Anatoly Blyznyuk1.pdf

Ramko Rolland Associates
Contents of this letter are Confidential and Proprietary Page 1 of 8
Corporate Finance and Operational Restructuring
40 East End Avenue New York, New York 10028 12 Gotlieb Street, Tel Aviv
Tel : +1-914-595-6026 Fax : +972-77-524-2780 Israel 64-392
E-Mail: hbranisteanu@bezeqint.net Tel +972-3-523-2744
Mr. Anatoliy M. Blyznyuk Tel Aviv, June 28, 2007
Chairman
Donetsk Regional Council (RADA)
34 Pushkina Boulevard
City of Donetsk 83105
Ukraine
Dear Mr. Anatoliy Blyznyuk
We received with thanks your letter 380/14 dated June 21, 2007, and hope that the proposed
project will come to fruition. For better understanding, I am sending the summary below related to
investments in a Bio Refinery project in the range of $100 million, which will produce a variety of
substitutes products now processed mainly from crude oil. In a broader way and based on studies
from the US this project would have very beneficiary impact on the rural economies of Southern
Donetsk Oblast, or any other agricultural based economy (please also see my other letter on switch-
grass). Support and financing for this project would be feasible at attractive interest rates in Ukraine.
As a reminder I would like to mention that a similar proposal was forwarded to Mr. Anatoliy K.
Kinakh, President of Ukrainian League of Industrialists & Entrepreneurs during the month of October
2006 and over a year ago to an Ukrainian Government official in New York which I guided and
explained to him, the essence of the know how on Bio Fuel / Refineries, and asked him to report
back to Kiev of my proposals, indicating that Ukraine has a better potential in using its own natural
resources than going into risky oil exploration JV in Iraq or Libya or other high security risk areas.
I am pleased that today, most if not all of my recommendation at the time, (April June 2006) were
implemented by the Ukrainian Government and Ukrainian Supreme Rada.
Presently I requested from Mr. Alexei P. Abrossimov preliminary information related to the agri-
business in the Donetsk Oblast trough a third party (Mr. Krut) that introduced me to Mr. Abrossimov,
to ascertain the preliminary economic validity of establishing such a venture in Southern Donetsk
Oblast.
In another vein, even that the more complicated biological processes and know how will be licensed
from major US companies, active in this field, and US Government entities such as USDA, NREL or
DOE, I envision the support of the Donetsk academic community in advancing genetically
engineering research and cooperation with the US counterparts to adapt the various microbial
processes to the Donetsk environment and available biomass material. Further I am also in
preliminary discussion with Tel Aviv University department which is engaged in similar research.
Looking forward to our meeting in the near future in hope of a mutual beneficiary cooperation
between Donetsk Oblast and us.
Sincerely yours
Haim R. Branisteanu, Partner (in Tel Aviv)

