Cellulosic Biofuels and Energy Grasses Energy Policy Issues Committee March 21, 2012 Agenda Commercializing cellulosic biofuels in North Carolina Feedstock (Biomass) is key Chemtex International, M&G Group Crescentino Italy First Commercial Cellulosic Biofuels Plant Project Alpha, Clinton NC Energy Grasses Feedstock Supply Chain Eastern NC Swine sprayfields agronomic rates Economic Viability Mark Conlon Vice President, Sector Development Biofuels Center of North Carolina
Cellulosic Biofuels and Energy Grasses Energy Policy Issues Committee March 21, 2012 Corn ethanol is currently the only bank financeable, proven turnkey technology for biofuels in the US Corn is not a viable option for biofuels in NC Limited acreage suitable for corn in NC Must import corn to supply our swine and poultry industries By policy, NC is pursuing 2 nd generation cellulosic biofuels
Biofuels Value Chain Creating Economic Viability 2nd Generation Biofuels Biofuels development requires economic sustainability across each link of the value chain Energy crops must provide greater value to the farm than existing crop practices Feedstock Transportation Processing and Conversion Distribution End User
Biofuels Value Chain Creating Economic Viability 2nd Generation Biofuels Biofuels development requires economic sustainability across each link of the value chain Production facilities are capital intensive and must generate ample ROI for equity investors with minimal new technology and commercial risk Feedstock Transportation Processing and Conversion Distribution End User
Biofuels Value Chain Creating Economic Viability 2nd Generation Biofuels Biofuels development requires economic sustainability across each link of the value chain Cellulosic ethanol can utilize existing petroleum and ethanol distribution infrastructure. Eventually new investment and ROI will be required for flex fuel pumps at the retail level Feedstock Transportation Processing and Conversion Distribution End User
Biofuels Total Production Costs Biomass is Key to Economic Viability All Other 20% Delivered Feedstock Costs Biomass Biofuels projects develop where feedstocks are most abundant and cost effective Clinton
North Carolina Swine Lagoon Map Sprayfields conversion to Energy Grasses 3343 swine waste lagoons 200,886 sprayfield acres Clinton
Swine Industry Concentration Higher Value from Sprayfields with Energy Grasses Chemtex Site, Clinton
North Carolina Swine Industry Higher Value from Sprayfields with Energy Grasses?
2nd Generation Biofuels Economics Enhanced by Higher Yielding Crops and switchgrass BIOFUELSCENTER.ORG Site: North Carolina s Biofuels Campus, Oxford
Farming Giant Reed Arundo donax
Chemtex International an overview A multi-national engineering design and construction company delivering turn-key projects USD $300 million plus in annual turnover U.S. administrative and engineering HQ Wilmington NC Part of a privately held Italian polyethylene terephthalate (PET) manufacturing concern Groupo Mossi & Ghisolfi (M&G Group) Worlds largest PET producer, resin used in high grade packaging Annual turnover is excess of USD $4 Billion
Chemtex International PROESA Renewable Platform Biofuels and Bioproducts breakthrough technology displaces petroleum with energy grasses commercial ready First plant under construction 15 MGY cellulosic ethanol Crescentino Italy - 100% equity finance Second plant under development - 20 MGY cellulosic ethanol Near Clinton in Sampson County NC Project Alpha Feedstock advantaged - energy grasses on swine sprayfields Equity secured, including 25% equity stake from Toyota Project finance tied to USDA 9003 loan guarantee program
Chemtex/M&G Group Crescentino, Italy 15 MGY Cellulosic Ethanol Plant 2 nd Plant (20 MGY) to be duplicated at larger scale in Clinton, NC
Chemtex International, M&G Group Crescentino, Italy Arundo donax feedstock Cellulosic Ethanol Plant Construction
