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SIV Holdings Management Presentation Jan 1, 2010
 

SIV Holdings Management Presentation Jan 1, 2010

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Project feasibility...

Project feasibility
The key driver of the Project is demand on the EU market for sustainable, bio-energy resources in general, and particularly for biomass pellets backed by a vast source of raw material in Western Ukraine

Description of the Project:
The owner and initiator of the Project is the Cyprus based company S.I.V. Holding Ltd. The Project developers consist of leading Ukrainian, US, and Canadian specialists in the bio-energy sector

The Project stipulates the construction and operation of 40 biomass pellet production lines by the end of 2014

A special purpose entity; ‘Eko-Bio Top’, has already built one production plant in Ukraine, with capacity of the plant amounting to 13,000 metric tonnes of pellets per annum.

The immediate objective is to build plants at nine other sites within the same region in order to consolidate the business and establish strong relationships with local sawmills, as reliable partners in supplying their waste products for pellet production.

Eventually, with a well established brand, SIV will move into processing agricultural residues for pellet production for industrial power plant use.

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    SIV Holdings Management Presentation Jan 1, 2010 SIV Holdings Management Presentation Jan 1, 2010 Presentation Transcript

    •  
    • Project description Overview of the Company  S.I.V. Holdings Ltd (hereafter referred to as the “Company” SIV production location or “SIV”) currently operates one plant with 2 Mt/hour production capacity in Ivano-Frankivsk region  The Company has already chosen four additional locations for production sites and have preliminary agreements with local authorities to secure long-term development. Each location has a sufficient raw material base (one in Rivne and three in Ivano-Frankivsk region)  SIV benefits from the following advantages: − Excellent location: close proximity to European Union (EU) – the largest and most prospective market for SIV products − Potential sales agreements directly with power producers Management: Strong management team in place with well-developed political − Availability of detailed and comprehensive financial and financial connections model and business plan, highlighting clear vision and Production: distinct focus on future operations of the Company Existing production – 2 Mt/hour; All four additional locations for future production sites have − Strong management team in place with well-developed preliminary agreements with local authorities already in place political and financial connections, which is fully Procurement: qualified to lead the Company to the next stage of its Harvested lumber in 2008: development Ivano-Frankivsk – 865 ths. m3(Source: Appendix 1) Rivne – 1,321 ths. m3(Source: Appendix 1) − Ongoing discussions about private placement with several potential Strategic Investors 
    • Project description Overview of the Industry Demand EU production vs. demand projections (mln tons)   Currently, the market for pellets is moving through its  growth phase, supported by Europe, which has evolved   into the largest consumer of wood pellets in the world.   Consumption in 2008 is estimated to be over 8 million   tons, with Sweden, Denmark, the Netherlands, Belgium       and Italy being the largest consumers on the continent          Geographical location of Ukraine is one of the major   factors, which contributes to business development with EU           It is estimated that production as well as demand will Source: Market experts’ estimate double over the next 4-5 years and some industry experts forecast an annual growth of 25-30% globally over the Overview of all EU pellet production plans next ten years Supply  Currently there is a clear playing field for pellet production in Ukraine. According to some market experts, there are no more than 15 wood pellets production plants in Ukraine at this moment. Annual pellets production output in Ukraine is estimated to range from 20,000 to 200,000 tones, but is highly fragmented, poorly financed, and mostly relying on outdated technology Source: www.pelletsatlas.info   