Summary of a Vertically Integrated Bio-refineries Project
Preliminary background for discussion.
Prepared by Haim R. Branisteanu
The concept is around exploiting the sun power absorbed by the plants and transforming them by a
chemical process into bio fuel / bio chemicals. Most of the process it is done by fermentation and/or
sugar or fat molecules break down into a group of /or multiple alcohols or alkyl or methyl esters
(ethanol, butyl alcohol compounds, acetone, hydrogen, synfuel and diesel fuel glycerol compounds
and so on).
Presently there is intensive R&D work in this field and new technologies are developed which lower
the price of processing the bio mass and increasing the yield on energy related products. Present
technologies of extracting Biodiesel by methyl transesterification and Ethanol via enzymes (yeast) at
higher temperatures are surpassed by newer Bio-Technologies.
The profit margins are very closely related to the price of crude oil and it start to be profitable if
crude oil is above $25 to $30 per barrel and corn around $2.80 per bushel. Recent indication of
OPEC intervention indicated that OPEC would like to maintain crude oil prices in the $55 to $65
range with hope of higher prices. Present high prices of corn can be compensated by switching the
bio-feed rich in sugars used for certain bio fuels like sugar beets or sweet sorghum.
At present average market prices, the financial gain by processing various grains, results in over
double the revenue per each hectare cultivated. The processes to manufacture bio-fuels or bio-
chemicals are well known and established for many years the only factor is the price of crude oil.
Differences between Bio Fuel processing plant and the Vertical integrated Bio Fuel Refinery
Bio-Fuel processing plant is usually a processing plant that uses a group of Bio-feeds (mostly
various grains) bought on the open market and processes those grains resulting in additives to
internal combustion engines like Ethanol or Bio-Diesel, and by products usually used as farming
animal feed, which are sold in the open market. The Ethanol and Bio-Diesel production from
renewable bio-feed reduce the dependence on foreign oil imports and lowers Carbon emission.
Vertically Integrated Bio-refineries - In addition to reducing dependence on foreign oil, fostering a
domestic biorefinery industry modeled after petrochemical refineries are a primary objective of this
concept. Existing industries such as pulp and paper mills fit the multiple-products-from-biomass
definition of a biorefinery, but the proposal goal is also to foster new industries converting
lignocellulosic biomass (cornstalks, grasses) into a wide range of products, including ones that
would otherwise be made from petrochemicals. As with petrochemical refineries, the vision is that
the biorefinery would produce both high-volume liquids for transportation fuel (meeting national
energy needs) and high-value chemicals or products (enhancing operation economics).
The byproduct of those processing plants are usually protein rich farm animal feeds, or plain
degradable Biomass which can be further processed to extract the remaining energy stored in the
existing CH2 chemical link – and trough combustion generating recycled H2O and CO2 . Those by
products are usually 25% to 60% by volume of the Bio processing input feed.
The “Verticality” of the integration is based on the following economic factors;
1. The farmer who owns the fertile land to grow the bio-feed will acquire shares in the Vertical
Integrated Bio-Refinery, with the assistance of the government and participate in the profits

of the enterprise. The assistance can be the issuance of loan guaranties to the farmer
against his assets which are mainly his farm.
2. The farmers will grow on a rotational basis and in coordination with the Bio-refinery, various
crops which will be used as Bio-Mass feed such as; corn, sorghum/sorgos, sweet sorghum,
sugar beets, soy, rapeseed / (rapiza), sunflower, alfalfa, switchgrass (Panicum virgatum) etc.
depending on soils qualities climatic environment and anticipated market prices.
3. To fully utilize the energy remaining within the by-products and hedge against market price
fluctuation, the enterprise will engage in growing farm animals as the market will dictate such
as; herds of dairy cattle and for meat consumption; cattle, swine, sheep, chickens, fish etc.
4. In an additional step further, the remaining manure and Biomass will further processed into
methane / synthetic gas and fertilizer for use on the Bio-Refinery land used for growing
renewable Bio-Feed or sale to neighboring community.
5. If economically viable and market acceptance, establishing a production line of substitute
food products for human consumption from the above mentioned farm products and
byproducts.
Those are the main differences between the two operation and the Vertically Integrated Bio Refinery
would have a broader economic base and as such stability and would positively affect the regional
economy and diversity of the labor force.
As a “rule of thumb” the proceeds at present prices per BTU, the farmer will achieve double the
profitability compared to the normal sale of his crop. The easiest way to compare the beneficial
effects of the proposed concept is comparing between selling iron ore and coal versus selling the
resulting products from the processing those natural resources into high quality steels or industrial
machinery.
Supporting Data - Total amount of meat & poultry etc. exported from the US to the countries below.
Import of meat $$ in 2005
Albania 2005 $ 4,628,000
Azerbaijan 2005 $ 17,787,000
Bulgaria 2005 $ 11,770,000
Greece 2005 $ 13,823,000
Macedonia 2005 $ 5,624,000
Moldova 2005 $ 20,964,000
Romania 2005 $135,596,000
Turkey 2005 $ 81,313,000
Ukraine 2005 $ 62,756,000
Total 2005 $354,261,000
Exports
-----------------------------------------------------------------------------------------------------------------------------------
Financial Background
1. Investment size for an economic viable Bio refinery with around 150,000 metric ton yearly
output is in the range of $60 to $70 million and will approach $100 million if the Verticality
concept of the animal farm complex will be added. The leverage and support existing today
from various sources will require around 15% to 25% of equity, part of which may be also
received from institution involved in promotion of international development.

