Biofuel Energy Asa Presentation Egm April 2008

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Biofuel Energy Asa Presentation Egm April 2008

  1. 1. Extraordinary General Meeting April 02, 2008 www.biofuelenergy.no
  2. 2. Company history 2003 • Project initiation – The sole owner Viviane Carolo acquired a small 300’ ton crushing capacity distillery in Paranapanema • Strategic alliance to fund aggressive growth 2006 – With Norse Energy and marchFIRST • Major land positions secured 2007 • Turn-key contract on new plant signed With leading Brazilian industrial group • USD 140 million raised to finance expansion 2008 • Umoe becomes major shareholder • Further land positions acquired, focus on local working capital financing • Independent executive management in place • Construction in process; plant operating from September • Negotiation MOU to acquire 50% of neighbouring Facility 2
  3. 3. The Paranapanema project • Industrial Complex – Works 1 – Small, old distillery of 300’ tons – Remodeled and expanded to new distillery of 1 M tons • Industrial Complex – Works 2 – Greenfield mill constructed close to Works 1 – Delivered by leading Brazilian industrial group – Partly utilized production capacity from 2008 – Fully utilized from 2009 • Securing feedstock from high yield arable land – Project designed to own 85% of feedstock need – 36.000 hectares arable land secured: • 27’ ha on 12 year lease contracts • 7,7’ ha on 12 year supply contracts • 1,3’ ha owned – 18.000 hectares planted 3
  4. 4. Company shareholders and structure (pre rights issue) Shareholder structure – Jan 15 2008 INVESTOR No of shares % UMOE INVEST AS 7 185 714 36,18 % VALENCIA S.A.R.L 6 242 285 31,43 % MONS HOLDING AS 900 000 4,53 % VERDIPAPIRFONDET KLP AKSJENORDEN 500 000 2,52 % OLYMPIA HOLDING AS 500 000 2,52 % CAMILLO ENERGY AS 475 000 2,39 % • Financial capitalisation history: SIS SEGAINTERSETTLE AG 25PCT 300 000 1,51 % – Jan 2007: USD 25 mill equity SAF INVEST AS 300 000 1,51 % MATHIAS HOLDING AS 250 000 1,26 % – May 2007: USD 85 mill bonds VIKSUND AS 200 000 1,01 % – Jun 2007: USD 30 mill equity VERDIPAPIRFONDET DANSKE FUND NOR 200 000 1,01 % NORSE ENERGY CORP.ASA 200 000 1,01 % – Jan 2008: USD 27 mill equity MARCHFIRST AS 200 000 1,01 % ÅSTVEIT INVEST AS 148 400 0,75 % PECUNIA FORVALTNING AS 125 000 0,63 % CAIANO AS 125 000 0,63 % STRAEN A/S 100 000 0,50 % CLIPPER A/S 100 000 0,50 % AUDLEY A/S 100 000 0,50 % BANQUE INVIK SA LUXEMBOURG 85 000 0,43 % OTHER 1 624 100 8,18 % TOTAL 19 860 499 100,00 % 4
  5. 5. Board of Directors (pre EGM) • Founded Paranapanema in 2003 and main owner Viviane Carolo • 25 years of experience from the sugar and ethanol industry acting as CFO, Commercial Chairman Manager and CEO – and her family has been in the business for more than 60 years Biofuel Energy ASA • Important consolidation competence – industrial, local, cultural • Over 30 years of diversified experience, mainly with international trading companies Paulo Avelino • Former CEO of Brazilian Alcohol Producers Association Director • Worked in companies such as Glencore and Cosan Biofuel Energy ASA • Regarded as one of Brazil’s most experienced market advisers • Represent the largest shareholder in the company – Umoe Erlend Grimstad • Joined Umoe in 2000 and is currently Executive VP and head of Umoe Invest Director • Grimstad is a lawyer by profession and has worked for the law firm de Besche Co Biofuel Energy ASA • He has also been deputy minister in the Norwegian Ministry of Petroleum and Energy • CEO of Norse Energy Corp. since 2005 when they merged with NaturGass (USA) AS Øivind Risberg • He was Managing Director and founder of NaturGass since 1991 Director • He has 17 y. of experience from the oil and natural gas industry primarily on/offshore the US Biofuel Energy • He is also working Chairman of the Board of Norse Energy´s Brazil operation • Since Feb. 2007 Corporate and Commercial Contracts Lawyer for Albertina Anna Maria Carolo • 1,5 y. experience in the same position for GOL Transportes Aereos S.A. Director • Several internship for different companies in the period 1999 - 2004 Biofuel Energy • Lawyer by profession • Works as an associate with the Energy and Natural Resources Group of Wikborg Rein Mona Katigbaht • Has been with W R since 2006 and served as a Law Clerk for the Supreme Court in Manila for Director 2 y. before that Biofuel Energy • She has passed the bar in both the Philippines and New York 5
