Transcript Ethanol Project Development

Biofuels Project Development:
Biodiesel Feasibility Studies
Virginia Biodiesel Conference
James Madison University
November 16, 2004
Brian Duff
BBI International
Golden, Colorado
[email protected]
(303) 526-5655
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 industryrelated publications, including:




Ethanol Producer Magazine
Biodiesel Magazine
Ethanol Plant Development
Handbook
Ethanol Industry Directory
www.bbibiofuels.com
www.ethanolproducer.com
www.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)
Net Revenue
Degummed Oil
Oilseed Meal
Oilseed Hulls
Total Revenue
1,170,000
$/Year
$6,173,319
$3,162,159
$0
$9,335,478
2,000,000
$/bu
$/Year
$5.276 $10,413,831
$2.703
$5,405,400
$0.000
$0
$7.979 $15,819,231
4,000,000
$/bu
$/Year
$5.207 $20,827,662
$2.703 $10,810,800
$0.000
$0
$7.910 $31,638,462
$/bu
$5.207
$2.703
$0.000
$7.910
Production & Operating Expenses
Oilseed Feedstock
Chemicals & Consumables
Natural Gas
Electricity
Makeup Water
Effluent Treatment & Disposal
Direct Labor & Benefits
Total Production Costs
$7,113,951
$29,543
$109,793
$174,535
$975
$2,685
$273,675
$7,705,156
$6.080 $12,160,600
$0.025
$50,500
$0.094
$187,680
$0.149
$298,350
$0.001
$1,667
$0.002
$4,589
$0.234
$341,325
$6.586 $13,044,711
$6.080 $24,321,200
$0.025
$101,000
$0.094
$375,360
$0.149
$596,700
$0.001
$3,333
$0.002
$9,179
$0.171
$564,263
$6.522 $25,971,034
$6.080
$0.025
$0.094
$0.149
$0.001
$0.002
$0.141
$6.493
Gross Profit
$1,630,322
$1.393
$2,774,520
$1.387
$5,667,427
$1.417
$130,159
$56,888
$142,332
$115,313
$114,189
$558,880
$0.111
$0.049
$0.122
$0.099
$0.098
$0.478
$178,772
$133,763
$195,037
$152,213
$126,429
$786,213
$0.089
$0.067
$0.098
$0.076
$0.063
$0.393
$284,479
$133,763
$305,889
$336,713
$150,909
$1,211,752
$0.071
$0.033
$0.076
$0.084
$0.038
$0.303
$1,071,442
$0.916
$1,988,307
$0.994
$4,455,675
$1.114
Administrative & Operating Expenses
Maintenance Materials & Services
Repairs & Maintenance, Wages & Benefits
Property Taxes & Insurance
Admin. Salaries, Wages & Benefits
Office/Lab Supplies & Miscellaneous
Total Administrative & Operating Expenses
EBITDA
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 coproducts, 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
Photo Courtesy of Envirologix
– Owner’s costs
– Operating costs
– Projected profitability and sensitivity studies
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
Federal Permit Requirements
• 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.
Site Selection
State Permit Requirements
•
•
•
•
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Air Quality Permits
Storage Tank Permits
Water Quality Permits
State Department of Motor Fuels
State Department of Transportation
o Highway Access Permit
o Possible Easement rights
• State Department of Health
• State Department of Public Service
o Boiler License
• State Department of Natural Resources
o Water appropriation permits
o Other waters and wetland considerations
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 Analysis
Document the historical feedstock production
Historic Soy Production in Pennsylvania, 1993-2002
12,000
6,000
D10 Northwestern
D40 West Central
D70 Southwestern
D20 North Central
D50 Central
D80 South Central
D30 Northeastern
D60 East Central
D90 Southeastern
Avg.
2002
2001
2000
1999
1998
1997
1996
1995
1994
0
1993
Bushels (000s)
18,000
Feedstock Analysis
Document historical feedstock pricing
8.00
DE
7.00
MD
6.00
NJ
5.00
NY
OH
4.00
PA
3.00
VA
2.00
WV
1.00
US
Avg.
