Embed Size (px)
Citation preview
Brian DuffBBI InternationalGolden, [email protected](303) 526-5655
Biofuels Project Development:Biodiesel Feasibility Studies
Virginia Biodiesel Conference James Madison University
November 16, 2004
Presentation Overview
• Introduction to BBI International
• Project Development Path
• The Feasibility Study
• Lessons Learned
BBI International
BBI International founded in 1995 by Mike and Kathy Bryan
27 full-time employees
Three Divisions:– Consulting Services– Conferences and Workshops– Publications and Recruiting
BBI Consulting Division
Leading biofuels consulting company in the US: >85 feasibility studies and business plans in the last five years
Primary expertise is in ethanol production from grain (corn, milo, barley, wheat) and sugar crops (potatoes, sugar beets, sugarcane)
Additional expertise in biotechnology and renewable energy technologies: biodiesel, anaerobic digestion, chemicals from biomass, cogeneration
An independent source of information and data for owners, lenders and policy makers
BBI Conferences Division Produce and Sponsor Conferences
and Workshops, including:
20th Annual International Fuel Ethanol Workshop & Trade Show
9th Annual National Ethanol Conference: Policy and Marketing
National Biofuels Symposium for Lenders
World Summit on Ethanol for Transportation Fuels
BBI Publishing Division
BBI produces a variety of industry-related publications, including:
Ethanol Producer Magazine Biodiesel Magazine Ethanol Plant Development
Handbook Ethanol Industry Directory
www.bbibiofuels.comwww.ethanolproducer.comwww.biodieselmagazine.com
Project Development Path
• Organize Board and Business • Secure Seed Money• Feasibility Study• Secure Project Development Funds• Business Plan• Prospectus• Raise Equity • Secure Debt Financing• Construction and Startup
The Feasibility Study
Oilseed Processing Capacity (bu/year) 1,170,000 2,000,000 4,000,000Net Revenue $/Year $/bu $/Year $/bu $/Year $/bu
Degummed Oil $6,173,319 $5.276 $10,413,831 $5.207 $20,827,662 $5.207Oilseed Meal $3,162,159 $2.703 $5,405,400 $2.703 $10,810,800 $2.703Oilseed Hulls $0 $0.000 $0 $0.000 $0 $0.000
Total Revenue $9,335,478 $7.979 $15,819,231 $7.910 $31,638,462 $7.910
Production & Operating Expenses Oilseed Feedstock $7,113,951 $6.080 $12,160,600 $6.080 $24,321,200 $6.080Chemicals & Consumables $29,543 $0.025 $50,500 $0.025 $101,000 $0.025Natural Gas $109,793 $0.094 $187,680 $0.094 $375,360 $0.094Electricity $174,535 $0.149 $298,350 $0.149 $596,700 $0.149Makeup Water $975 $0.001 $1,667 $0.001 $3,333 $0.001Effluent Treatment & Disposal $2,685 $0.002 $4,589 $0.002 $9,179 $0.002Direct Labor & Benefits $273,675 $0.234 $341,325 $0.171 $564,263 $0.141
Total Production Costs $7,705,156 $6.586 $13,044,711 $6.522 $25,971,034 $6.493
Gross Profit $1,630,322 $1.393 $2,774,520 $1.387 $5,667,427 $1.417
Administrative & Operating Expenses Maintenance Materials & Services $130,159 $0.111 $178,772 $0.089 $284,479 $0.071Repairs & Maintenance, Wages & Benefits $56,888 $0.049 $133,763 $0.067 $133,763 $0.033Property Taxes & Insurance $142,332 $0.122 $195,037 $0.098 $305,889 $0.076Admin. Salaries, Wages & Benefits $115,313 $0.099 $152,213 $0.076 $336,713 $0.084Office/Lab Supplies & Miscellaneous $114,189 $0.098 $126,429 $0.063 $150,909 $0.038
Total Administrative & Operating Expenses $558,880 $0.478 $786,213 $0.393 $1,211,752 $0.303
EBITDA $1,071,442 $0.916 $1,988,307 $0.994 $4,455,675 $1.114
Pre-Tax ROI = 25.2%
Why should you conduct a Feasibility Study?
• The study should clearly demonstrate the viability of your biodiesel project (or not!)
