Brasil EcodieselFueling Brazil with Biodiesel Biofuel Supply Chain Summit 2009 Supply Chain Summit 2009 Ghent – 09/15/09
Brazilian Experience on Renewable Fuels
Brazilian Experience on Renewable Fuels Energy Matrix 100% 87,1% 90% 80% 70% 60% 54,6% 50% 45,4% 0% 40% 30% 20% 12,9% 10% 0% World (2007) Brazil (2008) Renewable Non renewables RENEWABLE AND CLEAN ENERGY IS ALREADY A REALITY IN BRAZIL RENEWABLE AND CLEAN ENERGY IS ALREADY A REALITY IN BRAZIL Source: Resenha Energética Brasileira – Ministério de Minas e Energia
The Brazilian Biodiesel ProgramIntroduced in 2005, it was based on: ,• Energy matrix diversification with an eco‐friendly, sustainable and renewable f fuel.• Reduction of mineral oil and diesel imports of mineral oil and diesel imports.• Social development and job creation while incentivating family farming, mainly in the Northeast of the country. y• Better use of available lands.
Biodiesel: Brazilian Market Diesel market: potential market size for biodiesel. Di l k t t ti l k t i f bi di lDiesel is the main Brazilian fuel, 42% of all oil derivative fuels and more than 50% of transport sector fuels. Brazilian Mineral Diesel Market (‘000 m3) 50.000 47,000 * 44,188 46,478 45.000 39,663 39,361 37,971 40,947 40 768 42,206 39 663 39 361 37 971 40 947 40,768 42,206 40.000 2007‐ 2008 36,581 8.3% 35.000 30.000 25.000 20.000 15.000 Imports 10.000 (000 m3) 5.000 Internal Production ‐ (000 m3) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Domestic market extremely significant, allowing for the development and consolidation of the Domestic market extremely significant allowing for the development and consolidation of the sector.5 Source: National Agency for Petroleum, Natural Gas and Biofuels – ANP. (*) 2009 Forecast
Transportation fuels mix Gasoline C Gasoline + A h d G li Anhydrous Eth Ethanol l 21,8 + 7,7 = 29,5% Gasoline: 21,80% Diesel:49,20% Anhydrous Ethanol: 7,70% A h d Eth l 7 70% Hydrated Ethanol: 17 20% Hydrated Ethanol: 17,20% Ethanol (total) 7,7%+17,2%=24,9% Diesel (total) B100: 1,30%49,2% + 1,30% = 50,5% Natural Gas: 2,80% Source: MME ‐ Resenha Energética Brasileira – Resultados Preliminares de 2008 (Maio/2009)
National Biodiesel Program – where do we stand Biodiesel Law: Mandatory use to leverage production. July 2008 – y July 2009 – y 2010 on 2010 on 2005 ‐ 2005 2007 First half 2008 Fi t h lf 2008 June 2009 2010 Authorized Blend of Mandatory 2% Mandatory 3% Mandatory 4% Mandatory 5% up to 2% Minimum Blend Minimum Blend Minimum Blend Minimum Blend Expected anticipation of 5% blend, as happened with 3% and 4%... Brazilian Biodiesel Production (‘000 m3) 2,500 2 500 2,500 Production Increases show the success 2,000 1,645 of the program p g 1,500 1,168 1,000 402 Current blend percentages are only the p g y 500 0.7 69 initial stimulus: higher blends and pure B100 already feasible in ‐ engines. 2005 2006 2007 2008 2009 2010 Production Production Forecast 7 Source: National Agency for Petroleum, Natural Gas and Biofuels – ANP. (1) Forecast considers B4 in 2S09 and B5 in 2010.
The Ethanol Parallel Government policy and support Technological Evolution: Agricultural: the productivity of sugar cane increased from 55t/ha in 1975 to 85t/ha in 2008 Industrial: in the Ethanol production and in the automotive industry World Trend Potential for Brazil to become a leader Domestic alternative with impact in the Trade Balance Domestic alternative with impact in the Trade Balance Brazilian Biodiesel can achieve, in less time, the same stage ethanol took 40 years! It will happen with immediate investments and resources! ill h i hi di i d !8
The Brazilian Biodiesel Sector • The biodiesel program was introduced in 2005 and Brazil has become, already, the world’s 5th largest producer.• In 2010, B5 will be introduced, representing a 25% increase in the demand.• Extensive available areas, climate, strong and increasing domestic Extensive available areas climate strong and increasing domestic market favor the growth of the industry.• Besides the traditional feedstock (Soybean, Sunflower, Cotton and d h d lf d k( b fl d animal fats/grease), there are many viable options of non‐edible vegetable oil – Castor, Jatropha, Palm, Macaúba, Babaçu, etc.• As the industry matures, Brazil will become more competitive in the internacional market.
