 to +10
Cold Flow
Poor
Excellent
Specific Gravity
.88
.78
Cetane
Pipeline Fungible
Shelf Life
Oxidative Characterisitcs
50-65
< B5 (some pipelines; All Europe)
< 6 months
Poor
75-90
No
Yes
Good
<12 months
Excellent
28
Technology Evolution
Industry Trend Estimate*
2010 Cellulosic production begins.
Green diesel
comes on market. Blends to B100 use
existing national fuel pipeline lowering
transportation costs. Dynamic Fuels
turns on 75Mgy plant using poultry fat.
2011 Enzyme and catalyst development
reaches commercial level
2012 Twenty new plants come on line
using forestry waste, municipal waste
and grasses. Achieve significant large
scale, lowering production costs
2020 Genetic engineering, plant breeding
and “grass cocktails” are used to
amplify energy yields of biofuels,
decrease environmental impact, and
lower costs
2022 Chemists introduce biofuels that go
beyond butanol.
Biofuels % of Total Demand for Transportation fuels
Š How the Game Plays Out:
40%
CELLULOSIC ETHANOL
& RENEWABLE DIESEL*
35%
CORN ETHANOL
* And other biofuels
30%
25%
20%
15%
10%
5%
0
2006 2008 2010 2012 2014 2016 2018 2020 2022
*Source: Vinod Khosla,
Biofuels Trajectory to Success 2008
29
Technology Evolution
A Plethora of Technologies
Feed Cost
$ Higher
Š Companies to Watch:
Feedstock
Company
Core Technology
Product
Vegetable Oil
Imperium, Future
Fuel, Vanguard
Transesterification
Ester-Biodiesel
Cilion, Aventine
Altra, Poet, Verasun
Dry mill yeast fermentation
Ethanol
ZeaChem
Ethlvacetate production/hydrocracking
Ethanol
BP-Dupont Biofuels
Advanced Biofuels
Green Biologics
Cobalt, Gevo
Bacterial fermentation
Butanol
Amyris
LS9
Synthetic/fermentation
Diesel/Gasoline
Biocrude
Virent Energy
Aqueous phase reforming
Diesel/gasoline
GreenFuel, PetroSun
Aurora Biofuels
LiveFuels
Growth with CO2 and light /
transesterification of hydrocracking
Biocrude
Lipids
Fatty acid esters
Mascoma, Verenium
Logen, Poet, Abengoa
SunEthanol, TMA
Enzyme hydrolysis/fermentation
Ethanol
RangeFuels, BRI
Coskata, Chorena
Gasification/catalysis or syngas fermentation
Ethanol
Kior
Catalysis/pyrolisis
Biocrude
Lanza
CO fermentation
Ethanol
BlueFire
Acid hydrolysis/fermentation
Ethanol
Changing World Tech.
Thermal depolymerization
Fuel oil
Sugar/Starch
Companies in feedstock improvement:
Monsanto
DuPont, Praj
Syngenta
Allelyx, Teri
Ceres
Bical, Agrivida
Edenspace
$ Lower
Algae
Biomass
Forestry waste
Agricultural
Animal
Municipal Waste
30
Technology Evolution
National Biofuels Industry
Š Renewable Fuels Plants in Pilot, Under Construction or Planned (46)
31
Source: Biofuels Digest 10/7/10
Technology Evolution
Louisiana Biofuel Industry
Š Companies located in Alexandria Woodshed (within 250 miles)
Company
Feedstock
RFS2 Cat.
Technology
2012 - 2013
Production
Current Status
Aquatic Energy
Lake Chalres, LA
Algae
BioCrude Oil
Algal Oil Extraction
30k
12 acre algae demonstration facility
BP/Verenium,
Jennings, LA
Bagasse
Cellulosic Ethanol
Enzymatic Hydrolysis
36mgy
Starting 2012. BP sold 50%
stake to Verenium in 2010.
Dynamic Fuels/
Syntroleum/Tyson
Geismer, LA
Animal fats (Tyson)
Renewable Diesel
Pyrolysis/Gasification
Fischer Tropsch
75mgy
In production as of 10/10
Kior
Columbus, MS
Multiple Biomass
BioCrude oil
Pyrolysis/Gasification
Fischer Tropsch
120mgy
Plans to build three more
plants including in Newton
County and at Bude, MS
Multiple Biomass
Renewable Diesel,
Jet Fuel
Fischer Tropsch
250mgy
HQ, Rialto, CA.
Also biorefinery
Darling/Valero
Norco, LA
Animal fats
Renewable Diesel
Not determined
135mgy
Need DOE funding
to move ahead
Raven Biofuels
Paramus, NJ
Forestry waste
Cellulosic Ethanol
Acid Hydrolysis
10mgy
Funding/Public
Co. Mkt Cap
$630k
Rentech
Natchez, MS
Source: Biofuels Digest 10/7/10
32
III. Technology Development
33
Technology Development
Project Technology Selection
Š Technology Overview
ƒ Product choice: Bio-oil from biomass
(decision explanation, see next slide)
ƒ Technology proprietary, but uses off-theshelf science
ƒ IP development belongs to Vanguard
ƒ Possible trade secret vs. patent (TBD)
ƒ Project concurrent with production
after ramp-up to 30Mgy (new trans) 9/11
ƒ Plant size: 30Mgy to 50Mgy (TBD)
ƒ 100% funded through Vanguard
ƒ JatroDiesel will provide engineering thru new process commissioning
ƒ Approx. 30% of existing assets are usable (tanks, pumps, piping)
ƒ Feedstock milling and main processor main new items
ƒ Total cost including bench work, piloting, demo and plant: <$30M
ƒ Relationship options with http://www.JatroDiesel (see page 43).