• Determines suitability of sites
• Documents historical feedstock supply and pricing, determines markets for products and co-products, estimates the biodiesel capital and production costs
• Stronger investor and lender package
• Required by USDA loan programs
• Invest 0.1% to evaluate & reduce risk
Questions that should be answered by the Feasibility Study
• Are suitable sites available?
• What is the availability and likely costs for feedstocks?
• How will feedstocks be shipped?
• Are adequate utilities and labor available and affordable?
• How much will it cost to make your products?
• Who will buy the products and for how much?
• Will your proposed plant be competitive and profitable?
Key Elements of a Biodiesel Feasibility Study
• Site selection
• Feedstock analysis
• Market analysis
– Biodiesel
– Oilseed Meal
– Glycerol/Glycerin
• Financial analysis
– Construction costs
– Owner’s costs
– Operating costs
– Projected profitability and sensitivity studies
Photo Courtesy of Envirologix
Site Selection
Courtesy of Todd & Sargent/West Central Soy
Site Selection
• Typically 10 to 20 acres in a rural or light industrial area with:– Access to low cost feedstock – Good rail access– Good road access – Adequate utilities at reasonable cost– Close proximity to co-product markets– Access to biodiesel markets– Access to labor
Site Selection
• A 10 MMGPY plant could average ~15 trucks per day
• Access to rail will provide a plant more options for marketing products to more distant markets
• A plant site on a main line rail line is generally better than short line rail
• Access to two rail lines is another plus• An existing rail siding will reduce
construction costs
Site Selection
• Utilities required include electricity, steam, water, cooling water, and wastewater disposal
• Steam Consumption: ~7500 BTU/gal biodiesel
• Electricity: ~0.07 to 0.1 kWh/gal biodiesel
• Make-up Water: ~0.15 to 0.2 gal/gal biodiesel
• Cooling Water Capacity: ~75 gal/gal biodiesel or ~5800 BTU/gal
• Wastewater: can vary considerably with plant design, but can be as low as ~0.02 gal/gal
Site Selection
• Clean Air Act of 1990• Prevention of Significant Deterioration (PSD) & Construction Permits• Federal New Source Performance Standards (NSPS)• National Emission Standards for Hazardous Air Pollutants (NESHAPS)• Title V Operating Permit of the Clean Air Act Amendments • Risk Management Plan
• Clean Water Act• National Pollutant Discharge Elimination System (NPDES)• Oil Pollution Prevention and Spill Control Countermeasures
• Comprehensive Environmental Response Compensation and Liability Act & Community Right to Know Act (CERCLA/EPCRA)• Tier II Forms – listing of potentially hazardous chemicals stored on-site• EPCRA Section 313 and 304 and CERCLA Section 103: use and
release of regulated substances above threshold and/or designated quantities annually.
Federal Permit Requirements
Site Selection
• Air Quality Permits
• Storage Tank Permits
• Water Quality Permits
• State Department of Motor Fuels
• State Department of Transportationo Highway Access Permit
o Possible Easement rights
• State Department of Health
• State Department of Public Serviceo Boiler License
• State Department of Natural Resourceso Water appropriation permits
o Other waters and wetland considerations
State Permit Requirements
Feedstock Analysis
Feedstock Analysis
• Local or imported feedstock?• Availability and price (10-yr history)• Biodiesel production potential• Co-product yield• Competition for
feedstock
Feedstock Analysis
Define the feedstock supply area: ~50 mi
Feedstock AnalysisDocument the historical feedstock production
Historic Soy Production in Pennsylvania, 1993-2002
0
6,000
12,000
18,000
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Avg
.
Bu
sh
els
(0
00
s)
D10 Northwestern D20 North Central D30 NortheasternD40 West Central D50 Central D60 East CentralD70 Southwestern D80 South Central D90 Southeastern
Feedstock Analysis
Document historical feedstock pricing
Average Annual Soybean Prices for the US and Pennsylvania Region
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.001
99
2
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
Avg
.
So
yb
ea
n P
ric
e (
$/b
u)
DE
MD
NJ
NY
OH
PA
VA
WV
US
Feedstock Analysis
Document historical feedstock pricing
CBOT Monthly Crude Soy Oil Prices
12
14
16
18
20
22
24
26
28
30
1995
1996
1997
1998
1999
2000
2001
2002
2003
Year
So
y O
il P
rice
(ce
nts
/lb
)
Feedstock Analysis
Document historical feedstock pricing
Pricing of Animal Fats and Greases, 1997-2002
$0.000
$0.050
$0.100
$0.150
$0.200
$0.250
1997 1998 1999 2000 2001 2002 6-yrAvg.
