DuPont Biofuels Russ Sanders Marketing Director Pioneer Hi-Bred Technology that Fuels Citigroup October 2, 2007
Regulation G The attached charts include company information that does not conform to generally accepted accounting principles (GAAP). Management believes that an analysis of this data is meaningful to investors because it provides insight with respect to ongoing operating results of the company and allows investors to better evaluate the financial results of the company. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies. 2 This data should be read in conjunction with previously published company reports on forms 10-K, 10-Q and 8-K. These reports along with reconciliations of non-gaap measures to GAAP are available on the Investor Center of www.dupont.com. Forward-Looking Statement During the course of this presentation, I would like to remind you that we may make forward- looking statements. All statements that address expectations or projections about the future are forward-looking statements. Some of these statements include words such as expects, anticipates, plans, intends, projects and indicates. Although they reflect our current expectations, these statements are not guarantees of future performance, but involve a number of risks, uncertainties, and assumptions. We urge you to review DuPont's SEC filings, particularly its latest annual report on Form 10- K and quarterly reports on Form 10-Q, for a discussion of some of the factors which could cause actual results to differ materially.
DuPont Integrated Biofuels Strategy 3 Seed & Crop Protection Solutions Ag Inputs Seed & Crop Protection Biobutanol, advanced biofuels Advanced Fuels Butanol Cellulosic Fuels Biofuels From Biomass Pioneer: Increase Biofuels Yield Per Acre
Biofuel Demand Market Opportunity Biofuels Growth - 2020 Estimates by Region 4 North America Biofuels > 30 B gals Current Production > 6.5 B gals EU & Eurasia Biofuels - 20 B gals Current Production > 1.3 B gals +100 billion gallon market by 2020? Asia Pacific Biofuels - 30 B gals South & Central America Biofuels - 15 B gals Currently > 1.7 B gals Current Production > 5.0 B gals An industry driven by regional feedstock production, market conditions and government policy Source: Dept of Energy and DuPont estimates
US Ethanol: On Track to Double Again 5 140 billion gallons of gasoline used in the U.S. Ethanol Growth: 6.7 billion gallons in production 6.7 billion under construction Most new ethanol plants consume 250,000 acres of corn each.$12-15 Million in corn seed sales Ethanol is driving major change in corn value chain relationships
6 The Most Critical Moving Parts Oil and Gasoline Prices Government Policy Fuel vs Feed Grain Storage and Transportation Environmental Issues with More Intensive Pproduction Cellulosics: Viability and Timeline The Blend Wall North America Perspectives: 14 billion gallons at 100% E10 penetration Rail off-loading infrastructure issues 250 Million passenger vehicles in the US ~17MM vehicles sold per year 6 million Flex Fuel Vehicles on the road 1300 E 85 stations out of 170,000
Ethanol Plant Net Returns Over Operating Costs (07/08) Corn Price (Dollars per Bushel) 2.00 2.25 2.50 2.75 3.00 3.25 3.50 3.75 4.00 4.25 4.50 4.75 5.00 Ethanol Price (Dollars per Gallon) 1.25 0.07 0.01-0.06-0.12-0.19-0.25-0.31-0.38-0.44-0.51-0.57-0.64-0.70 1.30 0.12 0.06-0.01-0.07-0.14-0.20-0.26-0.33-0.39-0.46-0.52-0.59-0.65 1.35 0.17 0.11 0.04-0.02-0.09-0.15-0.21-0.28-0.34-0.41-0.47-0.54-0.60 1.40 0.22 0.16 0.09 0.03-0.04-0.10-0.16-0.23-0.29-0.36-0.42-0.49-0.55 1.45 0.27 0.21 0.14 0.08 0.01-0.05-0.11-0.18-0.24-0.31-0.37-0.44-0.50 1.50 0.32 0.26 0.19 0.13 0.06 0.00-0.06-0.13-0.19-0.26-0.32-0.39-0.45 1.55 0.37 0.31 0.24 0.18 0.11 0.05-0.01-0.08-0.14-0.21-0.27-0.34-0.40 