Chemtex Cellulosic Ethanol Project Alpha Why Clinton North Carolina? Eastern North Carolina can sustainably produce and deliver more tonnage of energy crops at lower price points - swine sprayfields NC swine industry provides high acreage and tonnage from a manageable supply base critical to supply chain & project finance 200,000 acres of swine sprayfields within 600,000 acres of hay provides for biofuels and bio-products plant clustering opportunities. State commitment to biofuels development
Chemtex International Project Alpha - $170 million Site selection, Sampson County Completed July 2011 USDA decision on Loan Guarantee Mid November 2011 USDA letter to BB&T decision delayed up to September 2012 Environmental Impact Assessment Completed Nov. 2011 Multi-year feedstock contracts (100%) Viable regulatory agronomic rate changes sought Chemtex offering long-term take or pay contracts Financial Closing March 2012 Delayed Initiate equipment purchases March 2012 Delayed Construction starts July 2012 Delayed Construction completed December 2013 Delayed Plant Start-up January 2014 Delayed
Chemtex and Energy Grasses Mixed Feedstock Supply Chain Plan Delivered to Chemtex, Clinton NC Energy Crop Giant Reed (Arundo) Conservative yield Dry short ton/ac Acreage Months supply tonnage 16 9,500 6 months 150,000 t Switchgrass 10 (to be confirmed) 5,000 2 months 50,000 t Biomass sorghum 10 (to be confirmed) 5,000 2 months Sorghum hybrids 50,000 t Grain sorghum 3 NA 1 month residuals 25,000 t Rye 2 Winter 1 month crop 25,000 t Harvest timing and type August, baled to be used in spring Nov Feb chopped Jan Feb baled to be used in spring Aug sep chopped October, chopped March, chopped Supply Chain Working Plan: Chemtex Chemtex Agro Biofuels Center of North Carolina Ceres (Seed Company)
Jan Feb Harvest Timeline Chemtex and Energy Grasses Mixed Feedstock Supply Chain Plan Harvested from the Farm and Sprayfields Crop Energy grass Switchgrass Giant reed Harvest Product Baled Chopped Dry Tonnage 50,000 tons 50,000 tons Acreage 5000 acres 3176 acres Yield Dry tons/acre 10 tons 16 tons March Rye Chopped 25,000 tons NA 2 tons April May June July Aug Sept Oct Giant reed Fiber sorghum Grain sorghum crop residue Baled Chopped 50,000 tons 50,000 tons 3176 acres 5000 acres 16 tons 10 tons Chopped 25,000 tons NA 3 tons Nov Giant reed Chopped 50,000 tons 3176 acres 16 tons Dec Supply Chain Working Plan: Chemtex Chemtex Agro Biofuels Center of North Carolina Seed Companies (Ceres)
North Carolina Swine Industry Higher Value from Sprayfields with Energy Grasses - Issues Swine sprayfields are regulated to manage nitrogen from swine waste (lagoon effluent). Agronomic data - nutrient uptake (nitrogen) and remediation capacity of energy grasses is limited Interim effluent application rates for perennial grasses set in July 2011 are too low for viable introduction Giant reed Switchgrass Miscanthus longer term interest, current establishment costs are too high
North Carolina Swine Industry Conditional Term sheet Supply Agreements for Energy Grasses with Chemtex 1. Murphy Brown LLC Swine Integrator Smithfield Foods 2. Murphy Family Ventures LLC Largest integrated contract swine producer 3. Goldsboro Milling Company Swine Integrator Maxwell Foods 4. Prestage Farms Swine Integrator Higher N agronomic rates for energy grasses are needed on swine sprayfields to finalize supply contracts with Chemtex
Chemtex and Energy Grasses Mixed Feedstock Supply Chain Agronomic rates; energy crops on swine sprayfields Annual Crops Perennial Crops Established rates Interim rates Rates for Economic Viability Bermudagrass 300+ lbs N/acre N/A No change Rye (winter crop) established N/A No change Sorghums Giant Reed (Arundo donax) Yr1 30 lbs N/acre 300 lbs N/acre Yr2 Yr3 60 lbs N/acre 60 lbs N/acre Switchgrass Yr1 0 300 lbs N/acre Yr2 Yr3 120 lbs N/acre 120 lbs N/acre 45-55 lbs N/ton No change