Bio Energy What is going on out there with renewables ?

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Presentation transcript:

Bio Energy What is going on out there with renewables ?

Bill Beukema General Manager of SoyMor is a 30 million Gallon per year Bio Diesel Plant in Albert Lea MN SoyMor has been in operation since August 2005 SoyMor currently uses Soybean oil as its feed stock SoyMor was built and is currently managed by REG

Outline of Presentation What is Ethanol and Biodiesel Overview of current Renewables market Investment opportunities for rural America Current impact on production agriculture Future of renewables

What is Ethanol Ethanol is a molecule Ethanol base raw material is –Shelled corn –Sugarcane –Cellulose Ethanol by-products include –DDG –Co2 Ethanols conversion is –1 bushel of corn = 2.8 gallons of ethanol –1 bushel of corn = 18 lbs of DDG –1 bushel of corn = 18 lbs of Co2 Ethanol energy conversion is Petroluem energy conversion is +.88

What is Biodiesel Biodiesel is a compound Biodiesel base raw material is –Oil seed ( SBO ) –Animal Fat –Waste Grease Biodiesel by-products include –Glycerin –FFA Biodiesel conversion is –1 bushel of SB = 1.5 gallons of Biodiesel –1 bushel of SB = 1.1 lbs of Glycerin Biodiesel energy conversion is Petroluem energy conversion is +.88

Overview of current Renewable Market ETHANOL –2005 DATA OVER 105 PLANTS TOTAL PRODUCTION OF 4.3 BILLION GALLONS 153,725 JOBS CREATED FROM DIRECT ETHANOL PRODUCTION ? PLANTS CURRENTLY UNDER CONSTRUCTION OVER 1.1 BILLION GALLONS TO BE ADDED 1.5 BILLION BUSHELS USED FOR ETHANOL 2005

Overview of current Renewable Market ETHANOL – Estimates 3.5 BILLION BUSHELS PROJECTED FOR FOOD AND IND USE BILLION FOR FEED USAGE FOR BILLION FOR EXPORT USAGE FOR OVER ? BILLION GALLONS AT THE END OF 2007

Overview of current Renewable Market Biodiesel –2005 Data 75 million gallons sold 1 company marketed over half of all the product sold ( REG) For all practical purposes biodiesel acted like a niche product

Overview of current Renewable Market Biodiesel –2006 Data Over 120 million gallons of capacity added to the market place. Biodiesel became widely accepted –Terminal storage –Pipeline movement (Grow Mark)

Investment Opportunities for rural America Both Ethanol and Biodiesel are experiencing tremendous Return on Equity To a producer Ethanol and Biodiesel are Hedge type investments Factors driving ROE –U.S. interests in becoming GREEN –Favorable tax treatment –$78 dollar crude oil –$ 3.00 gasoline and diesel pricing –$2.00 corn $.255 sbo

Current Impact on Production Agriculture Hedge fund activity Supply and Demand Basis Supply agreements Acreage Shifts Increased sensitivity of the commodity value Shift from fair market value to margin management To date all of these have been Positive results ( past success does not guarantee future results )

The Future of Renewables Long term 4 to 7 years –New technology will decrease the cost of production –Corn and Soybean acres will find a balance based on demand –Pricing points for retail will trade a at premium higher than the base commodity, but lower than the today's margin premium –Entities that respect Quality, understand commodity trading and invest appropriate amounts in R & D will own those who do not

The Future of Renewables Short term 1 to 3 years –Commodity volitity will increase –Acre shifts will be more frequent –Global energy equation will continue to be difficult to manage –Industry will struggle the speed of maturity