2. Investment recovery if all laws would be timely enacted, is around 3 years at present oil
prices and will drop to 2 years if crude oil prices will be over $70. The project is marginally
profitable around $30 to $35 (IRR of 10%). There are studies from University of Minnesota
and other institutions on this subject. There is ample additional material to discuss if needed.
3. From my experience, there is of major importance the appropriate legislation, vertical
integration of the Bio Refinery project and the ability to smartly hedge output several years in
advance, which can be done with consumer delivery contracts or trough the various
commodities exchanges which needs the expertise and understanding of international
markets.
4. In this respect, I do have the experience, tolls and access to capital to assist in building
vertically integrated refineries / processing plants, but also as mentioned before, there is the
need of local cooperation from the level of the Oblast Governor office to the actual farmers
producing the various crops.
5. The profitability and ability to finance such project will highly depend on the compulsory
implementation and harmonization of the EC/2003/30 dating May 2003 directive existing in
the EU or a similar legislation to The Energy Policy Act of 2005 - HR6 in the US, and drafting
the a renewable Energy Sources Law (RESL) and implementing the relevant regulations.
6. Further would be, the ability to sell the products of the vertically integrated processing plants
under long term contracts to neighboring Oblast, and or EU or Asian export markets, who
are, big consumer of hydrocarbons products for their energy needs– mainly in transportation
and chemical industry who use thinners and / or produce paints and plastic materials.
Various dairy and meat products sold locally or exported, would supplement the project
income.
7. An additional important legislative part would be Reductions or re-ordering of excise duties
on fuels derived from Bio Mass and establishing a clear directive and mechanism that the
credits will be directed to the originator of the Bio Product – the Bio Refinery. This
mechanism will be the major policy tool to encourage the establishment of this project.
8. The ability to cash in on Carbon Credits based on the Kyoto Accord, priced today around
EUR4 to EUR10 per metric ton (or depending on crop yield / CO2 absorption around
EUR140 to EUR180 per hectare) is also a requisite and important contributor to the incentive
to invest in this project.
Bio Processing Background
Sugar Platform Biorefineries would likely break biomass down into different types of component
sugars for fermentation or other biological processing into various fuels and chemicals.
The proposed concept is based on – Microbial Biological Conversion mainly by fermentation
Fermentation is at the heart of the biorefinery concept. It is the primary way to generate products
from the sugars that will be the platform chemicals produced by sugar platform technology. In
traditional bioprocesses, such as the current large-scale commercial fermentation of starch into
ethanol, relatively pure streams of glucose serve as the feedstock for fermentation. Microorganisms
well developed for industrial use, such as brewer’s yeast, are inexpensive and fully adequate. The
processes was developed many years before and around WWI and abandoned due to the falling
prices of crude oil and development of advanced petrochemical refineries.