Pri
ce (
$/lb
)
Lard Choice White Yellow Grease
Edible Tallow Inedible Tallow
Feedstock Analysis
4-Year Avg. Basis Difference = (-$0.40/bu)
Document historical feedstock basis
Soybean Price Basis Difference, CBOT vs. So-Central PA
0
1
2
3
4
5
6
7
8
9Jan-0
0
Apr-
00
Jul-00
Oct-
00
Jan-0
1
Apr-
01
Jul-01
Oct-
01
Jan-0
2
Apr-
02
Jul-02
Oct-
02
Jan-0
3
Apr-
03
Jul-03
Oct-
03
4-Y
r. A
vg.
Pri
ce (
$/b
u)
PDA-So-Central CBOT
Feedstock Analysis
Evaluate the biodiesel production requirements
Biodiesel Capacity (gal/yr) 3,000,000 5,000,000 10,000,000 15,000,000 20,000,000 30,000,000
Oil Required (gal/yr) 3,333,000 5,556,000 11,111,000 16,667,000 22,222,000 33,333,000
Oil Required (tons/yr) 12,500 20,800 41,700 62,500 83,300 125,000
Oilseeds Required (tons/yr) 41,700 69,300 139,000 208,300 277,700 416,700
Land Required (acres/yr) 55,600 92,400 185,300 277,700 370,300 555,600
Land in 4-Year Rotation (acres) 222,000 370,000 741,000 1,111,000 1,481,000 2,222,000
Regional Acres Required Based on 25% of acreage available (acres)
888,000 1,480,000 2,960,000 4,440,000 5,920,000 8,890,000
Feedstock Analysis
Evaluate the biodiesel production potential
50-mi Radius 1999 2000 2001 2002 2003 5-Yr Avg. 25% 4-Yr Rota. Oil Potential (gal/yr)
County A 346,500 368,500 362,800 337,400 335,100 350,060 87,515 21,879 1,155,198
County B 39,900 42,700 44,800 42,400 38,100 41,580 10,395 2,599 137,214
County C 98,500 106,900 120,700 112,200 108,600 109,380 27,345 6,836 360,954
County D 201,400 187,700 166,900 159,300 181,600 179,380 44,845 11,211 591,954
County E 111,900 116,400 118,100 105,200 102,800 110,880 27,720 6,930 365,904
County F 252,400 275,200 269,700 234,400 229,900 252,320 63,080 15,770 832,656
County G 637,300 662,800 646,700 631,300 592,100 634,040 158,510 39,628 2,092,332
County H 297,400 335,300 370,000 330,900 382,100 343,140 85,785 21,446 1,132,362
County I 81,300 78,500 80,600 75,700 83,400 79,900 19,975 4,994 263,670
County J 65,500 68,100 64,000 66,100 70,700 66,880 16,720 4,180 220,704
Total 2,132,100 2,242,100 2,244,300 2,094,900 2,124,400 2,167,560 541,890 135,473 7,152,948
Results of Feedstock Analysis
• Quantifies feedstock availability and identifies potential limitations
• Documents the historical local average price
• Evaluates whether the local basis (oilseed price relative to CBOT) is likely to go up a lot or a little based on increased demand
• Quantifies biodiesel production potential from regional feedstocks
Biodiesel Market Analysis
Biodiesel Market Analysis
• Defines local, regional and national markets for the project’s biodiesel
• Documents historical diesel use and price in the markets
• Estimates market potential and sets product selling price for financial analysis
Define Markets
PADD's were delineated during World War II to facilitate oil allocation
Define Markets
Regions as defined by the US DOE Energy Information Administration
Document Historical Use
Res Com Ind Trans Elec Total1995 6,523,566 3,418,800 8,154,846 30,247,098 779,226 49,123,5361996 6,676,782 3,453,366 8,557,752 32,225,214 788,760 51,701,8741997 6,304,998 3,155,796 8,674,386 33,688,452 797,538 52,621,1701998 5,565,672 3,056,214 8,734,992 34,692,588 978,600 53,028,0661999 5,968,368 3,129,420 8,559,726 36,058,932 1,010,436 54,726,8822000 6,523,860 3,501,834 8,654,856 37,237,830 1,260,672 57,179,052
