Bioenergy Qualifications

Transcription

1 Bioenergy Qualifications Bioenergy Project Evaluation and Due Diligence Services Authors: Jake Jacobi Mark Warren Contact: Chris Vlahoplus

2 ScottMadden and Ascendant Partners Have Recent, Relevant, and Unique Qualifications in the Bioenergy Space We have joined forces to develop significant qualifications to address the gamut of bioenergy project issues we can assess bioenergy project commercialization success factors Together, our team has been selected for over 90% of the Department of Energy Loan Guarantee Program due diligence projects for the biofuels sector (we have performed seven due diligence projects for DOE selected for others) Multiple feedstocks Multiple technologies Multiple market blendstocks Multiple co-products Multiple geographic regions Multiple project configurations Independently, we have performed over 100 bioenergy projects We combine to bring a wide range of expertise to bear on bioenergy projects Finance Operations Agriculture product expertise Market expertise: Feedstock and biofuels markets Electric generation and co-generation expertise Biofuels strategy expertise Infrastructure, logistics, storage, and handling 1

3 Biofuels Companies Must Address Fundamental Issues... What is the project position on the biofuels value chain where are the competencies? What is the project commercialization plan is it as robust as the technology plan? What is the project cost position on the advanced energy cost curve? Is the project a low cost producer? How does the project maximize value? Is there a co-product strategy? Is there a drop-in fuel product strategy? What is the feedstock strategy? Is the feedstock sustainable? Is the feedstock supply reliable? Is the feedstock affordable? Our team has the experience to evaluate company and project management of these critical strategic issues that are fundamental to project success 2

4 ... and Understand Their Positioning on the Value Chain We can evaluate project strengths and weaknesses across the bioenergy value chain Feedstock Supply Feedstock Transport Processing and Conversion Fuel Transport & Distribution Fuel Markets Sourcing - Contracts - Spot market Gathering or Harvesting - Structural factors - Firmness of supply - Process - Geography Consolidation Composition Transport - Cost - Flexibility - Contracts - Proximity Storage - Capacity - Proximity - Drying Pre-Treatment Conversion Production factors - Capacity - Feedstock flexibility - Yield Rail, Truck or Pipeline - Cost - Flexibility - Contracts - Proximity Storage Commodity Markets and Pricing Offtake Contracts Hedging Regulatory or Legislative Requirements or Mandates We understand all the policy and legislative drivers: RFS-2, BCAP, Cellulosic Biofuels Tax Credit, VEETC, Renewable Diesel Credit, California LCFS, etc. 3

5 We Have Extensive Experience in Bioenergy Due Diligence We have evaluated the largest bioenergy loan guarantee projects across the bioenergy value chain Feedstock Supply Feedstock Transport Processing and Conversion Fuel Transport & Distribution Fuel Markets Growing Harvesting Feedstock growth versus drain analysis Feedstock sustainability and project adequacy Feedstock pricing Feedstock origination contract(s) Aggregating Chain of custody Transportation Storage Moisture management Processing Experience with multiple conversion types Evaluation of major process inputs Market basis determination Netback calculation Transportation contracts Transportation strategy Blending strategy RFS-2 and advanced biofuels market Obligated party options Biofuels waiver credit Advanced biofuels cost curve analysis Cellulosic biofuels pricing Biomass-based diesel pricing Offtake contracts Business model Regulatory landscape Competitive assessment Business success factors Risk assessment Financial model analysis Alternative project cases Evaluation of financial parameters Liquidity analysis 4