34
Technology Development
Project Overview
Š Product Overview
ƒ Product choice: Bio-oil (or bio-crude)
ƒ Made from biomass (grasses, waste
wood, municipal solid waste)
ƒ Conversion process called
“hydrothermal.“ Process uses water
and methanol (or equal) at high temp.
and pressure to extract oil
ƒ Oil sent to an oil refinery’s coker unit
and is thermally “cracked” into a
drop-in-fuel (gasoline, diesel or jet fuel)
ƒ Bio-oil plant is 1/6th cost of making green diesel
or drop-in gasoline or jet fuel A
ƒ Plant is easily and rapidly scalable, with known costs
ƒ Low adoption hurdles
ƒ Leverages existing transport and storage infrastructure
ƒ Leverages existing refinery infrastructure
ƒ Plant easily replicable; modular; scalable from 5Mgy to ?
35
Technology Development
Project Development Costs
Plant operations
begin*
$750k
$25M
$600k
$500k
Build pilot testing processor.
Approx. 50kg/m
$400k
$300k
$200k
Pilot testing processor
starts operation
Pilot testing complete.
Final drawings
for 30Mgy plant
Installation
complete begin
commissioning
$15M
Equipment in and
ready for installation (4 months)
30Mgy trans
expansion complete.
Begin bench testing
2nd Gen
$5M
Complete drawings. Order pilot
plant equipment
Dec.
‘11
March
‘12
$10M
Main plant
drawings complete.
Order equipment.
$100k
Sept.
‘11
$20M
July
‘12
Technical Development Cost
Oct.
‘12
Capital Plant Cost
$2.0M
Equipment
installation begins
6 week build
Jan.
‘13
April
‘13
$1.0M
Oct.
‘13
* Operation concurrent with existing
30Mgy trans. Biodiesel ops.
Jan.
‘14
April
‘14
36
C a p i t a l P l a n t C o s t
Technical Development Cost
Š Development Cycle (Overview)
Technology Development
P&L Proforma
37
37
IV. Business Development
38
Business Development
Investment Options
Š Government
ƒ USDA loan guarantees – to show
commercial capability (vs. for R&D)
ƒ Dept. of Energy – for commercially
feasible technologies (drop-ins?)
Š Institutional (equity investment of
common and/or preferred stock)
ƒ Pension fund
ƒ Mutual fund
ƒ Investment trust
ƒ Investment banking
ƒ Hedge fund
ƒ Sovereign wealth fund
ƒ Endowment fund
ƒ Private equity firms
ƒ Insurance companies
Š Public Partnership
Š Enterprise Zone Tax Credits or Funding
39
Business Development
Investment Options
Š Developing Relationships
Targeting institutional and private
investors with quarterly newsletter
announcing company progress.
In addition, direct contact with certain
qualified investors, businesses,
banks and other lending
institutions, including:
9
9
9
9
Oil companies (as an adjunct to marketing effort)
Investment companies with a history investing
in renewable energy
Following up inquiries of investment interests from PR
Grant organizations (Federal, State and Private)
40
Business Development
Investor Relations
Š Companies Invested in Biofuels (sample, many more)
41
Business Development
Public Relations
Š National. International and State
Press Release written & adapted for each group. A first story might be about time
line for the development of new technology and anticipated production start date.
Distributed to:
ƒ Special interest publications - consumer
ƒ Daily newspapers business section editors – business & consumer
ƒ Business/Investor publications – business & investors
ƒ Energy organizations (print and on-line) – trade & consumer
ƒ Renderers’ Association - trade
ƒ Biofuels Digest - trade
ƒ Chemicals Digest - trade
ƒ Biodiesel Magazine - trade
ƒ Biofuels Business - trade
. . . and addressing Local market
(as shown on slide 14).
42
Business Development
JatroDioesel Investment Options
Š Step 1: Technology Procurement Options
Criteria
Positive Impact
Negative Impact
Hire scientists and develop
Company owns IP. License and distribution
rights opportunity
Acquire talent; keep talent; track
work history; potential long lead time
Hire Vendor to Develop
Own IP with all right thereof
Cost. Future development certainty
Exclusive License
Potential shorter lead time; technology
ready and; strong market position; ability to relicense and distribution rights; increased
company valuation
Initial and long term cost; lack of
control for development; financing
more difficult to obtain; legal issues
over use
Non-Exclusive License
Lower initial and on-going royalty cost;
technology tested and ready to deploy;
mitigated legal issues potential
Lack of competitive advantage; lack of
development control; financing more
difficult to obtain
Joint Venture
(stand alone JV entity)
Control over IP development; joint ownership in
IP; ability to maximize re-licensing and
distribution rights; no licensing fees to others.
Increased JV company valuation. Easier
financing
Separate company issue; cost of development;
trust in JV partner issues; harder to finance the
non-JV
component of business
Control over IP development; joint ownership in
IP; ability to maximize re-licensing and
distribution rights; no licensing fees to others.
Increased company valuation. Easier financing
Give up equity. Cost if preferred stock
option has guarantees and goals not
met etc.
Equity Partner
(w/preferred and/or
common stock)
43
Business Development
Company Valuation
Š Business strategy to migrate from
Ester-Biodesel to Renewable oil by 2014
Basis for common stock share value:
ƒ Plant Current valuation
12Mgy
$ 22,000,000
5 x EBITDA + assets
(port assets leased)
ƒ Plant at 30Mgy (trans.)
$ 55,000,000
5x EBITDA + assets
ƒ Plant at 30Mgy (2nd Gen)
$100,000,000
7 x EBITDA + assets
ƒ Plant at 90Mgy (2nd Gen)
$ 200,000,000
10 x EBITDA + assets
44