Res Com Ind Trans Elec Total1995 4,530,456 1,620,528 562,338 3,837,666 153,174 10,704,1621996 4,801,986 1,728,384 588,798 3,828,090 150,234 11,097,4921997 4,729,914 1,578,906 568,554 4,108,608 121,380 11,107,3621998 4,161,528 1,419,474 566,370 4,146,828 162,162 10,456,3621999 4,441,500 1,477,182 620,718 4,438,854 172,704 11,150,9582000 4,729,662 1,558,788 582,498 4,441,962 108,444 11,421,354
Northeast Region 000 gallons
Year
Year
US 000 gallons
Document Historical Use: National
0.00
10.00
20.00
30.00
40.00
50.00
60.00
Bill
ion
ga
l/yr
1997 1998 1999 2000 2001
US Distillate Fuel Oil Use by End-Use & Sector,1997-2001
Residential Commercial Industrial Oil Company
Farm Electric Power Railroad Vessel Bunkering
On-Highway Diesel Military Off-Highway Diesel
Document Historical Use: Regional
Sales of Distillate Fuel Oil by End-Use and Sector in the Northeast, 2001
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
PA NJ NY CT RI MA VT NH ME
State
MM
GP
Y
Residential Commercial Industrial Oil Co.Farm Elec. Power Railroad Vessel Bunk.On-Highway Military Off-Highway
Document Historical Prices
Distillate Fuel Prices to Resellers in the US, 1992-2001
0
20
40
60
80
100
120
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
10-Y
r. A
vg.
Wh
ole
sale
Pri
ce (
cen
ts/g
al)
No. 2 Dist No. 2 Diesel
US No 2 Fuel Oil #2 Fuel Oil PAD1X&Y
Document Historical Prices
Wholesale Heating Oil Prices, US and PADD District 1, 1992-2003
0.0
20.0
40.0
60.0
80.0
100.0
120.0
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
6-Y
r. A
vg.
Pri
ce
(c
en
ts/g
al)
US PADD 1 PADD 1X & 1Y
PADD 1X PADD 1Y PADD 1Z
Document Market Statistics: Current and Projected Use
Today:
• Production capacity ~60 million gal/yr (dedicated)
• Most sales to fleet and niche markets
• Biodiesel sales (2002): 18 million gal/yr
• Biodiesel sales (2003): ~20 million gal/yr
• Need legislative incentives to compete with petro-diesel
The Future
• The potential to capture some percentage of the 60+ billion gallon US diesel market:
– 1% of highway uses: 416 million gallons
– 5% of highway uses: 2+ billion gallons
Project Biodiesel Market Growth
Anticipated growth of the biofuels market under the proposed “RFS”is driving project development
Market Projections: US on-highway market to double by 2025
Distillate Demand Forecast for the United States, 2000-2025
0
20
40
60
80
100
120
2000 2003 2006 2009 2012 2015 2018 2021 2024
Year
Bill
ion
Gal
lon
s p
er Y
ear
Residential Commercial Industrial Transportation Electricity Gen.
Market Projections: US markets to be dominated by on-
highway sector through 2025
20002003
2006
20092012
2015
2018
2021
2024
Freight TrucksDomestic Shipping
Transit Bus (diesel)
Intercity Rail (diesel)
0
10
20
30
40
50
60
Billion GPY
Year
Vehicle Type
US Distillate Fuel Demand Forecast, Transportation Sector, by Vehicle Type, 2000-2025
Freight Trucks Light-Duty Vehicle Freight Rail Domestic ShippingInternational Shipping Military Use Transit Bus (diesel) Intercity Bus (diesel)School Bus (diesel) Intercity Rail (diesel) Commuter Rail (diesel)
Market Projections:Regional on-highway sector to increase
60% by 2025Distillate Demand Forecast for the Northeast Region, 2000-2025
0
2
4
6
8
10
12
14
16
18
2000 2003 2006 2009 2012 2015 2018 2021 2024
Year
Bill
ion
gal
lon
s p
er Y
ear
Residential Commercial Industrial Transportation Electricity Gen.