1.60 0.42 0.36 0.29 0.23 0.16 0.10 0.04-0.03-0.09-0.16-0.22-0.29-0.35 1.65 0.47 0.41 0.34 0.28 0.21 0.15 0.09 0.02-0.04-0.11-0.17-0.24-0.30 1.70 0.52 0.46 0.39 0.33 0.26 0.20 0.14 0.07 0.01-0.06-0.12-0.19-0.25 1.75 0.57 0.51 0.44 0.38 0.31 0.25 0.19 0.12 0.06-0.01-0.07-0.14-0.20 1.80 0.62 0.56 0.49 0.43 0.36 0.30 0.24 0.17 0.11 0.04-0.02-0.09-0.15 1.85 0.67 0.61 0.54 0.48 0.41 0.35 0.29 0.22 0.16 0.09 0.03-0.04-0.10 1.90 0.72 0.66 0.59 0.53 0.46 0.40 0.34 0.27 0.21 0.14 0.08 0.01-0.05 1.95 0.77 0.71 0.64 0.58 0.51 0.45 0.39 0.32 0.26 0.19 0.13 0.06 0.00 2.00 0.82 0.76 0.69 0.63 0.56 0.50 0.44 0.37 0.31 0.24 0.18 0.11 0.05 2.05 0.87 0.81 0.74 0.68 0.61 0.55 0.49 0.42 0.36 0.29 0.23 0.16 0.10 2.10 0.92 0.86 0.79 0.73 0.66 0.60 0.54 0.47 0.41 0.34 0.28 0.21 0.15 2.15 0.97 0.91 0.84 0.78 0.71 0.65 0.59 0.52 0.46 0.39 0.33 0.26 0.20 2.20 1.02 0.96 0.89 0.83 0.76 0.70 0.64 0.57 0.51 0.44 0.38 0.31 0.25 2.25 1.07 1.01 0.94 0.88 0.81 0.75 0.69 0.62 0.56 0.49 0.43 0.36 0.30 Source: Pioneer Global Marketing 7 More challenging plant economics will drive consolidation, and more intense, margin driven operating strategies
8 Ethanol Grain Origination Shadows (Iowa-2009) Pioneer Advantages Connection with specific growers Known placement of Pioneer Brand HTF hybrids Grain quality / crop condition information The emergence of corn micro markets Source: Pro Exporter Network
Biofuels and Acre Productivity 9 North America 1 acre of corn grain (160 bu) = 1 acre of corn stover (50%)= 439 gallons of ethanol 146 gallons of ethanol South America 1 acre of soybeans (43 bu) = 1 acre of sugar cane = 60 gallons of biodiesel 600 gallons of ethanol Europe 1 acre of switch grass (5 tons)= 375 gallons of ethanol 1 acre of sunflower (1200#) = 82 gallons of biodiesel 1 acre of canola (1557#) = 77 gallons of biodiesel Asia 1 acre of jatropha trees (2200#) = 250 gallons of biodiesel 1 acre of oil palm trees (4400#) = 587 gallons of biodiesel
Pioneer and the Ethanol Value Chain 10 Seed technology, support Pioneer Farmer Processor Seed technology, support Crop productivity services Grower relationship linkage Grain processing optimization Increased feedstock availability New DuPont technologies Pioneer is enhancing its seed product strategy with expanded supply chain relationships
11 Pioneer HTF Hybrids with Higher Ethanol Yield Herculex I for Less Grain Damage and Better Grain Quality Near infrared ethanol yield prediction Pioneer brand hybrids have about 7% variation in ethanol yield Identified 182 HTF ethanol hybrids for 2008 Most are leader products with the traits growers want Herculex I can help reduce the presence of mycotoxins, improving DDG feed quality 12% 10% 8% 6% 4% Ethanol Yield Potential Comp. Trait Pioneer IndustrySelect Ethanol Hybrids Fall within this Range Grain quality will become as important as grain volume 2% 0% Herculex Insect Protection technology by Dow AgroSciences and Pioneer Hi-Bred Herculex and the HX logo are registered trademarks of Dow AgroSciences LLC
Pioneer s Pipeline of Grain Traits For Fuel and Feed Markets 12 Increased functionality through optimization of genetic variation Increased total starch Improved fermentation properties Higher oil Additional starch Additional oil Improved oil Improved digestibility Further increases in starch and oil Improved oil Digestibility Improved protein quality Today 2016 Increase ethanol yield Increase feed energy value Maximize DDG co-product protein quality Reduce unwanted or low-value kernel components Accommodate new processing technologies such as fractionation High Grain Yields, Strong Agronomics and Input Traits are Key