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
0.00
1992
Soybean Price ($/bu)
Average Annual Soybean Prices for the US and
Pennsylvania Region
Feedstock Analysis
Document historical feedstock pricing
CBOT Monthly Crude Soy Oil Prices
30
26
24
22
20
18
16
14
Ye ar
2003
2002
2001
2000
1999
1998
1997
1996
12
1995
Soy Oil Price (cents/lb)
28
Feedstock Analysis
Document historical feedstock pricing
Pricing of Animal Fats and Greases, 1997-2002
$0.250
Price ($/lb)
$0.200
$0.150
$0.100
$0.050
$0.000
1997
1998
1999
2000
Lard
Choice White
Edible Tallow
Inedible Tallow
2001
2002
6-yr
Avg.
Yellow Grease
Feedstock Analysis
Document historical feedstock basis
Soybean Price Basis Difference, CBOT vs. SoCentral PA
9
8
7
5
4
3
2
1
PDA-So-Central
CBOT
4-Year Avg. Basis Difference = (-$0.40/bu)
4-Yr. Avg.
Oct-03
Jul-03
Apr-03
Jan-03
Oct-02
Jul-02
Apr-02
Jan-02
Oct-01
Jul-01
Apr-01
Jan-01
Oct-00
Jul-00
Apr-00
0
Jan-00
Price ($/bu)
6
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
County A
346,500
368,500
362,800
337,400
335,100
350,060
County B
39,900
42,700
44,800
42,400
38,100
County C
98,500
106,900
120,700
112,200
County D
201,400
187,700
166,900
County E
111,900
116,400
County F
252,400
County G
5-Yr Avg.
25%
4-Yr Rota.
Oil Potential (gal/yr)
87,515
21,879
1,155,198
41,580
10,395
2,599
137,214
108,600
109,380
27,345
6,836
360,954
159,300
181,600
179,380
44,845
11,211
591,954
118,100
105,200
102,800
110,880
27,720
6,930
365,904
275,200
269,700
234,400
229,900
252,320
63,080
15,770
832,656
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
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
Total
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
Year
1995
1996
1997
1998
1999
2000
Year
1995
1996
1997
1998
1999
2000
Res
6,523,566
6,676,782
6,304,998
5,565,672
5,968,368
6,523,860
Com
3,418,800
3,453,366
3,155,796
3,056,214
3,129,420
3,501,834
Res
4,530,456
4,801,986
4,729,914
4,161,528
4,441,500
4,729,662
Com
1,620,528
1,728,384
1,578,906
1,419,474
1,477,182
1,558,788
US 000 gallons
Ind
Trans
Elec
8,154,846
30,247,098
779,226
8,557,752
32,225,214
788,760
8,674,386
33,688,452
797,538
8,734,992
34,692,588
978,600
8,559,726
36,058,932
1,010,436
8,654,856
37,237,830
1,260,672
Northeast Region 000 gallons
Ind
Trans
Elec
562,338
3,837,666
153,174
588,798
3,828,090
150,234
568,554
4,108,608
121,380
566,370
4,146,828
162,162
620,718
4,438,854
172,704
582,498
4,441,962
108,444
Total
49,123,536
51,701,874
52,621,170
53,028,066
54,726,882
57,179,052
Total
10,704,162
11,097,492
11,107,362
10,456,362
11,150,958
11,421,354
Document Historical Use:
National
US Distillate Fuel Oil Use by End-Use & Sector,
1997-2001
60.00
Billion gal/yr
50.00
40.00
30.00
20.00
10.00
0.00
1997
Residential
Farm
On-Highway Diesel
1998
1999
Commercial
Electric Power
Military
2000
2001
Industrial
Railroad
Off-Highway Diesel
Oil Company
Vessel Bunkering
Document Historical Use:
Regional
Sales of Distillate Fuel Oil by End-Use and Sector in
the Northeast, 2001
4,000
3,500
MMGPY
3,000
2,500
2,000
1,500
1,000
500
0
PA
NJ
NY
CT
RI
MA
VT
NH
ME
State
Residential
Farm
On-Highway
Commercial
Elec. Power
Military
Industrial
Railroad
Off-Highway
Oil Co.
Vessel Bunk.
Document Historical Prices
Distillate Fuel Prices to Resellers in the US,
1992-2001
100
80
60
40
20
No. 2 Dist
No. 2 Diesel
US No 2 Fuel Oil
#2 Fuel Oil PAD1X&Y
10-Yr. Avg.
2001
2000
1999
1998
1997
1996
1995
1994
1993
0
1992
Wholesale Price (cents/gal)
120
Document Historical Prices
Wholesale Heating Oil Prices, US and PADD
District 1, 1992-2003
120.0
80.0
60.0
40.0
20.0
US
PADD 1
PADD 1X & 1Y
PADD 1X
PADD 1Y
PADD 1Z
6-Yr. Avg.