    • Project description Overview of the Strategy  SIV aims to harness the vast amount of Ukrainian-based  waste, and steward this renewable asset in a  sustainable, and environmentally friendly way to provide  for a cleaner and safer world  The Project further stipulates an increase in the Company’s production capacity to 40 plants by construction of additional 39 plants     The development plan envisions an increase in the total quantity of plants by nine units over the first 24 month period. As soon as the Company operates ten plants, it will generate surplus cash that can be reinvested to meet   future investment costs  The Company’s management also looks for further opportunities to merge with a well-managed, Ukrainian  Agricultural Company in order to safeguard and diversify its raw material resource base for its growing production         Note 1: MBP - Mixed biomass pellets are a newcomer on the pellet market. Due to low production costs this biofuel became very attractive. MBP can be produced from straw, grains, various types of grass, leguminous plants, flowers, fruit and a mixture of these materials (with some wood added). 
    • Project description Raw material base (Wood waste)  The source of raw materials for pellet production in Wood-working output and wood waste in Ukraine Ukraine is closely connected with wood-working and agricultural industries   Wood-working output and waste in Ukraine    Experts agree that throughout the different stages of  production process in the timber and wood-working   industry, wood waste may comprise up to 50% of the     output   Based on wood industry experts representation there were  approximately 15 million cubic meters of liquid lumber harvested in 2008 (see Appendix for details). If  smaller, ‘mom & pop’, sawmill operations are taken into account, this figure doubles       Source: Ukrainian Statistics & Management’s estimate 
    • Project description Raw material base (Residues) Agricultural Production output and agricultural Cropping and Residues 2007- 2009 residues in Ukraine    Based on experts’ representation, there is 1.5-2.0 tonnes  of straw, on average, for each tonne of cereal and oilseed  crop produced. Based on USDA data the crop production   for 2009 is 39 million tonnes which produced from 65 to 77     million tonnes of straw, the majority of which was either     shredded behind combines or burned in the field     An Agricultural Company harvesting 30 thousand  hectares, with an average yield of 3 tonnes per hectare will  potentially produce enough straw for producing approximately 90 thousand tonnes of pellets and leave  one tonne of straw per hectare for soil conservation and    replenishment Source: USDA Data, Management’s estimate  Thus, in a further measure to sustainably ‘backup’ the company with straw required for production of up to 500,000 tonnes of pellets, SIV would require Agriculturally cropped land of circa 160,000 hectares, which represents less than 0.5% of Ukraine’s arable land 
    • Financials Financial statements (IFRS) Financial statements track record Balance sheet as at 31Dec09, 08 and 1Jan08  The Company implemented International Financial (in UAH thousands) 31Dec09 31Dec08 1Jan08 Reporting Standards (IFRS) and has track record of Assets preparing financial statements under IFRS for the year Non-current assets ended 31 December 2009 and 31 December 20098 Property, plant and equipment 4,341 4,697 735 Current assets  Extract of Balance sheet and profit and loss is shown Inventories 569 363 119 below Trade and other receivables 130 37 4 Cash and cash equivalents 2 - - Profit & loss for the year ended 31Dec09 and 08 701 400 123 (in UAH thousands) 2009 2008 Total assets 5,042 5,097 858 Revenues 230 71 Cost of revenues (828) (290) Equity and liabilities Gross profit Equity (598) (219) Statutory fund 1,645 42 42 Administrative, selling and Reserves 4,040 4,040 - distribution expenses (10) (3) Retained earnings (781) (222) - Financial income 49 - 4,904 3,860 42 Profit before tax (559) (222) Non-current liabilities Income tax expenses - - Long-term loans and borrowings 41 52 64 Net income (559) (222) Current liabilities Source: IFRS financial statements Short-term loans and borrowings 11 899 712 Trade and other payables 86 286 40  Full set of the financial statements is available upon 97 1,185 752 request Equity and liabilities 5,042 5,097 858 Source: IFRS financial statements 
    • Economics Valuation summary Indicators of investment attractiveness:  Based on the above scenarios financial indicators are as follows:  Taking into account that the Ukrainian government has moved to support energy saving projects realized in − Project’s net present value amounts to EUR70 to Ukraine by income tax exemption for 2009-2013, of which 76.1million real discount rate 14.00 SIV is party to we have also performed of two scenarios: − Enterprise value, when the Company will reach its − Scenario 1 – not tax for 5 years (most probable) target production capacity is circa EUR136 million − Scenario 2 – normal tax − Project payback period is 4.0 – 5.2 years − Discounted Project payback period is 4.8 – 5.6 years EBITDA (EUR mln) & net profit margin (%) ROI                                                         Source: Management’s estimate Source: Management’s estimate 