6 We Have Deep Experience and a Proven Project Track Record We have significant experience with all major bioenergy feedstocks, and conversion processes and products Feedstock Oilseed crops Animal fats Unused cooking oil Conversion Source Fats and oils Conversion Type Transesterification Acid esterification Hydrotreating Grains Starches Conventional Sugar crops Sugars alcohol fermentation Ag residues Woody biomass Energy crops Algae Municipal solid waste Cellulose Hemicellulose Lignin Conventional alcohol fermentation Enzymatic hydrolysis and fermentation Anaerobic digestion Pyrolysis Gasification Catalysts to liquid fuels Products Biodiesel Biomass-based diesel Ethanol Butanol Ethanol Butanol Ethanol Butanol Methane Petroleum equivalent blendstocks Syngas Sugars Pyrolysis Ethanol Our broad-based experience allows us to evaluate bioenergy projects of all types Our experience base enables us to translate lessons learned across multiple projects Our versatility provides us with a vantage point for project due diligence that few other companies possess We are able to see past lofty projections and drill into the specific project drivers and success factors that are crucial to a successful due diligence project In addition to biofuels projects, our experience is directly translatable to biomass generation facilities 5

7 We Understand Elements of the Renewable Fuels Standard We have worked directly with EPA to develop our understanding of obligated parties under RFS-2 Accumulate RINs by purchasing the physical gallons of renewable fuel Accumulate RINs by purchasing advanced biofuels and the RIN (waiver value) Accumulate RINs by purchasing the required amount of RINs from the market Accumulate RINs by producing the physical gallons of renewable fuel Purchasing the correct RIN volume of renewable fuel will satisfy RVO requirements Obligated party can purchase fuel from producer and capture the RIN value This sets the high end of the advanced biofuels cost curve Advanced biofuel price is the marginal producer on the cost curve Any advanced biofuel (e.g., cellulosic ethanol) cannot be priced higher than the marginal cost curve producer because buyers will opt to purchase advanced biofuels + the RIN (waiver) Purchasing the RVO required amount of RINS from any advanced biofuels type RIN prices vary by different types of fuels (1:1, 1:1.3, 1:1.5; 1:1.7) which are driven by fuels btu value Obligated parties will focus on converting the gallons purchased into RIN equivalent gallons because different fuel types have varying RIN values A producer that also has RVO requirements can produce renewable fuels and then control the RINS produced Refiners, buyers, and blenders will satisfy their obligations by optimizing their costs across their choice of options When EPA built the nested hierarchy of advanced biofuels and then set the RFS-2 requirements based on RIN volumes, they assured that the marginal cost producer of advanced biofuels would set the cap on all other biofuels Given the options that obligated parties have for satisfying their requirements, the market will reward low cost producers and continually drive down marginal costs as low cost producers enter the renewable fuels space 6

8 We Have Developed Pricing Analytic Tools for Advanced Biofuels Our methodology enables us to evaluate advanced bioenergy market risks We have analyzed multiple project advanced biofuels blendstocks including biomass-based diesel, cellulosic ethanol, and crude oil replacements cellulosic naphtha, cellulosic diesel, and applicable co-product markets (biogas, ash, RECs, etc.) Our advanced biofuels cost curve has served as the basis for evaluating offtake prices and revenues for multiple DOE loan guarantee due diligence projects Our due diligence projects all have featured scenario evaluations of regulatory and commodity variations and their impacts on project profitability We also have calculated market price basis and netback (after transportation) revenue streams Advanced Biofuels Cost Curve (Illustration) $0.88 $3.58 $0.06 $0.19 $3.45 $ A 318 mmg y B 195 mmg y C 90 D 142 F G H I J Marginal Advanced Biofuels Price Biofuels Waiver Credit Cellulosic Basis Capture Transportation Netback Price Ethanol Price Netback Example We connect the dots between market price and policy 7

9 Our Feedstock Analytics are Second to None We thoroughly understand all bioenergy feedstocks, their availability, sustainability, cost, harvesting, transportation, and processing requirements We have detailed feedstock cost and availability databases and have access to all relevant government and private information sources We understand pricing, price basis management, transportation, and counterparty risk issues associated with all types of feedstocks Our assessments determine the project site attractiveness in regard to feedstock supply and cost We perform detailed feedstock growth and harvesting assessments to determine the true going forward feedstock costs Our Feedstock Analytics are Second to None Our Feedstock Analysis for Forestry Products is Equally Applicable to Biomass Electric Generators We thoroughly understand all bioenergy feedstocks, their availability, sustainability, cost, harvesting, transportation, and processing requirements We have detailed feedstock cost and availability data bases and have access to all relevant government and private information sources We understand pricing, price basis management, transportation, and counterparty risk issues associated with all types of feedstocks Our assessments include detailed growth versus drain calculations to determine the sustainability of the facility feedstock Our assessments determine the project site attractiveness in regard to feedstock supply and cost We perform detailed feedstock growth and harvesting assessments to determine the true going forward feedstock costs We have significant experience with woody biomass, including pulpwood, hardwood, forest residues, slash, waste wood, pellets, etc

