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Terraqua barranca executive summary no agribusiness


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Terraqua Barranca business plan assuming no income from sale of water or from agribusiness conducted with that water.

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Terraqua barranca executive summary no agribusiness

  1. 1. Terraqua Barranca A Business Plan Executive Summary ________________________________ Ramiro Priale & Paul Skillicorn 8/19/2011
  2. 2. Terraqua Barranca A Business Plan Executive Summary ________________________________ Ramiro Priale & Paul Skillicorn 9/9/2012Introduction: Terraqua Barranca, a collaboration among principals now based in Peru and theUnited States is launching a new business in Peru based on the Terraqua System.Following successful commissioning of a comprehensive pilot project now beingconducted in collaboration with the community of Santa Catalina and the City ofBarranca in the Lima Region of Peru, the Company intends implementing a fullcommercial scale operation which, through successive phases, will providecomprehensive wastewater treatment services to the entire province of Barranca. Terraqua Barranca intends to change, fundamentally, the existing paradigm forwastewater treatment in Peru. The Terraqua System treats municipal, industrial andCAFO (concentrated animal feeding operations) wastewater effluent to a fully recyclablecondition. Byproducts of the Terraqua wastewater treatment process – branded highprotein animal feeds, fish, crustaceans and protein concentrates – generate a positive cashflow sufficient to cover both operating and capital costs. Nothing is discharged. No wateris lost. The Terraqua System, as first implemented in Barranca, Peru will, in fact, becomethe first truly profitable commercial-scale “no-fees” wastewater treatment system in theworld. Terraqua Barranca intends using the “entre” and local presence afforded by itsrural, or small town wastewater treatment concessions, to introduce at the communitylevel in Peru the massive advantages of its aquaculture methods in the context of amutually beneficial, truly interdependent joint venture agribusiness relationship with ruralcommunity smallholders. In a second phase, agribusiness iteration, the TJVA (TerraquaJoint Venture Agribusiness) enterprises will leverage possession of the continuous streamof highly treated effluent realized by the Terraqua wastewater treatment system andadoption of fertigation irrigation technologies also to achieve highly efficient distributed2
  3. 3. production and local processing of a wide range of valuable extractive crops, energycrops, building materials and domes for internal consumption and sale to the US, Europeand the Far East. In so doing, TJVA enterprises will also enrich rural communitypartners in a manner and to a level hitherto thought to be unattainable.1 Terraqua Barranca intends employing an accelerated amortization, distributedtreatment approach to treating wastewater in the Peruvian urban context. In so doing, theSystem will save the Municipal client not only the cost of a treatment plant – but also thecost of installing and maintaining expensive mains that would otherwise be required toaggregate wastewater and transport it to common points of treatment and discharge. Itwill also allow quick, local distribution of treated wastewater to industrial clients and topublic and private irrigation applications – thus freeing up the municipality’s constrainedfresh water supplies for use in supporting new growth in the greater metropolitan area.Terraqua and its partners intend financing each such system located within the largerBarranca provincial area (Barranca, Supe, Puerto Supe, Pativilca and Paramonga) entirelyoff budget to the partnering municipality. In latter phases of this project, this expansionwill, in part, be enabled by the capital gains realized through sale of