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
0.0
1992
Price (cents/gal)
100.0
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 petrodiesel
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
6,000
Actual
Projected
Mil gal/yr
5,000
4,000
3,000
2,000
1,000
0
1990
1995
2000
Ethanol
2005
Biodiesel
2010
Market Projections:
US on-highway market to double by 2025
Distillate Demand Forecast for the United States, 2000-2025
120
Billion Gallons per Year
100
80
60
40
20
0
2000
2003
2006
2009
2012
2015
2018
2021
Year
Residential
Commercial
Industrial
Transportation
Electricity Gen.
2024
Market Projections:
US markets to be dominated by onhighway sector through 2025
US Distillate Fuel Demand Forecast, Transportation Sector, by
Vehicle Type, 2000-2025
60
50
40
30 Billion GPY
20
2000
2003
2006
10
2009
2012
Year
Freight Trucks
International Shipping
School Bus (diesel)
0
2015
2018
Fre ig
2021
Light-Duty Vehicle
Military Use
Intercity Rail (diesel)
2024
ht T
Do m
ru ck
e sti
s
Tra n
c Sh
s
i
i
p
t
ping
Bus
Inte
rc ity
( die
s el)
R ail
( die
se l)
Vehicle
Freight Rail
Transit Bus (diesel)
Commuter Rail (diesel)
Type
Domestic Shipping
Intercity Bus (diesel)
Market Projections:
Regional on-highway sector to increase
60% by 2025
Distillate Demand Forecast for the Northeast Region, 2000-2025
18
16
Billion gallons per Year
14
12
10
8
6
4
2
0
2000
2003
2006
2009
2012
2015
2018
2021
Year
Residential
Commercial
Industrial
Transportation
Electricity Gen.
2024
Estimate Local Market Potential
from Available Feedstock
Annual Biodiesel Production Potential from PA Soybeans Based on Mechanical Extraction, 000 gal/yr
10% of Annual Crop
25% of Annual Crop
50% of Annual Crop
% of Res.
% of Res.
% of Res.
% of On- Heating
% of On- Heating
% of On- Heating
000 gals Road Mkt. Oil Mkt. 000 gals Road Mkt. Oil Mkt. 000 gals Road Mkt. 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%
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 > US
Source: Situation and Development Potential for the Production of Biodiesel , an International Study by Dieter Bockey, Werner
Biodiesel Sales Trends: Germany
550,000 t /yr = 161 million U.S. gal/yr
Co-Product
Market
Analysis
Co-Product Markets
• Identify co-products based on process
and feedstock
• Are there nearby markets for the coproducts?
• 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 ($300-400/ton)
• Cannot ignore value as co-product
Financial Analysis
Profitability Surface for 10 MMGPY Integrated Oilseed Extraction and
Biodiesel Production Plant
Millions
30 -40
40
20 -30
30
10 -20
0 -10
20
(10)-0
10
Avg. Ann. Income
($/yr)
(20)-(10)
0
(30)-(20)
(10)
(40)-(30)
13.00
(20)
11.80
(30)
10.60
(40)
3.35
3.10
2.85
2.60
2.35
2.10
1.85
1.60
1.35
1.10
0.85
9.40
Price of Biodiesel ($/gal)
Cost of Oilseeds ($/bu)
8.20
7.00
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
Oil Extraction and Biodiesel Production Plant Statistics
Production Inputs
3 MMGY
5 MMGY
Oilseeds (tons/yr)
37,500
63,000
Oilseeds (bu/yr)
1,250,000
2,100,000
Water (gal/yr)
3,720,000
6,200,000
Electricity (kWh/yr)
4,500,000
7,500,000
Natural Gas (MCF/yr)
28,050
46,750
Chemicals & catalysts (tons/yr)
1,656
2,782
Production Outputs
3 MMGY
5 MMGY
Oilseed meal yield (tons/yr)
26,250
43,750
FAME (Biodiesel) (gal/yr)
3,000,000
5,000,000
Soapstock (tons/yr)
1,937
3,228
Wastewater (gal/yr)
1,636,800
2,728,000
Incoming Transportation
3 MMGY
5 MMGY
Oilseed (Trucks/yr)