  6. 6. Agenda • Project development status • Business strategy • Financial development • Key issues 6
  7. 7. Status – Key Elements • BOD has decided to go forward with Phase 2 – 700.000 capacity expansion + Cogen • Company needs additional liquidity ASAP • Completion of Phase 1 construction on tight schedules • Organization in place later than anticipated, but finally able to move company forward in professional manner • Several actions taken to not repeat mistakes • Several strategic discussions ongoing 7
  8. 8. Liquidity Need • Biofuel Energy ASA has a short term liquidity need because of: – Cost overruns in the infrastructure development of the company – Time delays in getting local bank and working capital financing in place – Adverse currency changes – Strategic decision to expand project with 700’ tons of crushing capacity with co- generation ability • Board has asked for a decision in which it can raise up to USD 70 million in equity and or a debt instrument targeted towards existing shareholders • The company is in negotiations with potential strategic partners that could mean significant injections of capital to the company. Outcome expected to be clearer by May / June • The size of the offering will not make the company fully financed. The Board however, believes that it is in the best interest of present shareholders to understand the likely outcome of the strategic discussions before capitalizing the company further 8
  9. 9. Project Expansion on tight schedules • The “old distillery” (Works 1) is remodeled and expanded to a modern facility of 1,0 mill ton crushing capacity (85 mill liters of ethanol). Aggressive time schedule to be in production in May. Could face a 30 days delay • The company has a turnkey project (Works 2) where it will take delivery of a green field facility of 1,9 mill ton crushing capacity (162 mill liters of ethanol) . This Unit is planned to be in operation in September 9
  10. 10. Works 1 (25.3.2008) 10
  11. 11. Works 2 (25.3.2008) 11
  12. 12. Works 2 (25.3.2008) 12
  13. 13. Organization finally in place • The Company has been affected by the strong demand for qualified people to the sector. • Present Brazilian CEO operational from November/December 07 • Late hiring of Brazilian CEO and other staff members in addition to management turnover has delayed several planned actions 13
  14. 14. Organization finally in place Silvio Taboas; Chief Executive Officer • Brazilian Executive with former experience in several industrial segments as oil, cement and automotive business • Mechanical engineer and MBA specialized in corporate management and finance • Occupied executive functions as CEO and board member of international groups in Brazil, particularly German and Swiss companies. • Business developer focused on growth strategy implementation, he established a relevant track record of always supporting social activities and human resources development • Member of the automotive engineering society he was for several years member of the National Autoparts’ Association Superior Council and General Motors Supplier Council • Honorary Citizen of the municipality of Arujá, São Paulo State • 45 years old, married, one daughter 14