properties that havebeen “cycled” through the Terraqua process and thereby gained “absolute preference”with respect to zoning allowances, installation of infrastructure (roads, electricity, water,wastewater, telephone, emergency service, police etc.), and preferential access toTerraqua-treated recycled water. Following formal commissioning of the Barranca Pilot project, scheduled for late-2011, construction of the first commercial Terraqua wastewater treatment plant, also inBarranca, will begin in mid-2013 with early subsystem commissioning to occur in late-2013 and full scale operations to begin in mid-2014. During the subsequent 5 years, theCompany will have become an important factor in the Peruvian domestic market forpremium, high protein branded feeds; an important new supplier of tilapia, barramundi, aWestern Pacific region fish, as well as Paiche (Arapaima in Brazil) and Paco, twoAmazonian fish species, to the US, European and East Asian markets. The Company will be managed at the discretion of an international board ofdirectors, by a compact team of managers and production experts based in the Company’soffices located in Barranca and Lima, Peru. Recognizing its preeminent position in the “new world of wastewater treatment,”Terraqua, Peru, the parent company, intends pursuing an aggressive program of Peru-specific R&D with an aim to continue improving its local technology base while alsobroadening the scope of its offerings. To that end, the Company will also continueworking with plants and organisms other than the duckweed and tubifex species that formthe foundation of existing technologies. The Company also intends to continue pushing1 Readers should consult The Terraqua Barranca Agribusiness Plan for details on Phase IIof the Terraqua Barranca Project.3
  4. 4. the boundaries of its existing experience with the groundbreaking community-levelimplementation of fertigation technologies and attendant approaches to derivingleveraged value from resulting treated water. Terraqua principals believe the Company’s “green” contributions to improving theaquatic environment; changing the global paradigms for treatment of wastewater andproduction of food protein; leveraging the limited and fragile supplies of fresh water forhuman use and consumption; and developing dramatic improvements in the productionefficiencies of building materials and renewable energy feed stocks will come to berecognized by a world that is gradually increasing its sensitivity to the environment inwhich we live.Public Benefits A recitation of Terraqua Barranca’s public benefits – in effect a contribution to allthe citizens of Peru – is noteworthy. During the first five years of the proposed project, Barranca will move from beingabsolutely negligent in its treatment of wastewater to become the unquestioned globalleader. All wastewater treated by the Terraqua Barranca wastewater treatment plants willmeet the highest treated effluent standards in the world, and all of it will be fullyrecycled. Nothing will be lost. This will have the effect of significantly expanding theavailability of water to all those living within Barranca Province – a region comprisingthe towns of Barranca, Supe, Puerto Supe, Paramonga, Pativilica, Santa Catalina andCaral. In addition to recycling all treated wastewater, the Company intends introducing anew, low cost means by which seawater can be brought, through ocean-current-poweredreverse osmosis, to a drinking water standard. Coastal communities participating in theproject will be given the option of supplementing their existing drinking water supplies ata fraction of the cost now incurred by conventional reverse osmosis technologies. By joint-venturing with rural communities, the Company intends to distribute upto 10% of the project’s profits to individual members of those communities. By the end of2017 rural household partners will be expected to share an annual distribution averagingjust over $150,000 per household. For the first time in contemporary history, a “majorrural development project” will have gone beyond merely providing basic needs, togenuinely enriching rural Peruvians – helping them truly get ahead. These same ruralPeruvians will also have reduced the “wastewater treatment burden” of 50% of theirurban brethren effectively to zero. During the next five years Terraqua Barranca expectsto expand services to encompass the entire sewered population within the greaterBarranca province.4