Advances Today – with today advances in bio-technology and genetic mutation of microorganisms
cultures for industrial use and the efficiency of inducing one or other type of fermentation, which will
produce different types of chemical substances is easily achievable. One of the simplest examples
is the Weizmann process, initiated around WWI – the ABE fermentation process with Clostridium
acetobutylicum, which produced acetone, butyl alcohol ethylene and hydrogen by fermentation.
The production of mainly one product can be achieved with the same or similar microorganisms by
genetically inducing different strains and produce the desired substance in substantial higher
quantities (As an example genetically mutation in Clostridium tyrobutyricum can produce substantial
more butyl alcohol and hydrogen).
Recently Industrialized Application beyond motor vehicles fuels and fuel additives
BIO-PDO or 1,3-Propanediol also propane-1,3-diol or trim ethylene glycol, is a three-carbon “diol”
(key ingredient “Sorona” polymer) being produced with genetically modified strain of e-coli that's fed
a refined corn syrup. It is a clear colorless viscous liquid that is miscible with water and ethanol. 1,3-
Propanediol can be formulated into a variety of industrial products including composites, adhesives,
laminates, coatings, moldings, novel aliphatic polyesters (such as polytrimethylene terephthalate),
co-polyesters, solvents, antifreeze and other end uses.
Polymerized Bio PDO or Polyetherdiols the value - added properties of polyetherdiols (“Cerenol”) and
can increase process efficiencies for a broad range of products in diverse markets including personal care,
functional fluids and high-performance elastomers. Unlike petroleum-based or other plant-based alternatives it
is easily tailored to meet specific needs and performs better in many end uses while providing environmental
benefits. Existing alternatives to polyetherdiols are such polymers as polytetramethylene ether glycol(PTMEG)
Propylene glycol. Glycerin is a co-product of processing vegetable oil into Bio-diesel. The glycerin
co-product can be processed into propylene glycol which is a common ingredient in a variety of
resins, lubricants, cosmetics, paints, detergents and antifreeze. Today, propylene glycol is produced
from propylene oxide, a petroleum-based intermediate.
BIO polyols are derived from natural vegetable oils such as soybean oil, BIO poly-oils not only
deliver unique product benefits but also help flexible polyurethane foam manufacturers reduce their
environmental footprint and market their environmentally responsible choice to downstream
customers. BIO poly-oil represents the most significant development the polyurethane industry has
seen in decades. BIO polyols are designed to replace a significant part of petroleum-based polyols
as raw materials in flexible foams in common applications including automotive, bedding and
furniture. Foams made with BIO polyols meet industry requirements and provide superior
performance in processing versus conventional petrochemical-based polyols on the market.
New Direction and Developments - In other Bio Mass substances, sugar streams derived from
lingo-cellulose, however, pose significant technical barriers. These streams contain five sugars, the
hexoses glucose, mannose, and galactose, and the pentoses D-xylose and L-arabinose. With five-
carbon structure instead of six, the pentoses, in particular, are not metabolized by common yeast.
Cost-effective processes will require the rapid, complete and simultaneous fermentation of all five
sugars.
In response to this challenge, Biomass Program researchers metabolically engineered the
bacterium Zymomonas mobilis to add ability to ferment xylose and arabinose to its natural ability to
ferment glucose. One of only three hexose/pentose co-fermenters developed to date, the patented
microorganism received a prestigious R&D 100 award and has been licensed to a number of
companies for research and development use.

In addition, hydrolysates of lignocellulose contain compounds that are inhibitory to most
microorganisms. The goal of Biomass Program strain development research is to facilitate the
development of robust "platform" biocatalysts that can ferment biomass sugars into either ethanol or
other desired bio-products with economically viable rates and yields at industrial scales. Tolerance
to harsh environments, including elevated temperatures, high salt, and low pH, will be essential.
Currently available strains are severely limited in pentose utilization and exhibit poor hydrolysate
tolerance.
Current Developments - Currently, primary Biomass Program efforts in strain development are
focused on Cooperative Research and Development Agreements (CRADA's) with two partners,
DuPont and the National Corn Growers' Association, as described below. More fundamental studies
on sugar uptake, metabolite flow and modeling, pathway regulation, and stress tolerance will allow
us to address basic informational gaps in biocatalyst development.
Arabinose Yeast CRADA - Researchers are working with the National Corn Growers Association
(NCGA) to design unique biocatalysts to ferment L-arabinose, one of the major components of the
available sugars in corn fiber. Corn fiber is a residue of the corn-to-ethanol process and is
considered a low-value by-product. Previous work, performed under a CRADA with Corn Refiners
Association (CRA) and NCGA established that one of the major deficiencies in L-arabinose
fermentation by the S. cerevisiae strains engineered to express bacterial araA, araB, and araD
genes, is poor transport of L-arabinose. Current work focuses on improving L-arabinose transport in
the engineered strains. The results of these studies, which employ classical genetics,molecular
biology, and recombinant DNA technology, will lead to better understanding of the metabolic
mechanisms required to efficiently use the residual components in corn fiber.
DuPont CRADA - established in 2003, is a four-year research project that will provide a technical
foundation for DuPont's proposed Integrated Corn-based Bioproducts Refinery. Participants in this
project are DuPont, Diversa, John Deere, Michigan State University, and NREL. The objectives of
the NREL work will be to develop a corn stover/fiber pretreatment scheme and microbial
biocatalysts that integrate with enzymatic saccharification. NREL's role includes pretreatment,
chemical analysis, and strain development. The pretreatment efforts involve the development of a
mild pretreatment approach and will be developed in concert with Diversa's enzyme discovery and
development efforts. The pretreatment effort will involve a bench scale program, including
development of rapid chemical analysis methods specifically for these pretreated feedstocks,
followed by scale up in NREL's PDU and eventually, to a dedicated semi works facility built and
operated by DuPont. The strain development efforts involve the collaboration of scientists and
engineers at DuPont and NREL to generate a superior ethanologenic Zymomonas mobilis. The
work is scheduled to be performed over a four-year period, between 2003 and 2007.
Sugar Platform Integration - The Sugar Platform Integration projects seek to advance
development of a lingo-cellulose-based biorefinery (rather than a corn-based biorefinery) by
developing integrated enzymatic cellulose hydrolysis-based sugar-ethanol platform technologies,
and include the Enzyme Sugar Platform and DuPont CRADA
2,5-dimethylfuran - whose energy density is some 40 per cent higher than that of ethanol,
from fructose or glucose is a two-stage process for turning biomass-derived sugar into 2,5-
dimethylfuran, or DMF. DMF is stable in storage and, in the evaporation stage of its production,
consumes one-third of the energy required to evaporate a solution of ethanol produced by
fermentation for bio-fuel applications. The process for turning sugar into a chemical intermediate,
the – hydroxymethylfurfural. The sugars can be catalytically converted to hydroxymethylfurfural, a
possible intermediate for the production of plastics and other products that currently rely on
petroleum, and dimethylfuran, which can be used as a fuel with a higher energy density than
ethanol. Production can be achieved by using metal chlorides in ionic liquid solvents to catalyse the