Estimate Local Market Potential from Available Feedstock
000 gals% of On-
Road Mkt.
% of Res. Heating Oil Mkt. 000 gals
% of On-Road Mkt.
% of Res. Heating Oil Mkt. 000 gals
% of On-Road Mkt.
% of Res. Heating Oil Mkt.
B100 1,134 0.08% 0.13% 2,834 0.20% 0.32% 5,668 0.41% 0.64%B20 5,668 0.41% 0.64% 14,171 1.02% 1.59% 28,342 2.05% 3.19%B2 56,684 4.10% 6.38% 141,710 10.24% 15.94% 283,420 20.48% 31.88%
10% of Annual Crop 25% of Annual Crop 50% of Annual CropAnnual Biodiesel Production Potential from PA Soybeans Based on Mechanical Extraction, 000 gal/yr
Based on 10-Yr Average State Production of Soybeans and 2001 Distillate Fuel Consumption
2003 European Union (EU) Biodiesel Production Statistics:
• European Union:– 2,124,000 tonnes of
capacity– 624 million gal/yr – 315 million gal/yr sales
• US– 200,000 tonnes of
capacity– ~60 million gal/yr- <20 million gal/yr
sales• EU capacity ~10x > US
capacity• EU sales ~15x > USSource: Situation and Development Potential for the Production of Biodiesel , an International Study by Dieter
Bockey, Werner Körbitz
Biodiesel Sales Trends: Germany 550,000 t /yr = 161 million U.S. gal/yr
Co-Product
MarketAnalysis
Co-Product Markets
• Identify co-products based on process and feedstock
• Are there nearby markets for the co-products?
• Oilseed Meal
• Glycerol
• Soapstock
Courtesy of biodiesel.org
Oilseed Meals• Up to 80% of bushel of soy (48/60 lbs)• Up to 67% of bushel of Brassica oilseeds (40/60 lbs)• Mechanical extraction yields higher oil content in
meal: 7 to 13%• Solvent extraction yields lower oil content in meal:
<1.5% (boosts protein concentration)• Typically sold dry or pelletized as livestock feed• Priced based on protein content against soy meal as
standard• High fat meals sold at a premium• Other meal uses: organic biocontrol agent, fertilizer,
edible food grade
Glycerol /Glycerin• ~10% of material balance
• Several grades of Glycerol possible: 80% (crude, bulk), 99.5% (USP), 99.8 (Kosher)
• Glycerol refining optional; additional cost
• Primary market is USP grade for pharmaceutical uses: >$1200/ton
• Market subject to downward pressure from oversupply: EU problems
Soapstock• By-product of crude vegetable oil refining:
washing, degumming, neutralization
• Up to ~17% of incoming crude oil
• High fatty acid content
• Can also be converted into biodiesel
• Cheaper than oilseed feedstock
• Used as a surfactant and emulsifier
• Can be sold as animal feed
• Other applications: dust suppressant, fatty acid production
• $0.15 - 0.20/lb ($300-400/ton)
• Cannot ignore value as co-product
Financial Analysis
7.00
8.20
9.40
10.60
11.80
13.00
0.8
5
1.1
0
1.3
5
1.6
0
1.8
5
2.1
0
2.3
5
2.6
0
2.8
5
3.1
0
3.3
5
(40)
(30)
(20)
(10)
0
10
20
30
40
Avg. Ann. Income ($/yr)
Millions
Cost of Oilseeds ($/bu)
Price of Biodiesel ($/gal)
Profitability Surface for 10 MMGPY Integrated Oilseed Extraction and Biodiesel Production Plant
30 -40
20 -30
10 -20
0 -10
(10)-0
(20)-(10)
(30)-(20)
(40)-(30)
Financial Analysis
• Use conservative assumptions
• Evaluate 2 or 3 plant sizes
• Use ROI or IRR for profitability
• 25% minimum pre-tax ROI, 30% for better projects
• Returns are most sensitive to feedstock cost and product sales price
Establish Project Statistics
