Garten Rothkopf
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Garten Rothkopf
“12 Facts, Six Trends, Four Pillars
and Three Conclusions”…
David Rothkopf
Garten Rothkopf
April 2, 2007
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Garten Rothkopf
Recent News Headlines
All these headlines are from March 2007
• “France: Government Proposes increase
in Biodiesel”
• “US and EU to Partner on
Commoditization and Standardization on
Biofuels”
• “Synergy Drive on Track for Main Board
Listing by Year End”
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Garten Rothkopf
Recent News Headlines cont.
• “China Launches Rapeseed Biodiesel
Industry”
• “EU adopts binding energy targets:
Merkel”
• “Petrobras Plans to Use Waterways, Rail
to Spur Ethanol Exports”
• “Brazil's Lula Visits Bush for Ethanol and
World Trade Talks”
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Garten Rothkopf
12 Key Facts
1. The transport sector today produces 20% of
greenhouse gas emissions.
2. Blend mandates have been enacted in 27 of
the 50 countries surveyed by this report and 40
have some form of biofuels promotion
legislation.
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Garten Rothkopf
12 Key Facts
3. Biofuels are the most competitive alternative
today:
a) Clean and GREEN, unlike coal liquefaction
b) A proven technology, unlike hydrogen
4. The Western Hemisphere today produces 80%
of the world’s biofuels. Latin America alone
produces 40 percent of the world’s biofuels.
5. Brazil accounted for over 50% of total trade in
ethanol in 2005
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Garten Rothkopf
12 Key Facts
6. Investment in clean energy reached $38bn in 2005, up
from just over $5bn a decade before. Major recent
investment announcements include:
– The Chinese government has announced it will invest $187bn
in clean energy through 2020.
– The UK government will invest $2bn in a clean energy
research center.
– British Petroleum has pledged $500m to create the Energy
Biosciences Research institute, which will focus on biofuels.
– Brazil’s Petrobras and Japan’s Mitsui announced plans for
$8bn investment in ethanol capacity expansion
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Garten Rothkopf
12 Key Facts
7. Many countries in Latin America and the Caribbean
have the land, climate, and labor to be well positioned
to capture a significant percentage of this investment.
– Recent Investments Include:
• Pure Biofuels to expand its feedstock production by an additional 60
thousand hectares in Peru to supply its 200m liter a year biodiesel
facility.
• Mitsubishi Corp established a 30 year supply contract and 10% equity
stake in Usina Boa Vista in Brazil.
• Leading US private equity investors made a $200m investment in
Brenco, a Bermuda-based company which will develop biofuels projects
in Brazil.
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Garten Rothkopf
Garten Rothkopf
Colombia: 5th largest
producer and exporter of
palm oil, 4th in terms of
yield per hectare
Peru: Highest
sugarcane yield per
hectare in the world
and significant
production of multiple
biodiesel feedstock
Chile: potential for
second generation
technology using its
wood chip industry –
the country’s third
largest export
Argentina: The world’s
largest exporter of
soybeans and is
already developing a
cost-competitive
biodiesel industry
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Garten Rothkopf
Mexico: Sugarcane and sorghum
Dominican Republic: 200k
are abundant. The latter
hectares of traditional sugarcane
accounts for 13.5% of
land available for ethanol
agricultural production and 0.5%
production without diverting food
of GDP. Sorghum is Mexico’s
crops. 40% of sugar production
second largest crop, with 6m
now exported.
tons produced each year.
Guatemala: The world’s
fifth largest sugar
exporter, with 72% of
Jamaica: A hub for
production destined for
Brazilian ethanol
export.
exports to the US
market.
Honduras: 6th in the
world in palm in terms
of area cultivated, with
between 500k and 1m
hectares of additional
land available for
expansion.
Costa Rica: A developed ethanol
export industry producing
approximately 40m liters
annually, destined primarily for
the US market under CAFTA.
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Garten Rothkopf
12 Key Facts
8. Most countries in the region are net oil importers.
9. Biofuels also have potential in some countries as an export
industry.
10. Of the 22 countries surveyed in the region, only 7 have blend
mandates in place and only 5 have a comprehensive national
plan.
11. There are today no common global standards for ethanol or
biodiesel, no international futures contracts, and tariff barriers to
trade.
12. Costs of all alternative energy forms are plummeting and so
concepts of what national energy policies should look like are
changing.
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Garten Rothkopf
6 Key Trends
1. Developing countries are expected to increase
energy consumption at a rate 3 times higher
than industrialized countries.
2. $100bn is expected to be invested globally in
clean energy in the year 2010 – up from $58bn
in 2005 and $5bn in 1995.
3. The transport sector is projected to increase
energy consumption by 55% by 2030.
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Garten Rothkopf
6 Key Trends
4. $200+ billion in new investment is necessary for
biofuels to provide 5% of transport energy in 2020.
5. To meet its current target of tripling ethanol production,
Brazil will require between $40bn and $60bn in new
investment.
6. The growth of biofuels will give the advantage to
countries with long growing seasons, tropical climates,
high precipitation levels, low labor costs, low land
costs… and the planning, human resources, and
technological know how to take advantage of them.
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Garten Rothkopf
4 Pillars
Pillar 1 - Innovation (R&D and Education)
• Brazil the undisputed leader to date.
• Global investment in research and development is booming.
• New disruptive technologies will dramatically change the
playing field.
Investment in innovation, particularly through regional
initiatives and knowledge sharing, is critical for the region
to remain a center of high value added technology exports
in biofuels, not simply commodity production.
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Garten Rothkopf
4 Pillars
Pillar 2 – Capacity Expansion
• Potential to expand capacity in Brazil, and a number of other
countries in the region, is significant.
• There is clear interest from investors in funding such an
expansion.
What are needed are clear regulatory frameworks, tailored
financing lines, zoning of territory to identify the
appropriate areas for expansion and mitigate
environmental impact, and support for the improvement of
private sector transparency to encourage foreign
investment.
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Garten Rothkopf
4 Pillars
Pillar 3 - Infrastructure:
• Infrastructure, particularly transport infrastructure, was the
leading concern of almost every expert consulted for this
report.
• It is estimated that Brazil needs as much as $1bn a year in
infrastructure investment
• In countries with new industries, investing in biofuels
distribution infrastructure is necessary for the
implementation of existing and planned blend mandates.
Investment in infrastructure requires a dual focus - looking
inward to facilitate the growth of the biofuels industry in
underdeveloped regions and looking outward to how
production reaches ports for exports.
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Garten Rothkopf
4 Pillars
Pillar 4 – Building Global Markets
• This expansion strategy rests on the promise of global biofuels
markets.
• While there has been some movement on this issue in recent
weeks, with the establishment of the International Biofuels
Forum at the UN, much remains to be done.
Liquid global markets with a diversity of producers and
consumers are the key to energy security, but require
common standards and sophisticated risk management
tools – neither of which exists today.
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Garten Rothkopf
3 Recommendations
1. Sustainability – In terms of
competitiveness, financing, and
environmental and social impact.
2. Scale – Visibility to attract private sector
investment and make a meaningful impact
3. Vision – Innovation, capacity expansion,
infrastructure and the development of
global markets are four pillars of one
strategy.
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Garten Rothkopf
Thank you.
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