conversion of both fructose and, significantly, glucose to 5-hydroxymethylfurfural or a biphasic
reactor for the acid catalyzed dehydration of fructose. This had the advantage of allowing a
relatively efficient partitioning of HMF into an organic extraction phase while reducing unwanted
side-reactions. The HMF is subsequently converted to DMF by adding hydrogen over a copper-
ruthenium catalyst.
Other Platforms a number of technologies have been identified as having significant potential for
expanding use of biomass energy. Particularly important for reducing fossil fuel use and imports and
for promoting new domestic industry are those for development of biomass-derived "platform
chemicals." From such platforms, Bio Refineries could make a variety of fuels, chemicals, products,
and power, much as is done with petroleum and petrochemicals today. There are several other
interesting possibilities including the following.
Biogas Platform - Decomposing biomass with natural consortia of microorganisms in closed tanks
known as anaerobic digesters produces methane (natural gas) and carbon dioxide. This methane-
rich biogas can be used as fuel or as a base chemical for biobased products. Although the Biomass
Program is not currently doing much research in this area, a joint Environmental Protection
Agency/Department of Agriculture/Department of Energy program known as AgStar works to
encourage use of existing technology for manures at animal feedlots.
Carbon-Rich Chains Platform - Natural plant oils such as soybean, corn, palm, and canola
oils are in wide use today for food and chemical applications. Transesterification of vegetable oil or
animal fat produces fatty acid methyl ester, commonly known as biodiesel. Biodiesel already provides
an important commercial air-emission reducing additive or substitute for petroleum diesel, but it, its
glycerin byproduct, and the fatty acids from which it is made could all be platform chemicals for Bio
Refineries.
Plant Products Platform - Selective breeding and genetic engineering can develop plant
strains that produce greater amounts of desirable feedstocks or chemicals or even compounds that
the plant does not naturally produce - getting the Bio Refining done in the biological plant rather
than the industrial plant.
Micro-Algae Cultures Capabilities of up to then times the energy production (biodiesel and also
ethanol and hydrogen) form the same acreage of land. (the ability to harvest 5,000 to 10,000
gallons of biofuels per year per acre, v. around 400 gallon for soy or sunflower or 600 gallon for
palm oil). The culture are grown in shallow pounds feed with CO2 from a electrical power plant or
other sources
Botryococcus braunii is a green colonial fresh water micro alga is recognized as one of the
renewable resource for the production of liquid hydrocarbons. B. braunii is classified into A, B and L
races depending on the type of hydrocarbons synthesized. Race A produces C23 to C33 odd
numbered n-alkadienes, mono-, tri-, tetra-, and pentaenes, which are derived from fatty acids. Race
B produces C30 to C37 unsaturated hydrocarbons known as botryococcenes and small amounts of
methyl branched squalenes, whereas race L, produces a single tetraterpenoid hydrocarbon known
as lycopadiene. Hydrocarbons extracted from the alga can be converted into fuel such as gasoline
and diesel by catalytic cracking. B. braunii (Races A and B) strains are also known to produce
exopolysaccharides up to 250 gm -3
, whereas L race produce up to 1 kg m -3
. However, the amount
of exopolysaccharides production varies with the strains and the culture conditions. Algae differ in
their adaptability to salinity and based on their tolerance extent they are grouped as halophytic (salt
requiring for optimum growth) and halotolerant (having response mechanism that permits their
existence in saline medium). Careful control of pH and other physical conditions for introducing CO2
into the ponds allowed greater than 90% utilization of injected CO2