Production Inputs 3 MMGY 5 MMGY 10 MMGYOilseeds (tons/yr) 37,500 63,000 126,000Oilseeds (bu/yr) 1,250,000 2,100,000 4,200,000Water (gal/yr) 3,720,000 6,200,000 12,400,000Electricity (kWh/yr) 4,500,000 7,500,000 15,000,000Natural Gas (MCF/yr) 28,050 46,750 93,500Chemicals & catalysts (tons/yr) 1,656 2,782 5,564
Production Outputs 3 MMGY 5 MMGY 10 MMGYOilseed meal yield (tons/yr) 26,250 43,750 87,500FAME (Biodiesel) (gal/yr) 3,000,000 5,000,000 10,000,000Soapstock (tons/yr) 1,937 3,228 6,456Wastewater (gal/yr) 1,636,800 2,728,000 5,456,000
Incoming Transportation 3 MMGY 5 MMGY 10 MMGYOilseed (Trucks/yr) 938 1575 3150Chemicals & catalysts (Trucks/yr) 42 70 70Total Trucks Inbound per Day 3 5 9Total Trucks Inbound per Year 980 1645 3220
Outgoing Transportation 3 MMGY 5 MMGY 10 MMGYDegummed Oil (trucks/yr) 600 1000 2000Oilseed Meal (trucks/yr) 656 1094 2188Gums (trucks/yr) 97 161 323Total Trucks Outbound per Day 4 6 13
Total Trucks Outbound per Year 1353 2255 4510Outgoing Transportation 3 MMGY 5 MMGY 10 MMGY
Total Trucks per Day 7 11 22Total Trucks per Year 2333 3900 7730
Oil Extraction and Biodiesel Production Plant Statistics
Determine Staffing Requirements
Employees 3 MMGY 5 MMGY 10 MMGYAdministration/Management
General Manager 0 0 0Plant Manager 1 1 1Quality Control Manager 0 0 1Controller 0 0 1Commodity Manager 0 0 0Administrative Assistant 0 1 1
Production Labor 0 0 0Microbiologist 0 0 0Lab Technician 1 1 1Shift Team Leader 0 1 3Shift Operator 4 5 6Yard/Commodities Labor 0 0 1
Maintenance 0 0 0Maintenance Manager 0 0 0Boiler Operator 0 0 1Maintenance Worker 1 1 1Welder 0 0 0Electrician 0 1 1Instrument Technician 0 0 0
Total Number of Employees 7 11 18
Oil Extraction and Refined Oil Production Plant Staffing Requirements
Determine Construction Cost Components
Biodiesel Plant Costs
01,000,0002,000,000
3,000,0004,000,0005,000,0006,000,000
7,000,0008,000,000
2.5 5 10 20 30
Filtration - RF&O Bleaching - RF&OThermal deacidif ication - RF&O Esterif ication - RF&ODegumming - Soy/RF&O Biodiesel & Crude Glycerin - Soy/RF&OGlycerin refining - Option Tank FarmUtilities
Establish Construction Costs
Biodiesel Production (gal/year)Project Engineering & Construction Costs
Biodiesel Plant Capital Cost $3,694,000 $4,745,000 $6,301,000Oilseed Extraction & Degumming Plant Capital Cost $5,636,000 $7,245,000 $10,578,000Recycled Oil Deacidification and Degumming $0 $0 $0Physical Refining to Edible Grade Oil $0 $0 $0USP Glycerine Distillation Capital Cost $1,386,732 $1,767,476 $2,488,100
Total Engineering and Construction Cost $10,717,000 $13,757,000 $19,367,000
Capital Cost EstimateCCFB Oilseed Extraction and Biodiesel Production
3,000,000 5,000,000 10,000,000
Identify Owner’s Costs
• Land, roads, rail & site development• Administration building/furnishings• Utilities, water treatment, fire water• Permits• Startup costs and training• Construction interest and loan fees• Inventory costs• Owner’s Costs can add 20-30¢ per gallon
to the overall project cost
Quantify Owner’s Costs
Plant Capacity 3 MMGY 5 MMGY 10 MMGYInventory - Oilseeds $225,000 $375,000 $750,000Inventory - Chemicals & Catalysts $25,000 $42,000 $85,000Inventory - Biodiesel, Glycerine, Oilseeds Meal $246,000 $411,000 $821,000Inventory - Spare Parts $210,000 $210,000 $190,000Startup Costs $197,500 $427,500 $637,500Land $50,000 $100,000 $150,000Administration Building & Furnishing $100,000 $150,000 $250,000Rail Improvements $0 $700,000 $900,000Water Treatment $10,000 $25,000 $50,000Site Development Costs $150,000 $280,000 $500,000Rolling Stock and Shop Equipment $95,000 $170,000 $170,000Organizational Costs $500,000 $625,200 $781,500Capitalized Fees and Interest $203,618 $247,635 $329,241Contingency $1,070,000 $1,030,000 $1,160,000