  15. 15. Organization finally in place Strong international management group Paulino Raphael Silverio Garbin Marco Viana Luis Cauzzo Supply Chain Officer Engineering Officer Agricultural Officer Shared Service Center • Agronomist Engineer • Civil Engineer, MBA in • Executive highly specialized in • Mechanical engineer and corporate management and • 22 years experience in the administrative processes and specialized in supply-chain holds a Master Certificate in Sugar, Ethanol and Energy Information Technology. management Project Management industries, incl. São José da • Former Administrative Director • International exposure in Asia, Estiva Mill, Virgolino de • 20 years’ experience in of Educational Institution and Europe and North America Oliveira, Corona and Abertina managing and marketing a IT executive of international • Procter Gamble, Schlumberger diversity of projects, in both • Focused on agro-industrial corporations incl. Mann and , Diageo and the national large-scale and high- management and integration of Behr (automotive) conglomerate Votorantim complexity, in Engineering, agronomics, agricultural and • Broad relationship with the • Implemented complex Civil Construction, Mining, industrial concepts market, full command of supply SAP/ERP projects and focused Chemical, Power and • Manager of operational chain techniques and best on internal customers´ Telecommunication sectors processes and consultant he practices application in diverse satisfaction incl. Bunge and Turner did international trips to segments as consumer goods, • Coordinated outsourced and Construction and Promon Australia, Argentina, Israel, mining, paper and services insourced functions, while • He achieved significant results South Africa and U.S.A • Skilled in structuring and leading restructuring and as to profitability, productivity benchmarking the motivating working teams and developing process oriented and quality in the developed implementation of harvest defining sourcing strategies organizations. projects, always leading team- mechanized systems and according to market dynamics • 49 years old, married, two oriented groups plantation techniques • 48 years old, married, two children • 43 years old, married, two • 46 years old, married, two children • Brazilian-Spanish citizenship children children 15
  16. 16. 20/12/2007 Silvio Taboas Chief Executive Officer Brazilian Operation Silverio Garbim Paulino Raphael TBD Marco Viana TBD Engineering Officer Supply Chain Officer Industrial Officer Agricultural Officer Financial Officer TBD Shared Services Center (1) Director TBD Mgr. Hermes Brioschi TBD Mgr. Rivaldo Santos Fabiano Rossanez TBD Mgr. Sales and Marketing Purch. Procurement Production Structured Finance Engineering Technology Henrique Oliveira Specialists Gildeon Pereira Paulo Braga TBD Mgr. Marcelo Perout Logistics Process Engineering Controller Construction Quality System Production J. Paulo Teixeira Ana Isa (Eng. Specialist) Carlos Ravanelli Wadi Farath Maintenance Environmental Issues Value Chain Controlling Automotive Maintenance Leandro Estevan Laboratory (1) including the following services: IT, HR, Treasury, Accountancy and Legal Issues 16
  17. 17. Several actions taken to not repeat mistakes • Strengthen organization – Capital and risk management – Project management – Controlling areas – Quality control • Use of external consultants to check major business case fundamentals – Financial control: Outsourcing of accounting to PWC – Financial business forecasts and modeling: KPMG – Project completion: Quality controls with external consultant • Change in board and corporate governance structure 17
  18. 18. Strategic processes Outcome of strategic processes likely to be understood before summer • MOU negotiation with regional operator to become 50% owner – Approx 2,0 MT capacity expandable to > 4,0 MT – Strategic value – Operational benefits • MOU negotiations with Fortune 500 utility company – Potential development of JV in cogeneration • Oil and gas company – Off-take – Significant ownership • Cellulose process industry group – Industrial cost position / improvements – High margin application areas for bagasse and ethanol – 2nd generation 18
  19. 19. Agenda • Project development status • Business strategy • Financial development • Key issues 19
  20. 20. Objectives • Establish itself as a major and long term operator in the international industry of bioethanol production • Create a “state of the art” international business operation • Grow Biofuel Energy ASA to become a preferred supplier of ethanol to international oil companies and other buyers • By 2012 Biofuel Energy ASA shall own & control – 10 mill ton sugarcane crushing capacity – production of 850 mill liters of bioethanol per year – Production of 1.000 MWh electric power 20
  21. 21. Key business plan elements • Cost competitiveness – Limited ethanol activity in Paranapanema historically; high yield land relative to cost of land – Concentrated acreage and infrastructure saves logistics cost – Cost efficient state-of-the-art plant with cogeneration – Agricultural operations highly mechanised – Scale advantages and cogeneration • Qualified international management – Proven track record from both domestic and international industries – Ethanol business experience, local knowledge and relationships – International business practices, governance, social responsibility • Regional consolidator – Highly fragmented industry and land owner structure – Family ownerships dominate; old-fashioned operations, limited capital and discipline – Significant synergies in merging “neighboring plants”; Land leasing, CLT (cut, load, transport), Maintenance, Purchasing, OH • Control of feedstock – 85% of crushed sugarcane supplied from own plantation • Value chain optimisation, beneficial partnership models – Focus on core, win-win relationships • Financial flexibility – Access to capital markets creates flexibility and possibilities to reap benefits of ethanol price volatility 21
  22. 22. Expansion of present platform Starting point Present Development Present investment plan Potential capacity Phase 1 Phase 2 Full potential Phase 0 6000 6 000 6 000 6 000 6 000 5 000 5 000 5 000 5 000 4 000 4 000 4 000 4 000 2600 3 000 3 000 3 000 3 000 1900 2 000 2 000 2 000 2 000 1400 1000 1000 1 000 1 000 1 000 1 000 300 0 0 0 0 Wo rks 1 Wo rks 2 Wo rks 1 Wo rks 2 Wo rks 1 Wo rks 2 Wo rks 1 Wo rks 2 • Project initiated 2003 • Combined capacity of 2,9 • Expanding Works 2 with • Additional investments in mill T when both works are 700’ T crushing capacity industrial capex calculated • 3-4 year starting period operational September and Cogen capacity to be in the region of USD learning regional criteria 2008 225 to reach full capacity and secure expansion • Industrial capex of approx possibilities • Plan is to crush 1,4 mill T USD 100 mill • Could potentially reach 2008. Dependent on maximum level 2012/2013 • Delivery expected late 2009 purchasing approx. 150’ T cane from 3rd party and • Cogen return alone can own investment plan carry total capex program (planting schedule) Securing land is key 22
  23. 23. Present vs future Company structure Present structure Potential future structure Biofuel Energy ASA Biofuel Energy ASA 100% 100% Christiania Bioenergia Participações S.A. Ethanol Co. Power Co. Land Co. 100% Destilaria Paranapanema • Owner / co owner of • Owner / co owner of • Owned and leased S.A. distilleries / sugar power units land Industrial Complex mills • Units to have • Agreement with • Potentially also a agreement with Ethanol Co separate CLT- distilleries on subsidiary (Cutting, bagasse Works 1 Works 2 Loading, Transport) • Could be other units than only the distilleries in the portfolio 23
  24. 24. Multiple neighboring consolidation opportunities 24
  25. 25. Electricity spot price has hit the roof • The spot price reached all time high (R$ 570/MWh) in January 2008 after a long period of very low prices • 570 level is the maximum allowed and reflects the tight supply-demand balance and below average rainfall Source: ONS, CCEE and UBS Pactual 25
  26. 26. Logistic projects for ethanol exports • Ethanol Exportation Corridor Program Biofuel Energy AS • 60-70 øre per liter in transportation cost from Paranapanema to Rotterdam Source: IEA, World Energy Outlook 2006 26