13 Other Pioneer Strategies in the Biofuels Value Chain Corn-After-Corn Crop Management Expertise Hybrid development and selection Tillage, pest management practices Grain Quality, Storage Consultation Management practices Grower training Grain Quality Data Feedback System Near infrared ethanol yield prediction Hybrid selection data for farmers, plant optimization data for processors Farming practices, grain handling infrastructure, and grain information systems are being impacted NIR Grain Assay
14 Modifying Fermentation Microbe Software to Produce Biomaterials and Improved Biofuels Genome Metabolic Engineering DuPont is a Technology leader Cell Factory Engineering the cell to economically produce high value products with fermentation Genetic enhancement technologies will extend beyond the field crop to the fermentation process Cell modified to increase PDO production 500X
Development of an Advanced Biofuel BioButanol: a 4 carbon alcohol molecule made from corn in existing ethanol facilities Ethanol Processing 15 Ethanol Limited blend flexibility Vehicle modification issues High vapor pressure Water absorption tendencies Pipeline transport issues Biobutanol High flexibility No modification needed Comparable to gasoline No Water absorption issues Pipeline transport possible Gasoline Refining Pipeline Transport Terminal Reduced fuel mileage - 77,000 BTUs/gallon Comparable to gasoline - 110,000 BTUs/gallon Biobutanol will enable growth in biofuels Retail Marketing
16 Ethanol Feedstock Source Scenario A Scenario for Growth of Biofuel to Supply 30% of 2004 U.S. Gasoline Demand by 2030 70 60 Billion Gallons/Year 50 40 30 20 January 2007 State of the Union Goal Cellulose ethanol 10 0 2005 2010 Grain-based ethanol Grain Ethanol 2015 2020 2025 2030 Grain feedstocks provide the foundation, cellulose drives long-term growth
17 U.S. Department of Energy View of Biomass Availability Cellulose sources: Crop residues, methane emissions (manure landfills, wastewater treatment facilities), forest residues, mill residues, urban wood waste, and dedicated energy crops. U.S. could produce nearly 1 billion dry tons from agricultural lands and still meet food, feed and export demands Forest lands could produce another 368 million tons each year U.S. could support a large-scale, cellulosic industry capable of replacing up to 1/3 of U.S. petroleum consumption (70 billion gallons) Corn Belt crop residues represent the highest volume source of cellulosic feedstocks
DuPont Working Across the Cellulosic Ethanol Supply Chain Downstream Markets 18 Fermentation Production & Separation Conversion Pretreatment Enzyme Saccharification Handling, Storage, Drying & Transport Feedstock Production Feedstock Harvest U.S. Government National Energy Agenda Incentives & Funding Pioneer is evaluating corn hybrids for possible differences in cellulosic ethanol yield
Meeting the Production Challenge of Corn Cellulosics 19 A 200 bushel / acre crop produces about 4.8 tons of dry matter 50% removal produces about 180 gallons per acre Cobs are the initial feedstock target for DuPont ICBR technology 2X the bulk density of stover Percent Dry Matter 50 45 40 35 30 25 20 15 10 5 0 49 20 11 10 8 2 Grain Stalk Leaves Husks Cob Other Source: University of Kentucky Important Issues Harvest technology Storage options Soil / crop management Pioneer s farmer relationships and knowledge of production agriculture are key leverage points
20 Corn: Bright Future as a Biofuels Feedstock Long-Term Goal: 1,000 Gallons Per Acre of Corn More efficient conversion technologies Higher crop yields per acre More diverse feedstocks beyond grain Ethanol Productivity 1200 1000 Endosperm Pericarp 500 gallon/acre (2010) 18 gallon/acre (2010) Gallons / Acre 800 600 400 200 Stover 100 gallon/acre (2010) 0 2010 2015 2020 Endosperm Grain Fiber Stover Corn will be competitive with other feedstocks