  5. 5. Duckweed, the principal crop produced by the project, is widely recognized as themost productive of all leafed plants. Grown with supreme efficiency, as it will be in thisproject, duckweed will convert more CO2 per hectare than can any other combination ofplants on any “footprint” on the face of the earth. By 2017, project-grown plants, whiletreating up to 500 liters of water each second to a drinking water standard, will beremoving over 20 tonnes of CO2 from the environment each year. This would beequivalent to taking over a dozen mid-sized cars completely “off the road.” By substituting for conventional activated sludge wastewater treatment plants, theonly comparable system when it comes to effluent quality, the Terraqua system, oncefully deployed as proposed in this business plan, will also save over 25,000 megawatthours of electricity each year – enough capacity to provide all the electricity needs ofover 1,000 Peruvian households: capacity that can contribute to improving the lives ofevery Peruvian citizen. If produced by a conventional coal-powered thermal power plant,that same energy would generate release of over 25,000 tonnes of carbon dioxide over a12 month period, approximately the same amount as a fleet of 2,500 mid-sized cars. The centerpiece of the Terraqua wastewater treatment system, the duckweed-based biological nutrient removal system, will effectively change the global paradigm forproduction of plant-based protein. One hectare of duckweed surface area will produce 30times as much plant protein as will soybeans – and a better protein (better amino acidprofile) at that. In 2016, the project will produce more than 106,000 tonnes of duckweedmeal – substituting for approximately 120,000 tonnes of soybeans – all of which mustnow be imported into Peru. The project’s novel vermiculture primary treatment systemwill also produce more “meat protein” per unit of surface area than does any other animalprotein production system. As harvests of fishmeal inevitably decrease with overfishingand the advent of global warming, “Terraqua worms” can easily replace those losses. The Terraqua phased-sequenced anaerobic digesters provide an alternativemethod by which to extract value from volatile solids. Today, they can deliver morebiogas, and a better biogas (higher methane) from primary waste solids than can anyother comparable process. These systems will also contribute, in a significant manner, toboth CO2 mitigation and energy savings throughout Peru.Location The Terraqua System may be profitably deployed in any Peruvian location wherewastewater is collected. Long term benefits are maximized, however, along the waterdeficient coastal plain and in the Andean highlands – regions expected to experienceincreasing future water shortages as the effects of global warming become more apparent.This advantage is most pronounced in regions such as Barranca province, wheresmallholder farmers – campesinos – still predominate. These favorable geographiccircumstances, combine with the favorable disposition of municipal authorities to make5
  6. 6. Barranca Province ideally suited to host the first major implementation of the Terraqua System. The Numbers A brief summary of the “numbers” is presented below. The reader should note that beyond Barranca city, no other sewered towns and villages of greater Barranca Province feature in this plan. The “numbers” also ignore income and future value derived from urban real estate capital gains. The Company believes, nevertheless, that this source of income may eventually come to exceed most other Terraqua System outputs. Additionally, invitations already received from the mayors and councils of towns such as Supe, Paramonga and Pativilca suggest the Company will have no difficulty expanding its services to cover the entire province.Income Statement (Profit & Loss) 2013 2014 2015 2016 2017SALES $ 51 $ 10,228,632 $ 16,262,780 $ 17,072,238 $ 17,072,238 Product Group 1 Sales $0 $1 $0 $0 $0 Product Group 2 Sales (frozen fillets) $4 $ 10,228,620 $ 16,262,768 $ 17,072,226 $ 17,072,226 Product Group 3 Sales $ 12 $6 $6 $6 $6 Product Group 4 Sales $ 35 $6 $6 $6 $6COST OF GOODS SOLD $ 64,458 $ 5,035,878 $ 7,463,691 $ 7,900,092 $ 7,990,297INCOME FROM PRODUCTION (Gross Margin) -$ 64,407 $ 5,192,754 $ 8,799,089 $ 9,172,146 $ 9,081,941OPERATING EXPENSES $ 1,294,840 $ 2,611,773 $ 3,066,000 $ 2,974,286 $ 2,814,886EBITDA -$ 602,083 $ 3,417,765 $ 6,616,776 $ 7,105,128 $ 7,200,979INCOME FROM OPERATIONS -$ 1,359,247 $ 2,580,981 $ 5,733,089 $ 6,197,860 $ 6,267,054NET INTEREST INCOME -$ 1,075,109 -$ 2,192,222 -$ 2,155,091 -$ 2,027,702 -$ 1,826,481INCOME BEFORE TAXES -$ 2,434,357 $ 388,759 $ 3,577,998 $ 4,170,158 $ 4,440,573TAXES ON INCOME $0 $ 157,158 $ 1,154,254 $ 1,379,165 $ 1,491,634NET INCOME AFTER TAXES -$ 2,434,357 $ 231,601 $ 2,423,744 $ 2,790,992 $ 2,948,939Cashflow Statement 2013 2014 2015 2016 2017INVESTMENT AND OTHER CAPITAL $0 $0 $0 $0 $0LONG-TERM DEBT $ 14,241,330 $ 3,171,833 $0 $0 $ 530,000SHORT TERM LOANS $ 3,000,000 $ 2,400,000 $0 $0 $0INCOME FROM OPERATIONS $ 47 $ 9,002,182 $ 16,066,547 $ 17,072,238 $ 17,072,238INCREASE IN ACCOUNTS PAYABLE $ 25,089 $ 284,778 $ 403,317 $ 416,655 $ 412,588INCOME FROM INTEREST $ 38,051 $ 16,357 $ 18,183 $ 39,161 $ 73,341TOTAL SOURCES OF FUNDS $ 17,304,517 $ 14,875,150 $ 16,488,048 $ 17,528,054 $ 18,088,167 6
  7. 7. CAPITAL EXPENDITURES $ 14,241,330 $ 3,214,517 $ 428,553 $ 480,428 $ 528,405SALARIES, LABOR & COMM. $ 102,093 $ 2,065,236 $ 2,662,202 $ 2,710,939 $ 2,674,703COST OF GOOD SOLD $ 27,071 $ 3,522,292 $ 5,408,875 $ 5,750,758 $ 5,821,567OTHER OPERATING COSTS $ 472,970 $ 1,502,866 $ 1,852,483 $ 1,742,888 $ 1,593,633PAYMENT OF PRINCIPAL $ 922,427 $ 2,170,850 $ 2,413,107 $ 2,519,518 $ 2,572,038INTEREST EXPENSE $ 1,113,160 $ 2,208,580 $ 2,173,274 $ 2,066,863 $ 1,899,822INCOME TAX PROVISION $0 $ 157,158 $ 1,154,254 $ 1,379,165 $ 1,491,634DIVIDEND PAID $0 $0 $0 $0 $0TOTAL UTILIZATION OF FUNDS $ 16,879,052 $ 14,841,499 $ 16,092,748 $ 16,650,559 $ 16,581,803FUND INCREASE (DEFICIT) $ 425,465 $ 33,651 $ 395,300 $ 877,495 $ 1,506,364OPENING CASH BALANCE $0 $ 425,465 $ 459,116 $ 854,416 $ 1,731,911CLOSING CASH BALANCE $ 425,465 $ 459,116 $ 854,416 $ 1,731,911 $ 3,238,275Balance Sheet 2013 2014 2015 2016 2017ASSETS CASH & SHORT TERM INVESTMENTS $ 425,465 $ 459,116 $ 854,416 $ 1,731,911 $ 3,238,275 ACCOUNTS RECEIVABLE $4 $ 1,226,454 $ 1,422,687 $ 1,422,686 $ 1,422,686 INVENTORIES $ 81 $ 135,183 $ 404,698 $ 831,757 $ 1,363,299 TOTAL CURRENT ASSETS $ 425,551 $ 1,820,754 $ 2,681,800 $ 3,986,355 $ 6,024,260 LAND AND IMPROVEMENTS $0 $0 $0 $0 $0 MACHINERY, EQUIPMENT, VEHICLES $ 14,241,330 $ 17,436,975 $ 17,874,340 $ 18,374,698 $ 18,935,547 BUILDINGS & IMPROVEMENTS $0 $0 $0 $0 $0 ACCUMULATED DEPRECIATION $ 757,164 $ 1,593,948 $ 2,477,635 $ 3,384,904 $ 4,318,828 TOTAL PLANT & EQUIPMENT $ 13,484,166 $ 15,843,027 $ 15,396,705 $ 14,989,794 $ 14,616,719 OTHER ASSETS $0 $0 $0 $0 $0TOTAL ASSETS $ 13,909,717 $ 17,663,780 $ 18,078,505 $ 18,976,149 $ 20,640,979LIABILITIES SHORT-TERM DEBT & NOTES PAYABLE $ 2,476,875 $ 3,705,900 $ 2,352,584 $ 872,318 $0 ACCOUNTS PAYABLE $ 25,089 $ 309,867 $ 713,185 $ 1,129,840 $ 1,542,427 TOTAL CURRENT LIABILITIES $ 2,501,964 $ 4,015,767 $ 3,065,769 $ 2,002,158 $ 1,031,060 LONG TERM DEBT $ 13,842,028 $ 16,013,987 $ 14,954,195 $ 13,914,943 $ 13,256,591 INVESTMENTS & OTHER CAPITAL $0 $0 $0 $0 $0 RETAINED EARNINGS -$ 2,434,276 -$ 2,365,974 $ 58,541 $ 3,059,048 $ 6,353,328 TOTAL EQUITY -$ 2,434,276 -$ 2,365,974 $ 58,541 $ 3,059,048 $ 6,353,328TOTAL LIABILITIES $ 13,909,717 $ 17,663,780 $ 18,078,505 $ 18,976,149 $ 20,640,979 Financing and Capital Contribution: Terraqua Barranca is seeking investments of $8 million in cash and 50 qualifying hectares of land immediately proximate to Barranca, along with $10 million in long-term debt and $4.5 million in short term credit. The cash investors will acquire a minority 49% stake in Barranca Investment Partners, which in turn, when fully subscribed, will own a controlling 85% of Terraqua Barranca. The land investments will acquire a proportionate 7
  8. 8. stake in Barranca Land Partners, which in turn, when fully subscribed, will own aminority 15% interest in Terraqua Barranca.2 Alternatively, the project can employ a Public-Private Partnership (PPP) approachwithin the context of a 30 year concession. Employing creative phrasing and thePeruvian SNIPs mechanism, this approach can allow 100% of project financing to beprovided through the public sector. Trust-pooled municipal bonds, aid agency guaranteesto commercial credit and direct sovereign debt may all be employed, either singly or insome combination, to raise the necessary capital. To that end, project principals are nowengaged in discussion with cognizant officials of the Peruvian Ministry of Housing, TheCity of Barranca, USAID, The Overseas Private Investment Corporation (OPIC), TheInterAmerican Development Bank (IDB), private commercial banks and AndinoRegional Capital (bonding agency).3 Each “partner” in this Barranca expression of the Terraqua System contributes anessential element to the project. Terraqua contributes proprietary technology andmanagement; its investment partner provides equity; the Municipal, Provincial andRegional partners contribute wastewater and the means for its collection; and communitypartners contribute their land, their labor and the environmental circumstance in whichthey now live. The banking consortium will provide credit and the government of Peru,acting on behalf of the project’s true beneficiaries, the people of Peru, will provide thebasic infrastructure which allows the project to move forward. Peruvian private sectorcompanies, their principals and their employees will also contribute contract construction,expertise, machinery, design, engineering and supplies to the project.Timing: The Barranca pilot project is underway and treating raw municipal wastewater toan advanced tertiary standard – higher than any commercial municipal system nowdeployed anywhere in Peru. (see appendix 1.) A site to accommodate the wastewatertreatment elements of the Barranca city wastewater treatment project has been selected.The city has thrown its full weight behind the project. The project has even beenapproved by the Santa Catalina rural community board. Cognizant Barranca city and2 Alternatively, the option exists to use only Terraqua Barranca and issue class A(common), B (preferred) and C (land related preferred) shares – forgoing use of BarrancaInvestment Partners and Barranca Land Partners.3 In the event alternative financing becomes available, 85% of project equity will be heldby Terraqua, Peru, with 15% contributing to the Terraqua Barranca Trust, a fund havingan independent board exercising the Trust’s charitable mission towards the city and it’sresidents.8
  9. 9. regional water and wastewater officials (SEMAPA) are fully engaged. An environmentalassessment is underway. Construction is expected to commence within 120 days.Contact Information: Readers requiring additional information or those wishing to express an interest inmaking an investment should contact:Paul, PaulSkillicorn@gmail.comHome/office: +1 512-383-5006 cell: +1 512-934-7441Skype: PaulSkilliornRamiro Prialerpriale@terraquaperu.comHome/office +511 4365103 cell: +511 996595044 / +511 969333641Skype: RamiroPriale9