    • Economics Financing requironments Project financing Use of funds and financing sources (scenario – NO TAX)  It has been assumed that the ten production plants would in EUR '000 2010 2011 2012 2013 2014 2015 be built over a two-year period, with a total capital Working capital 410 1,101 1,133 1,132 1,274 - requirement of circa EUR10.7 – 14.5 million. In CAPEX 9,964 10,020 11,377 11,391 12,804 169 practice, because the plants function independently, the Sawmill waste line 9,401 9,401 10,744 10,744 12,087 - rate at which they are constructed can be easily adjusted Other CAPEX 563 619 633 647 717 169 according to the available funding Total External financing 7,200 2,436 - 9,636  The plan is to finance the project with a combination of Equity 2,160 731 - 2,891 equity 30% and debt 70% as shown in the tables on the Loan 5,040 1,705 - 6,745 right  SIV project gives investors a very attractive internal rate Self financed 3,174 8,685 12,510 12,523 14,078 169 Source: Management’s estimate of return (IRR) 51% for 5 calculated based on 5 year period and 94% - 10 year period Use of funds and financing sources (scenario – NORMAL TAX) IRR for equity participants in EUR '000 2010 2011 2012 2013 2014 2015 Scenario 1 Scenario 2 Average Working capital 410 1,101 1,133 1,132 1,274 - IRR 5 years 69% 33% 51% CAPEX 9,964 10,020 11,377 11,391 12,804 169 IRR 10 years 105% 84% 94% Sawmill waste line 9,401 9,401 10,744 10,744 12,087 - Other CAPEX 563 619 633 647 717 169 Total  Interest rate for the debt financing was assumed to be External financing 7,864 4,380 2,142 14,386 12.5% in 2010 with decrease down to 10% starting from Equity 2,359 1,314 643 4,316 2011 Loan 5,505 3,066 1,500 10,070 Self financed 2,510 6,741 10,368 12,523 14,078 169 Source: Management’s estimate 
    • Organization Company’s Management Director  Chris Chatterton, has extensive experience in building large-scale energy businesses in challenging environments, and in very pioneering roles, in the CIS and Asia, in an executive capacity, to include The AES Corporation, D1 Oils PLC, and Yukos Oil. Most recently, Chris was instrumental in raising initial funding for Landkom Ukraine, and also one of the founding shareholders in Landkom International PLC Financial  Vladimir Vasyuta is a skilled and qualified financial and business leader uniquely experienced in emerging Director market sectors. Vladimir has significant experience in fields of business valuations and audit of large Ukrainian enterprises with one of the ‘Big 4’ companies. He has extensive experience in consulting companies in agriculture, telecommunication, chemical, metallurgical and trading sectors Company  BohdanChomiak, is an experienced Canadian farmer with over 12 years experience in the Ukrainian Secretary Agricultural sector as Director for USAID’s Agriculture Division. In this role, Mr. Chomiak was very influential in policy creation and implementation, and in advising and consulting both governments and private companies in the acquisition of Ukrainian farmland 
    • Organization Legal and ownership structure                        Note: All shareholders are founding shareholders except for Revane Ltd 
    • Disclaimer and Contact details  This document is provided on the basis that it is kept  In providing this document, S.I.V. Holdings Ltd. reserves CONFIDENTIAL and its circulation and use are the right at any time to make changes or fully replace it. RESTRICTED. It should not be copied or sent to any other Nothing in this document may and should be deemed to person/party without the express permission of S.I.V. be or interpreted as an obligation or promise regarding the Holdings Ltd future  This document has been prepared because S.I.V. Holdings Ltd intends to raise funds to execute its business  For any information relating to this opportunity, please, plan, which may include bank loans, merging with a contact: strategic partner to form a joint company, or the sale of a significant equity stake Bohdan Chomiak  This document includes the basic information, estimates and forecasts, which have been prepared by S.I.V. Corporate Secretary Holdings Ltd. This document is provided exclusively to S.I.V Holdings Ltd. assist interested parties in making decisions on the Tel: +380 67 4030258 advisability of further study of the investment opportunity. Bohdan@ebtpelletfuel.com Any recipient of this material should conduct its own analysis of the potential investment, and understand that info@ebtpelletfuel.com the receipt of this material from S.I.V. Holdings Ltd in no way signifies confirmation that the Transaction is justified  S.I.V. Holdings Ltd will not be liable in any way for any representations or warranties directly or indirectly contained/arising from this material 
    • Appendix 1 Harvest liquid lumber, 2008 