938
1575
Chemicals & catalysts (Trucks/yr)
42
70
Total Trucks Inbound per Day
3
5
Total Trucks Inbound per Year
980
1645
Outgoing Transportation
3 MMGY
5 MMGY
Degummed Oil (trucks/yr)
600
1000
Oilseed Meal (trucks/yr)
656
1094
Gums (trucks/yr)
97
161
Total Trucks Outbound per Day
4
6
Total Trucks Outbound per Year
1353
2255
Outgoing Transportation
3 MMGY
5 MMGY
Total Trucks per Day
7
11
2333
3900
Total Trucks per Year
10 MMGY
126,000
4,200,000
12,400,000
15,000,000
93,500
5,564
10 MMGY
87,500
10,000,000
6,456
5,456,000
10 MMGY
3150
70
9
3220
10 MMGY
2000
2188
323
13
4510
10 MMGY
22
7730
Determine Staffing Requirements
Oil Extraction and Refined Oil Production Plant Staffing Requirements
Employees
3 MMGY
5 MMGY
10 MMGY
Administration/Management
General Manager
0
0
0
Plant Manager
1
1
1
Quality Control Manager
0
0
1
Controller
0
0
1
Commodity Manager
0
0
0
Administrative Assistant
0
1
1
Production Labor
0
0
0
Microbiologist
0
0
0
Lab Technician
1
1
1
Shift Team Leader
0
1
3
Shift Operator
4
5
6
Yard/Commodities Labor
0
0
1
Maintenance
0
0
0
Maintenance Manager
0
0
0
Boiler Operator
0
0
1
Maintenance Worker
1
1
1
Welder
0
0
0
Electrician
0
1
1
Instrument Technician
0
0
0
Total Number of Employees
7
11
18
Determine Construction Cost
Components
Biodiesel Plant Costs
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2.5
5
Filtration - RF&O
Thermal deacidification - RF&O
Degumming - Soy/RF&O
Glycerin refining - Option
Utilities
10
20
30
Bleaching - RF&O
Esterification - RF&O
Biodiesel & Crude Glycerin - Soy/RF&O
Tank Farm
Establish Construction Costs
CCFB Oilseed Extraction and Biodiesel Production
Capital Cost Estimate
Biodiesel Production (gal/year)
3,000,000
5,000,000
Project Engineering & Construction Costs
Biodiesel Plant Capital Cost
$3,694,000
$4,745,000
Oilseed Extraction & Degumming Plant Capital Cost
$5,636,000
$7,245,000
Recycled Oil Deacidification and Degumming
$0
$0
Physical Refining to Edible Grade Oil
$0
$0
USP Glycerine Distillation Capital Cost
$1,386,732
$1,767,476
Total Engineering and Construction Cost
$10,717,000
$13,757,000
10,000,000
$6,301,000
$10,578,000
$0
$0
$2,488,100
$19,367,000
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
Oil Extraction and Biodiesel Production Plant Owners' Costs Components
Plant Capacity
3 MMGY
5 MMGY
10 MMGY
Inventory - Oilseeds
$225,000
$375,000
$750,000
Inventory - Chemicals & Catalysts
$25,000
$42,000
$85,000
Inventory - Biodiesel, Glycerine, Oilseeds Meal $246,000
$411,000
$821,000
Inventory - Spare Parts
$210,000
$210,000
$190,000
Startup Costs
$197,500
$427,500
$637,500
Land
$50,000
$100,000
$150,000
Administration Building & Furnishing
$100,000
$150,000
$250,000
Rail Improvements
$0
$700,000
$900,000
Water Treatment
$10,000
$25,000
$50,000
Site Development Costs
$150,000
$280,000
$500,000
Rolling Stock and Shop Equipment
$95,000
$170,000
$170,000
Organizational Costs
$500,000
$625,200
$781,500
Capitalized Fees and Interest
$203,618
$247,635
$329,241
Contingency
$1,070,000
$1,030,000
$1,160,000
Total Owners Costs
$3,082,118
$4,793,335
$6,774,241
Set Key Parameter Assumptions
Oil Extraction and Biodiesel Production Plant Owners' Costs Components
Model Input
3 MMGY
5 MMGY
10 MMGY
Installed capital cost per gallon ($/gal)
3.57
2.75
1.94
Biodiesel Yield (gal/bu)
2.80
2.80
2.80
Biodiesel Selling Price ($/gal)
2.10
2.10
2.10
Biodiesel Transpo. Cost ($/gal)
0.04
0.04
0.04
Biodiesel Oil sales comm.