Total Owners Costs $3,082,118 $4,793,335 $6,774,241
Oil Extraction and Biodiesel Production Plant Owners' Costs Components
Set Key Parameter Assumptions
Model Input 3 MMGY 5 MMGY 10 MMGYInstalled capital cost per gallon ($/gal) 3.57 2.75 1.94Biodiesel Yield (gal/bu) 2.80 2.80 2.80Biodiesel Selling Price ($/gal) 2.10 2.10 2.10Biodiesel Transpo. Cost ($/gal) 0.04 0.04 0.04Biodiesel Oil sales comm. 1.00% 1.00% 1.00%Delivered oilseed price ($/bu) 7.00 6.00 7.00Oilseed meal yield (lb/bu) 39 39 39Oilseed meal price ($/ton) 150 150 150Oilseed meal sales commission 2.00% 2.00% 2.00%Glycerol yield (lb/gal) 0.714 0.714 0.714Glycerol price ($/ton) 1,400 1,400 1,400Electricity use (kWh/gal) 1.5 1.5 1.5Electricity price ($/kWh) 0.07 0.07 0.07Natural gas use (BTU/gallon) 9,350 9,350 9,350Natural gas price ($/MMBTU) 6.50 6.50 6.50Makeup water use (gal/gal) 1.24 1.24 1.24Makeup water price ($/1000 gal) 0.50 0.50 0.50Wastewater effluent (gal/gal) 0.55 0.55 0.55Wastewater effluent cost ($/1000 gal) 2.00 2.00 2.00Chemicals & catalysts ($/gal) 0.15 0.15 0.15Number of employees 7 11 18Maintenance materials 1.50% 1.50% 1.50%Property tax and insurance 1.50% 1.50% 1.50%Debt/equity ratio 0.4/0.6 0.4/0.6 0.4/0.6Loan terms 0.08 for 10 0.08 for 10 0.08 for 10 Land ($/acre) 10,000 10,000 10,000
Oil Extraction and Biodiesel Production Plant Owners' Costs Components
Results of Financial Analysis
Project Summary
Performance Metric 3 MMGY 5 MMGY 10 MMGY11-Year Average ROI 5.77% 15.85% 33.99%Average Annual Net Earnings 311,000 1,112,000 3,400,000Installed Capital Cost per Gallon of Capacity 3.57 2.75 1.94Plant Capital Cost $10,717,000 $13,757,000 $19,367,000Owner's Costs $2,769,368 $3,784,735 $5,642,441Total Project Investment $13,486,368 $17,541,735 $25,009,44140% Equity $5,394,547 $7,016,694 $10,003,776
Summary of Oil Extraction and Biodiesel Production Plant Financial Projection
Proforma Income Statement for Year 2Biodiesel Production (gal/yr) 3,000,000 5,000,000 10,000,000Net Revenue $/Year $/gal $/Year $/gal $/Year $/gal
Biodiesel $6,178,170 $2.059 $10,296,950 $2.059 $20,593,900 $2.059Oilseed Meal $8,835,750 $2.945 $14,726,250 $2.945 $29,452,500 $2.945Glycerin $1,499,400 $0.500 $2,499,000 $0.500 $4,998,000 $0.500State Producer Payment $0 $0.000 $0 $0.000 $0 $0.000Future Federal Biodiesel Incentive $0 $0.000 $0 $0.000 $0 $0.000USDA CCC Bioenergy Program $0 $0.000 $0 $0.000 $0 $0.000
Total Revenue $16,513,320 $5.504 $27,522,200 $5.504 $55,044,400 $5.504
Production & Operating Expenses Feedstocks $12,902,875 $4.301 $21,504,792 $4.301 $43,009,583 $4.301Chemicals & Catalysts $448,440 $0.149 $747,400 $0.149 $1,494,800 $0.149Natural Gas $374,804 $0.125 $624,674 $0.125 $1,249,347 $0.125Electricity $183,600 $0.061 $306,000 $0.061 $612,000 $0.061Makeup Water $1,879 $0.001 $3,131 $0.001 $6,262 $0.001Effluent Treatment & Disposal $3,306 $0.001 $5,511 $0.001 $11,021 $0.001Direct Labor & Benefits $246,308 $0.082 $358,391 $0.072 $526,594 $0.053