10 Our Financial Analysis is Comprehensive and Robust We get to the heart of the project finance issues by performing a detailed sensitivity on major project inputs - we also validate the reasonableness of these inputs by comparing to the relative markets or historic projects Our financial model analysis guides informed decisions, helps de-risk potential investment decisions, and increases the chances of a success for a project investment Our Due Diligence Includes a Detailed Financial Proforma Analysis We Perform a Detailed Financial Model Stress Testing We get to the heart of the project finance issues by performing a detailed sensitivity on major project inputs - we also validate the reasonableness of these inputs by comparing to the relative markets or historic projects Our Financial model analysis guides informed decisions, helps de-risk potential investment decisions, and increases the chances of a success for a project investment

11 Our Project Business Plan Analysis Evaluates all Relevant Aspects Our business plan analysis includes the following components Assessment of risk management strategies, contracts (off-take and origination) Development of a matrix for each critical component of the business model and rank the project position relative to the marketplace in order to identify those areas which need improvement Assessment of management and staffing of the project sponsor and any strategic partners An infrastructure assessment of elements necessary for a sustainable site: Natural gas specifications and cost Electricity specifications and cost Water and waste water specifications and cost Land access Storage access Rail strategy, layout, and rail line analysis implications to the project Evaluation of opportunities of expansion based upon site characteristics A risk assessment methodology that identifies key risks and prioritizes them according to a risk magnitude and likelihood of occurrence An assessment of competition for all project aspects such as feedstock, offtake, infrastructure requirements, etc. An analysis of legal and regulatory environment 10

12 Our Combined Qualifications Provide Us With a Unique Advantage Over Others in the Bioenergy Sector ScottMadden ( Ascendant Partners ( A leading provider of professional consulting services in all aspects of the energy sector including generation, markets, clean tech, renewables, and infrastructure where we provide strategic, process, and technical services For nearly 30 years, ScottMadden has been a leader in energy consulting serving more than 200 energy organizations, including 90% of the top 20 utilities, and completed thousands of projects Through our publications, including our Energy Industry Update, Perspectives, white papers, and other independent and multi-client research reports, we provide clients with thoughtful analysis and consideration of issues, opportunities, and approaches to their business A leading provider of professional consulting, credit risk management, and capital solutions dedicated to serving clients in the food, agribusiness, and renewable energy industries Recently engaged to complete over 150 renewable fuels projects to help clients conduct comprehensive feasibility studies, complete actionable business plans and raise the capital required to fund development Through years of experience, clients are assisted in business life cycle issues that improve financial returns by better matching the means of production with the needs of the marketplace Investment banking services provided by Ascendant Financial Partners, LLC Due diligence skills in the following bioenergy areas Advanced biofuels - Feedstock diversification - Biobutanol Cellulosic biofuels - Technology assessments - Feedstock analysis - Platform integration Biodiesel, biojet fuel, and renewable diesel Policy and legislative implications of prices and market forces Biomass to energy - Anaerobic digestion - Gasification - Cogeneration/CHP Biomass supply chain management Feedstock origination Advanced biofuels blendstock and offtake market management Electricity/natural gas markets 11

13 Contact Us For more information on Bioenergy Qualificaitions, please contact us. Chris Vlahoplus Partner and Clean Tech & Sustainability Practice Leader ScottMadden, Inc Glenwood Avenue Suite 480 Raleigh, NC Phone: