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Pellet Mexico


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Pellet Mexico is nowadays developing the scarcely explored biomass and bioenergy market in Mexico. Utilizing residues from the forestry food and agriculture industries we are going to produce solid biofuel that can substitute fossil fuel consumption both in the industrial, tourism and domestic sectors. By covering the whole value chain of producing the biofuel, commercializing it and adapting the industry and domestic sectors for biofuel consumption, Pellet Mexico will contribute to develop a green economy by efficiently managing residues form the forestry, food and agricultural industries, transfer a competitive advantage to the industry by reducing approximately by 40% the thermic based energy consumption costs and minimize CO2 emissions, thereby contributing to a low carbon economy, to the diversification of renewable energies in our country and support the global commitment to combat climate change.

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Pellet Mexico

  1. 1. Pellet Mexico is a firm currently developing the solid Biomass market in the country. VISION
  2. 2. Chairman of the Board Oscar Espinosa Villarreal Chief Executive Officer Oscar Espinosa Mijares Chief Operating Officer Luis Rodríguez Benayas Chief Technology Officer Alberto Bustamante Founding Members With a very broad experience in both the private and the public sector in México, Oscar was former Tourism Secretary of State, Mayor of México City, General Director of Nacional Financiera, the country’s most important Development Banking Institution and President of the National Banking and Securities Commission. Oscars’ knowledge of our Country`s policies, his relation with Government authorities both in State, Regional and Municipal territories, as well his outreach with the Business Community in Mexico, makes him an ideal Chairman, both to identify opportunities and to represent the company. Business Administrator and Masters in Finance Expert in the development of projects in the Biomass sector both in Europe and Latin America, with more than 20 different specific developments in both continents. He is owner of three pellet production plants in Europe, co- proprietor of three more in Ecuador and already part of an important project in Colombia for the development of pellet for the country’s biggest palm oil producer. Alberto’s experience of more than ten years in the sector and his expertise in the building of several projects in different countries makes him an invaluable partner to develop the Biomass market in Mexico. Administrator and Business Manager. Professional specialization in Engineering and Renewable energies Proprietor and former general manager of two firms dedicated to energy efficiency and cost reduction. Acknowledged for his e x p e r i e n c e i n t h e fi e l d o f sustainable development, proven managerial capacities, key decision maker in formar business and comercial knowledge and background. The capabilities of Luis as an experienced manager, his ability in the coordination of teams, decision making capacity, his thorough execution of projects and the k n o w l e d g e i n s u s t a i n a b l e development make him an essential component for the operation of the firm. Graduate of the Superior Institute of Security Studies. Strategic and sustainable development specialization. Founder and 10 years CEO of Contorno, a mexican consulting firm with expertise in the fields of tourism, communication, innovation and urban development. Important stakeholder in the entrepreneurship and innovation ecosystem in Mexico. Oscar’s executive and managerial capacities are well proven in the business development world. His knowledge of the public and private sector in Mexico, as well as the expertise in public policy in the country, makes him a key player in the company, both to identify opportunities, manage the firm and execute with efficiency its goals and objectives. Philosopher. Masters in communication.
  3. 3. The The Problem The Cause The Solution
  4. 4. • Global warming is a fact. With disastrous consequences for the economy, society and the environment. • The fight against global warming has really begun. Paris agreement is the first-ever universal, legally binding global climate deal: a long-term goal of keeping the increase in global average temperature to well below 2°C above pre-industrial levels. Fight against global warming Increase clean power to 50% of the electricity generated across North America by 2025. Reducing methane emissions from the oil and gas sector by 40-45% by 2025. This objectives are only viable if this economies move towards a clean growth economy, which includes as their main actions renewable energy generation, power transmission, and energy efficiency. • In the case of Mexico, our country compromised the reduction of green house gas emissions by a 22% and the emissions of black carbon by a 51%. • In the recent (june 2016) North American Leaders’ Summit the economies of United States, Canada and Mexico signed a North American Climate, Clean Energy, and Environment Partnership including some of the following actions:
  5. 5. • Energy transition to clean energies is not only a global trend, but a mandatory development of the sector if the world wants to comply with climate change agreements. Clean Energies “Technology will help solve our energy issues. The urgency of climate change and the energy needs in the poorest parts of the world require an aggressive global program for zero-emission energy innovation.” Breakthrough energy coalition
  6. 6. According to Mr. Amin: Renewable power generation technologies have accounted for more than half of all new power generation capacity additions in every year since 2011. Today, 164 countries have renewable energy targets, up from just 43 in 2005. A record high of more than 130 gigawatts (GW) of renewable energy was added to the global energy mix in 2014 and investment in the sector increased from US $55 billion in 2004 to more than US $260 billion in 2014. In 2014, new capacity additions of solar PV set a new record of 40 GW, while wind power also had a record year with 52 GW added. Director General of the International Renewable Energy Agency: Renewable energy accounts for 13.5% of the world’s total energy supply, and only for the 22% of the worlds electricity (iea) Adnan Z. Amin Barriers for their uptake: Market structures, a lack of understanding of emerging renewable technologies, difficulty in accessing finance, high financing costs, inadequate regulatory frameworks, lack of remuneration for offsetting fossil fuel externalities (e.g. carbon and local air pollutant emissions), small markets and policy uncertainty have all played a role in hindering the deployment of renewables.
  7. 7. • There are other renewable energy sources (RES) that have been developed successfully in regions like Europe and North America, as the production of Bioenergy and specifically of solid Biomass, as pellets, that have been ignored in other latitudes. • Specifically the pellet sector has the capacity to grow from a niche product to a major energy commodity (Bioenergy Report, AEBIOM, 2015) • Biopower electricity comes primarily from wood and agricultural residues that are burned as a fuel for cogeneration of electricity and heat in the industrial sector. Accounts for 12% of all renewable energy generated in the US. (2014 Renewable Energy Data Book) BIOENERGY
  8. 8. Source: EPC Survey, Hawkins Wright, FAO • Globally 27,1 million tonnes of pellets produced in 2014. • 13,5 million tonnes produced in the European Union • North America slightly increased its production • Russia & CIS and Asia have shown an important growth in their production EU28% 50%% Other% Europe% 4%% North% America% 30%% Russia%&% CIS% 6%% China%% 5%% Rest%of% Asia% 4%% Rest%of% World% 1%% • Producing 13,5 million tonnes but consuming 18,8 million tonnes, the EU is the biggest pellet importer in the world. • Imported pellets are mainly for industrial use (Power plants and CHPs) • The imported pellets are mainly sourced from the USA and Canada • Russia & CIS countries are gaining importance in EU pellet supply to both the Industrial and residential sectors • Trade from North America to EU has slightly increased from 4,69 million tonnes in 2013 to 5,15 million tonnes in 2014 showing a very different trend in USA than Canada. • US exports to EU have increased 41 % with 3,89 million tonnes, while Canadian exports have reduced 34%. • Exports from Russia & CIS countries to EU have increased around 20 % from 2013 to 2015 to reach 950.000 tonnes. • The Baltic states and Russia produced 4.15 million tons during 2015 Source: EPC Survey, Hawkins Wright, FAO WORLD WIDE PELLET PRODUCTION
  9. 9. MexicoNatural resources / Agriculture Mexico is among the world’s leading agrifood producer: ranked first in avocado, lemon and limes, third and fourth respectively for grapefruit and corn,fifth for beans, coconut oil, oranges and poultry and sixth for sugar. Mexico produces 24.5 millions of tons of maize annually and 53.5 tons of sugar cane. Biodiversity Mexico has been recognized as a mega diverse country, ranked in the top 5 countries in the world -after Brasil, C o l o m b i a , C h i n a a n d I n d o n e s i a - w i t h m o r e Biodiversity. It is estimated that more than 10% of all world’s species live in this country (CONABIO) Green Growth Green jobs creation. Knowledge transfer. Take advantage of taxation. Green Portfolio standards. Public private funding and incentives. Increase value of organic, agricultural and wood residues Ta k e a d v a n t a g e o r Mexico’s biodiversity and natural resources Grant value to residues that result of agricultural production Energy Reform and Climate Policy Last year Mexico advanced in a constitutional energy reform, which enhances the adoption of non fossil fuel based energies. Environmental policy is recently developing incentives that favor the adoption and investment in clean energies and the participation in green bond markets and carbon offset programs.
  10. 10. Solid Biomass opportunities in Mexico Forestal and agricultural residues can be processed by undergoing dehydration and compression to improve combustion performance and energy density. Once processed, residues can be transformed into higher value briquettes and pellets, which can cater for heating and electricity-generation purposes, as well as be transported for exports over transcontinental distances. In Mexico, agricultural residues have a large potential to contribute to production of solid biofuels. Still there is no large-scale production or demand for briquettes and pellets, nor a broad regulatory effort to promote non fossil (e.g. biomass-based) cogeneration in the country. Even with low prices of oil and natural gas, the demand for briquettes and pellets in large markets such as the European Union, and the national consumption bring a good opportunity for this market. Forestry land use, wood industry residues, forestal residues. Identified agricultural products that could contribute to the solid Biomass market: Sugarcane, Soy, Corn, Rice, Coffee, Sorghum, Agave, oil palm rachis. Based on the 13 products surveyed, bioelectricity could produce 10.55 per cent of the yearly national electricity consumption in Mexico; second generation bioethanol could replace 6.33 per cent of gasoline used (in energy terms); biomass-to-liquid biodiesel could replace 23.22 per cent of diesel demand and biogas could make up to 14.03 per cent of natural gas demand in the country. Biofuels from residues could also deliver substantial employment to Mexican agriculture. Bioelectricity from agricultural residues could add over 39.000 new jobs (direct and indirect), bioethanol over 49.400 jobs; biodiesel 71.700 jobs and biogas 4.000 jobs.
  11. 11. Pellet, projects and investments will develop the solid Biomass market in Mexico, specifically through the production and commercialization of pellets derived from forestry land use, forest and wood industry, organic and agricultural residues. Pellet production and commercialization in México offers solution to: Reduction of CO₂ Emissions Contribute to expand and diversify the renewable energies market Increase value of organic, agricultural and wood residues. Economic and Industrial Development. Green Growth
  12. 12. Fuel Market The incremental tendency of oil prices has a negative effect on the product prices of different industries, transferring the oil costs to the price of the product for the final customer, losing therefore market competitiveness. Pellet can become an energy alternative given that it can substitute the calorific power of diesel with a significant cost reduction of approximately 50%, it can become a stable market without the incremental price tendencies of oil, and can maintain competitive advantage for the Mexican industries in the worldwide market. Historical comparison of fuel price both in the USA and in Mexico In Mexico diesel use in the industrial sector is equivalent to 475 million barrels of oil annually, most of them used in thermic processes in the industrial sector. As can be seen in the graph, the oil prices in the last 35 years have been incrementing
  13. 13. Pellet - Diesel equivalence The national pellet market will be directly related with the substitution of diesel industrial use, in order to accomplish a 100% substitution, 17 million tons of pellet would be needed. 2,44 kg rice pellet 2,32 kg palm pellet 1,85 kg pine tree pellet = 1 lt Fuel Calorific Power Diesel 8800 Kcal/L Gas 9500 Kcal/kg Rice pellet 3800 Kcal/kg Palm pellet 3800 Kcal/kg Pine tree pellet 4800 Kcal/kg
  14. 14. Pricing and Competing Industries Up to date there are NO COMPANIES in Mexico producing pellets for the substitution of industrial diesel consumption. Even in its historic low price, diesel is still 40-60% more expensive that the approximate price to market of pellets in Mexico. The up to date price (june 2016) of diesel is 13.77 Mexican pesos per liter. Oil estimates for the next 2 years show an upward tendency, which would make the diesel derivative more expensive. The price estimate for Pellet depends on multiple factors as the guaranteed price of feedstock, logistics, productive process, return of investment and utility margins. Given the up to date analysis of these factors and based on the experience of projects in other latin american regions with similar conditions to Mexico, the price estimate for pellets could vary between 6 and 9 Mexican pesos. The natural gas industry has a more competitive price in respect to diesel, it's average price to date approximately of 12.83 Mexican pesos. Still Pellet represents a cheaper option, with the competitive advantage that the adaptation technology to natural gas represents a huge investment. VS
  15. 15. Dryers: • Rice • Corn • Coffee • Wood Industrial Use • Furnaces • Boilers • Steam Boilers • Heating • Canning Industry • Pharmaceutical industry • Paper Industry • Etc. Industrial adaptation for Pellet Consumption. • Robust Equipment • Local fabrication • 96% Efficiency • Quick installation (24/48 hrs) • Easy maintenance • Over 1,5 MGW/H • Competitive prices • Direct service centre. Pellet Industrial Use
  16. 16. Pellet Mexico Business Model. The project in Mexico will replicate the Business Model as well as the know-how imported from Spain. The pellet production will be based mostly for internal consumption (and not for export). Where important availability of feedstock is guaranteed PIP will build a Pellet production plant. The commercialization of the pellet will be for the regional industries around the plant installation. Mexican market of industries with intensive thermic combustion are all PIP potential clients. Even more now that an energy conversion model to green energies is needed given the compromise to reduce carbon dioxide emissions. Our managerial approach is based on the construction of several plants and an association model with the provider of feedstock or a long term contract that guarantees the low and stable price of the feedstock. . Main activities Product plant installation and implementation. Development of the business model, knowledge and technical requirements, and equity participation of the specific project, both with owner, local state holders and or investors. Development and implementation of projects for medium and large companies for private use or own consumption. Development of energy conversion projects. Engineering consultancy for companies that are willing to substitute their fossil fuel consumption for that of pellets. Provisión of services related to the management and maintenance of the production plants. Distribution and commercialization of equipment and biomass burners. Consultancy regarding solid biofuels. Business Development Initial fase: Legal constitution of the firm. Kick off and beginning of operations. Undertake the implementation of five pellet production plants in a maximum of two years, which will mean an annual production of 200 thousand tons a year, substituting what will only account for the 1.17% of fossil fuels. Expansion: Consolidate the business model through participation in several projects in different regions of the country, substituting a wider margin of consumption of fossil fuels. PIP Mexico would be by this moment the number one positioned company in the development of the biomass market. Put Option: Once the company is properly developed and consolidated a put option could be considered.
  17. 17. The six month period of work to date, has permitted us to work both on the assessment of the opportunity with both important stakeholders of the private and public sectors, and the identification of specific projects of which the more important ones are: - Pellet production plant in the State of Chiapas, known for the rapid growth of its palm oil industry and its expansion to neighboring states. There's and advanced process of negotiation with the biggest producer in the state to either buy from him the palm rachis (which has no market or secondary use), or work a partnering option. - The State of Mexico presents several opportunities which have been discussed with key stakeholders both for the explotation of the corn residues, the forestry sustainable explotation programs and an important wood industry which produces important amounts of sawdust that can be converted to pellet - The tequila industry in the northern region of Mexico represents an important opportunity which has been already discussed with Grupo Cuervo, the biggest producer of tequila in the world. The residues from the agave have no alternative use or market, and they could be converted to pellets with a very good calorific power. Identified Opportunities (to date)
  18. 18. • Given the Business Plan already developed, and the main income activities of Pellet Mexico the objectives in a three year projection are as follows: Revenue Stream 2016 2107 2018 Consulting 8 projects 8 projects 8 projects Plant implementation for third party users 2 projects 0 0 Production and pellet distribution 6,6000 tons 133,000 Tons 200,000 tons Equipment distribution and maintenance 38 38 39 Anual income Anual utility