The Brazilian Biodiesel Sector (cont.)• The industry has been working with, aproximately, 50% of its capacity.• The industry is most likely to face a consolidation process in the Th i d t i t lik l t f lid ti i th near future.• Verticalization or some sort of control of the feedstock will be essential for survival. essential for survival• Efficiency in the industrial process and productivity in the agriculture side will be extremely important when the free market takes place. p
The competitive advantages of Brazil
Technology or Raw Material: Key Success Factor? 100% 10% 10% Other Inputs and 80% General Expenses 60% Methanol/ Ethanol 80% % 40% Vegetable Oil 20% 0% Biodiesel Cost Structure Bi di l C t St t Technology Well‐Known! Main Input is Vegetable Oil, in volume and cost. Not an entry barrier. Second main input is methanol. Achieve uniform quality in large scale production and with different vegetable So, its a variable cost industry. oils is the challenge! oils is the challenge! Known Technology + Variable Cost Industry = Access to raw material is the key success factor.12
Biodiesel Producion by Raw Material ‐ B il Bi di l P d i b R M i l Brazil jan/09 feb/09 mar/09 apr/09 may/09 jun/09Soya 71.16% 73.68% 85.37% 76.37% 81.33% 81.10%Animal Fat 24.54% 19.25% 10.94% 19.36% 16.11% 14.03%Cottom 3.25% 4.96% 1.59% 2.04% 0.00% 2.97%Others 1.05% 2.11% 2.1% 2.36% 2.56% 1.90%Total 100% 100% 100% 100% 100% 100%
Optimized Mix of Oils in the Long Term… SOYA COTTON SUNFLOWER CASTOR JATROPHA PALM % of oil 18 ‐ 20 15 ‐ 20 40 ‐ 45 45 ‐ 50 30 ‐ 39 18 ‐ 22 in the seeds in the seeds kg of oil 400 350 700 700 1,500 3,000 per hectareTechnologically Developed Perennial Edible Avoid competition for food lands; Diversify Risks! Higher content of oil per hectare; Optimize land usage! Take advantage of regional potential of crops; Occupy idle areas, with poor soil correction!
Brazil: Land, Climate, Regular Rainfall, SunAMAZON REGION: No plantationexpansion, avoiding degradation NORTHEAST: Available land, mostly inadequate for food production; Excellent for alternative crops, such p, as Castor and Jatropha; Contribution to social development. BRAZIL - Area Million ha Total 851 Suitable for Agriculture 340 Cultivated 72 Pastures 172 Available 96 Source: FGVAgro – 2º Brazil –EU Business Summit, Dec 22, 2008. Keynote Speaker Roberto Rodrigues. CENTER‐WEST, SOUTH and CENTER WEST SOUTH and SOUTHEAST: Current main production areas
Fuel Distribution Bases and Diesel consumption North ‐ 9% Northeast ‐ 15% Mid‐west– 11% Southeast ‐ 45% South ‐ 20%
Brasil Ecodiesel SA Highlights
Brasil Ecodiesel on the map Major biodiesel producer in Brazil and the only one with nationwide presence Biodiesel Plants – 580 ths m3 p.y. Biodiesel Plants 580 ths m p.y. 6 operational multi–feedstock Crushing Units 2 operational Multi‐seed– 1,600 tpd 3 Certification Laboratories (CE, TO e RS) 3 Certification Laboratories (CE TO e RS) Farms: 41,500 hectares of own land + 17,000 leased
Investments in agriculture• Initial investment in Castor based on family ta est e t Casto based o a y farming ‐ disappointing results • Investment in experiments with Jatropha p p plantation – 5,000 hectares• Most likely the company will have Jatropha as the main alternative feedstock
Company s Financial Restructuring Company’s Financial RestructuringDebt (in ths R$) 1T09 2T09 After 2nd Capital RaiseShort Term 120,106 92,543 12,877( )(+) Long Term g , 177,991 136,912 , 80,499 ,(=) Total Debt 298,097 229,455 93,376(-) Cash 7,416 2,321 151,66(=) Net Debt 290,681 227,134 -58,284
Issues to be tackled by the Biodiesel Industry
Issues to be tackled by the industry• Worlwide involvement of society in the global warming issue and in the biofuels discussion.• The need to lower the cost of biodiesel production. • Definition of the most suitable feedstock for each region. Definition of the most suitable feedstock for each region.• Genetically modified seeds will play a decisive role in p productivity of the non‐edible feedstock. y• The water footprint and NxO emissions will become recurrent issues in biofuels discussions.• Artificial comercial/specification barriers, such as the land use restrictions and the different national certifications so as to protect local industries, hindering world supply of biodiesel.
“Biodiesel is an industry in its infancy” od ese s a dust y ts a cy “The production of oil seed biodiesel occurs in conjunction with the production of proteins” j ti ith th d ti f t i ” “Mineral oil should be directed to the chemistry y industry, which is a higher value aggregator”“How much does it cost not to produce biodiesel?” How much does it cost not to produce biodiesel? “Biodiesel: no war required”