1.00%
1.00%
1.00%
Delivered oilseed price ($/bu)
7.00
6.00
7.00
Oilseed meal yield (lb/bu)
39
39
39
Oilseed meal price ($/ton)
150
150
150
Oilseed meal sales commission
2.00%
2.00%
2.00%
Glycerol yield (lb/gal)
0.714
0.714
0.714
Glycerol price ($/ton)
1,400
1,400
1,400
Electricity use (kWh/gal)
1.5
1.5
1.5
Electricity price ($/kWh)
0.07
0.07
0.07
Natural gas use (BTU/gallon)
9,350
9,350
9,350
Natural gas price ($/MMBTU)
6.50
6.50
6.50
Makeup water use (gal/gal)
1.24
1.24
1.24
Makeup water price ($/1000 gal)
0.50
0.50
0.50
Wastewater effluent (gal/gal)
0.55
0.55
0.55
Wastewater effluent cost ($/1000 gal)
2.00
2.00
2.00
Chemicals & catalysts ($/gal)
0.15
0.15
0.15
Number of employees
7
11
18
Maintenance 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
0.4/0.6
Loan terms
0.08 for 10
0.08 for 10
0.08 for 10
Land ($/acre)
10,000
10,000
10,000
Results of Financial Analysis
Project Summary
Summary of Oil Extraction and Biodiesel Production Plant Financial Projection
Performance Metric
3 MMGY
5 MMGY
10 MMGY
11-Year Average ROI
5.77%
15.85%
33.99%
Average Annual Net Earnings
311,000
1,112,000
3,400,000
Installed Capital Cost per Gallon of
3.57
2.75
1.94
Capacity
Plant Capital Cost
$10,717,000 $13,757,000 $19,367,000
Owner's Costs
$2,769,368
$3,784,735
$5,642,441
Total Project Investment
$13,486,368 $17,541,735 $25,009,441
40% Equity
$5,394,547
$7,016,694
$10,003,776
Results of Financial Analysis
Pro Forma Projection
Proforma Income Statement for Year 2
Biodiesel Production (gal/yr)
Net Revenue
Biodiesel
Oilseed Meal
Glycerin
State Producer Payment
Future Federal Biodiesel Incentive
USDA CCC Bioenergy Program
Total Revenue
3,000,000
$/Year
$6,178,170
$8,835,750
$1,499,400
$0
$0
$0
$16,513,320
Production & Operating Expenses
Feedstocks
Chemicals & Catalysts
Natural Gas
Electricity
Makeup Water
Effluent Treatment & Disposal
Direct Labor & Benefits
Total Production Costs
Gross Profit
$/gal
$2.059
$2.945
$0.500
$0.000
$0.000
$0.000
$5.504
5,000,000
$/Year
$10,296,950
$14,726,250
$2,499,000
$0
$0
$0
$27,522,200
$/gal
$2.059
$2.945
$0.500
$0.000
$0.000
$0.000
$5.504
10,000,000
$/Year
$20,593,900
$29,452,500
$4,998,000
$0
$0
$0
$55,044,400
$/gal
$2.059
$2.945
$0.500
$0.000
$0.000
$0.000
$5.504
$12,902,875
$448,440
$374,804
$183,600
$1,879
$3,306
$246,308
$14,161,212
$4.301
$0.149
$0.125
$0.061
$0.001
$0.001
$0.082
$4.720
$21,504,792
$747,400
$624,674
$306,000
$3,131
$5,511
$358,391
$23,549,898
$4.301
$0.149
$0.125
$0.061
$0.001
$0.001
$0.072
$4.710
$43,009,583
$1,494,800
$1,249,347
$612,000
$6,262
$11,021
$526,594
$46,909,607
$4.301
$0.149
$0.125
$0.061
$0.001
$0.001
$0.053
$4.691
$2,352,108
$0.784
$3,972,302
$0.794
$8,134,793
$0.813
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
Average Annual Income
(millions)
$30
30 MMGPY
$25
10 MMGPY
2.5 MMGPY
$20
$15
$10
$5
$0
($5)
0.77
1.02
1.27
1.52
Fat & Oil Price ($/gallon)
1.77
2.02
Breakeven Analysis:
Biodiesel Selling Price
Biodiesel Price Sensitivity
Average Annual Income
(millions)
$65
$55
$45
30 MMGPY
10 MMGPY
2.5 MMGPY
$35
$25
$15
$5
($5)
1.20
1.45
1.70
1.95
Biodiesel Price ($/gallon)
2.20
2.45
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
Thank You!
[email protected]
303-526-5655
www.bbibiofuels.com