  27. 27. Agenda • Project development status • Business strategy • Financial development • Key issues 27
  28. 28. Funding activities • Road show Brazilian banks (business model developed together with KPMG) – BNDES – Other banks, trade financing sources • Rights issue MUSD 40-70 and Bridge loan with warrants MUSD 0-50 (max. MUSD 70 in total) • Strategic partnership discussions 28
  29. 29. Financing activities – overview of Investments and Sources Source of funds for the expansion plan Sources of funds - R$ millions Phase I Phase II Total Investments 465,6 247,5 713,1 Working capital 46,4 25,0 71,4 Total Investments 512,0 272,4 784,4 BNDES/Bonds 180,0 153,0 333,0 Bank and project financing 72,5 67,5 140,0 Equity 259,5 51,9 311,4 Total financing sources (1) 512,0 272,4 784,4 Loan guarantee structure: Capital structure Total: R$ 784.4 million -Mortgage on Real Estate; 40 % -Lien on sugarcane; -Lien on machinery; BNDES -Bills receivable; -Lien on stocks. Bank Financings Equity 42 % 18 % Source: Company’s management Total investments already applied: R$ 219.1 million (1) 29
  30. 30. Financing activities – business overview Graphics 07/08 Harvest 08/09 Harvest 09/10 12/13 10/11 11/12 (1) (1) Harvest(1) Harvest(1) Harvest(1) Harvest(1) Unit I / Farming Total crushing capacity (3) 300 1.000 1.000 1.000 1.000 1.000 Unit I Investment (R$ MM) R$ 53.0 R$ 22.7 R$ 0 R$ 0 R$ 0 R$ 0 Farming Investment (R$ MM) R$ 70.1 R$ 103.4 R$ 40.9 R$ 23.5 Destilaria Paranapanema S.A. Total crushing capacity (3) 0 1.900 1.900 2.600 2.600 2.600 Unit II Investment (R$ MM) R$ 93.5 R$ 234.8 R$ 65.8 R$ 0 R$ 0 R$ 0 Unit II Total crushing capacity (3) 300 2.900 2.900 3.600 3.600 3.600 Cogeneration 71 000 MWh 284 000 MWh 284 000 MWh 284 000 MWh Total investment (R$ MM) R$ 219.1 R$ 362.8 R$ 107.8 R$ 23.5 Total investment: Period begins 1 April and ends March 31 each year. (1) R$ 713.1 MM Farming investments will supply both units (I and II). (2) The distance between the units is 30 km. Crushing capacity in thousands of tons. / annum. (3) 30
  31. 31. Financing activities – main business assumptions Farming Productivity Planted area (ha) (*) 2008/09 2009/10 2010/11 2011/12 2012/13 Own Land 1.292 1.292 1.292 1.292 1.292 Land in Partnership 24.641 28.287 30.447 34.147 37.847 Suppliers' Land 3.285 7.219 7.969 8.442 8.915 Total Land 29.218 36.798 39.708 43.881 48.054 Cultivation Area (ha) Land for Expansion 8.473 8.700 2.160 3.700 - Land for Transplanting 860 916 368 762 - Fallow land 130 456 1.516 3.918 6.172 Harvested land 10.959 19.266 27.977 30.221 36.966 Total Cultivation Land 20.422 29.338 32.021 38.601 43.138 Productivity (tons of sugarcane / ha) Average Farming Productivity 97 106 102 94 88 Sugarcane Volume thousand ton/annum Own sugarcane 53 90 116 103 108 Leased sugarcane 1.007 1.960 2.730 2.725 3.161 Suppliers' sugarcane 318 855 762 780 340 Total 1.378 2.905 3.608 3.608 3.608 Harvest Manual 5,9% 5,9% 5,9% 5,9% 5,9% Mechanized 94,1% 94,1% 94,1% 94,1% 94,1% 31
  32. 32. Financing activities – cash flow prognosis DESTILARIA PARANAPANEMA S.A. CASH FLOW 2008/09 2009/10 2010/11 2011/12 2012/13 EBITDA 13.430 79.513 150.279 152.941 172.111 EBITDA Margin 15% 39% 51% 50% 54% Income Tax and Social Contribution - - (2.746) (5.386) (14.156) Investments (362.747) (108.656) (22.597) (19.913) (16.135) Working Capital (6.186) (28.454) (12.586) (5.285) 1.955 Free Cash Flow (355.504) (57.597) 112.350 122.358 143.776 32
  33. 33. Agenda • Project development status • Business strategy • Financial development • Key issues 33
  34. 34. Issues of primary concern • Corporate Social Responsibility – Aim to become “best in class” in region – Compliance with all public regulations, permits and licence requirements • Completing executive team and organisation • International Corporate Governance standards • Getting solid long term financing structure in place – Rigid bond loan structure – BNDES: Long term governmental loan – Local trade finance sources 34

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