Total Production Costs $14,161,212 $4.720 $23,549,898 $4.710 $46,909,607 $4.691
Gross Profit $2,352,108 $0.784 $3,972,302 $0.794 $8,134,793 $0.813
Results of Financial Analysis
Pro Forma Projection
Typical Operating Costs & Revenue: Soy Oil
• Variable Operating costs:– Crude Soy Oil @ $0.25/lb ……………………...1.92/gal– Energy…………………………………………..0.05/gal– Chemicals, catalysts, reagent…………………...0.18/gal– Labor…………………………………………....0.03/gal– Water/Waste……………………………………0.02/gal
• Administrative costs….……………..……0.17/gal• Debt service …………….………………..0.07/gal
• Total Cost of Production……...$2.44/gal• Biodiesel @ $1.90/gal.………………..….1.90/gal• USP Glycerin @ $1200/ton……………...0.38/gal
• Total Revenue .….……………. $2.28/gal• Pre-tax income .………..….. –($0.16/gal)
Typical Operating Costs & Revenue: RF&O
• Variable Operating costs:– RF&O @ $0.15/lb ……………………………...1.15/gal– Energy…………………………………………..0.05/gal– Chemicals, catalysts, reagent…………………...0.18/gal– Labor…………………………………………....0.03/gal– Water/Waste……………………………………0.02/gal
• Administrative costs….……………..……0.17/gal• Debt service …………….………………..0.07/gal
• Total Cost of Production……...$1.67/gal• Biodiesel @ $1.90/gal.………………..….1.90/gal• USP Glycerin @ $1200/ton……………...0.38/gal
• Total Revenue .….……………. $2.28/gal• Pre-tax income ………….....…..$0.61/gal
Breakeven Analysis:Oil Feedstock with RFS
Oil Feedstock Price Sensitivity
($5)
$0
$5
$10
$15
$20
$25
$30
0.77 1.02 1.27 1.52 1.77 2.02
Fat & Oil Price ($/gallon)
Ave
rag
e A
nn
ual
Inco
me
(mill
ion
s)
30 MMGPY
10 MMGPY
2.5 MMGPY
Breakeven Analysis:Biodiesel Selling Price
Biodiesel Price Sensitivity
($5)
$5
$15
$25
$35
$45
$55
$65
1.20 1.45 1.70 1.95 2.20 2.45
Biodiesel Price ($/gallon)
Av
era
ge
An
nu
al
Inc
om
e
(mil
lio
ns
)
30 MMGPY
10 MMGPY
2.5 MMGPY
It’s Feasible. So now what?• Complete a business plan• Obtain commitment for the site • Select process design company and begin
preliminary engineering work• Begin discussions with lenders• Complete prospectus for stock offering• Obtain required permits• Secure equity and debt financing• Hire a project coordinator• Begin construction
Commercialization Strategy
• Follow ethanol industry “model”:– Site with adequate feedstock supply,
utilities, transportation and markets– Utilize successful design/build firms – Hire experienced product marketing and
risk management firms– Assemble first rate management team– Need 40% equity, 50% better– Projected Return on Equity should be
30% or higher
Lessons Learned
Why Biofuels Projects Fail
• Poor management
• Undercapitalized
• Increased price of raw materials or lower price for products
• Plant is too small/not competitive
• Poor feasibility study/business plan
• Plant does not perform up to specs
Successful Biofuels Projects
• Strong management team
• Many are farmer owned with feedstock delivery contracts
• Win/Win marketing agreements
• Reputable design/build companies
• Profitable: 25 to 30% average annual ROI
The Last Word:
In most circumstances:• Without RFS, vegetable oil not currently feasible• Without RFS, RF&O are still potentially feasible• Increasing demand for biodiesel (even 200 million
gallons per year!) does not mean higher prices if supply keeps pace with demand
• Do not use a high biodiesel price to justify your project
• Do not rely on USDA CCC program payments to make/break project