See U.S. Patent PP06169 - Nonomura May 3, 1988 (expired) Botryococcus braunii var. showa is chemo-
taxonomically distinct from previously cultured strains of the species in quality and quantity of hydrocarbons
produced in vitro. Morphological and cultural differences distinguish this variety from other cultured strains of
Botryococcus braunii. In particular, the variety is characterized by the ability to produce and secrete large
amounts of botryococcenes during all phases of its growth cycle. The algae is growing in an environment of 22o
to
24o
C with a mass doubling time of 40 hours or less under optimum conditions, resulting in a botryococcene
yield equal to approximately 30% of the dry weight of the biomass
Hydrocarbon oils of the alga Botryococcus braunii, extracted from a natural 'bloom' of the plant,
have been hydrocracked to produce a distillate comprising 67% a petrol fraction, 15% an aviation
turbine fuel fraction, 15% a diesel fuel fraction and 3% residual oil. The distillate was examined by a
number of standard petroleum industry test methods. This preliminary investigation indicates that
the oils of B. braunii are suitable as a feedstock material for hydrocracking to transport fuels. At
present time the cost of harvesting micro alga is more expensive as other corps like vegetable oil at
$0.52 per liter v. 0.66 for palm oil and $1.50 for algae oil.
NREL has selected approximately 300 species of algae, as varied as the diatoms (genera Amphora,
Cymbella, Nitzschia, etc.) and green algae (genera Chlorella in particular). These samples are
stored at the Marine Bioproducts Engineering Center (MarBEC), where they are put at the
disposition of researchers from around the world. Both fresh-water and salt-water algae, particularly
rich in oils, were selected. Molecular biology technology is used to optimize the production of algae
lipids, as well as their photosynthetic yield. Other species, capable of synthesizing hydrogen, are
also the object of research.
Oil content of some microalgae
Microalga Type Oil content (% dry wt)
Botryococcus braunii 25–75
Chlorella sp. 28–32
Crypthecodinium cohnii 20
Cylindrotheca sp. 16–37
Dunaliella primolecta 23
Isochrysis sp. 25–33
Monallanthus salina N20
Nannochloris sp. 20–35
Nannochloropsis sp. 31–68
Neochloris oleoabundans 35–54
Nitzschia sp. 45–47
Phaeodactylum tricornutum 20–30
Schizochytrium sp. 50–77
Tetraselmis sueica 15–23
Comparison of some sources of biodiesel
Crop Oil yield (Liter/ha)
Corn 172
Soybean 446
Canola 1190
Jatropha 1892
Coconut 2689
Palm Oil 5950
Microalgae b 136,900
Microalgae c 58,700
b - 70% oil (by wt) in biomass.
c - 30% oil (by wt) in biomass.
Hope the explanation is providing the necessary preliminary information.

References upon request.

Anatoly Blyznyuk1.pdf

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