2 NatureWorks LLC BIO-BASED MATERIALS February 22-23, 2005 Peter C. Clydesdale OR

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NatureWorks LLC - a new vision, an expanding start up,... NatureWorks was formed in 1997 with the intent of creating a company to develop more sustainable plastics from annually renewable resources This intent aims to meet the needs of today without compromising the earth’s ability to meet the needs of tomorrow 3

… with increasing resources Since then we’ve grown to more than 200 people The Blair, Nebraska polymer plant officially opened in April (400) million pounds of PLA (LA) capacity is available to serve the globe A unique and extensive patent position has been built 3 primary commercial platforms - packaging, fibers and consumer products - are in place today 4

What is PLA? PLA is a polymer made from lactic acid Lactic acid is a natural product It is found in the body, yogurt, & many other foods Lactic acid is made from fermentable sugars Sugars are found in plants NW uses corn sugar (dextrose) today to make lactic acid Sugars are made from CO 2 via photosynthesis Photosynthesis involves carbon

6 Is SUSTAINABILITY enough to drive the adoption of bio-polymers? Sustainability is a complicated topic There is little agreement on what it means or how to measure improvement Many talk about it, only a few act on the talk Although NW is involved with many innovative companies, widespread brand adoption is critical long term Brand adoption still depends on performance, cost, and the availability of an efficient delivery / disposal infrastructure The tide seems to be turning, though … –Kyoto Protocol / Global warming –Rising oil prices –Pollution (white, air, water, other) concerns –Health & lifestyle issues –Corporate responsibility –AICHI Expo. (2005), Green Olympics (2008), Shanghai Expo. (2010)

Reduce Dependence on Petroleum Reduce Environmental Footprint Traditional raw material source NatureWorks’ current raw material source 6

Renewable Resource Benefits CO 2 ++ NatureWorks TM PLA M’fg Process + Conventional Plastics M’fg Process Process Energy +

Environmental Footprint Benefits Measure all inputs and outputs in a Life Cycle Analysis (LCA): –Raw materials, upstream and downstream –All products through manufacturing and product use and disposal Energy, CO 2, other impacts on environment

PLA Net Green House Gas Emissions: Cradle to Pellets CO 2 Kg / ton Lignocellulosic with Energy Integration PLA using fossil energy 56% less GHG than PET

Fossil Resource Use & GHG Emission Reductions Example: PLA vs. PS Cups1 31% less fossil fuel use 32% fewer GHG emissions 1 Up to Cup Production; Current Blair production data; HIPS&GPPS; European Industry data, APME

Sustainable Materials Ideal Renewable resource Minimum environmental footprint –Small enough so the ecosystem can still balance Completely recyclable –Carbon level –Material level Safe ingredients (both human and environment) No persistent compounds No negative impact on food supply (enhance food and feed) Scorecard

Does NatureWorks PLA Differ From Traditional Plastics? Renewable Sustainable Abundant Carbohydrates Iowa Mid-west Dirt Bushels Plant Harvest Fewer GH gases Easy to biodegrade Running out Not sustainable Scarce Crude Oil Iraq Mid-east Dinosaurs Pump Drill Barrels More GH gases Difficult to biodegrade vs. US PRC JPN

Responsibility is the next big thing for brands, and the ball is starting to roll The landscape is rapidly changing for businesses Consumers expect corporations to be more responsible Consumers are looking for actions, not just words, when it comes to corporate responsibility Responsibility (or making a positive impact) is becoming a necessary part of doing business in today’s world

So, let’s talk about responsibility... 8

Which brands will litter the planet, and which will be responsible?

The same container that holds your soft drink could become branded trash The opportunity is for brands to start actively (and publicly) working toward eliminating the negative repercussions of their commercial success 10

Many audiences have opinions & influence, and are starting to “force” the issue with influential brands...

Brands adopting NatureWorks PLA realize it’s an opportunity to show that they are becoming more responsible, too

So, let’s talk about bio-based or biodegradable materials... 15

Supportive Consumer Market Research The research evaluates consumer attitudes regarding desirability of bio-based packaging, and the additional costs consumers are willing to pay –This is a summary of 4,800 completed consumer surveys throughout W. Europe, NA and Japan EU 59% of European consumers surveyed ranked bio-based packaging “very desirable” Of those, 72% would pay 10 euro cents more/item, and 69% would pay 20 euro cents more/item NA 41% of NA consumers surveyed ranked bio-based packaging “very desirable” Of those, 74% would pay 5 cents more/item and 60% would pay 10 cents more/item Japan 56% of Japanese consumers surveyed ranked bio-based packaging “very desirable” Of those, 54% would pay 10 yen more/item, and 35% would pay 20 cents more/item Source: Grapentine Company, Inc.

2 What are the longer-term prospects? Category growth is expected to exceed 13% per annum over the next 3 years Global demand is forecast at more than 338,000 tons by 2008 U.S. market value alone is worth more than $490 million today Market globally is being driven by: –Increase of “fit-for-use” applications - computer cases, H2O bottles, etc. –More competitive price structure - oPS vs oPLA film (U.S.) –Greater government / legislative traction - e.g. Taiwan, Korea, JPN –More unified biodegradation standards - MOU between Japan, EU, US and China has led to more “+” global interactions –Increase in collaborative R&D efforts - HDT, PLA foam, PLA alloys, etc. –Higher levels of consumer education/wealth, & user adoption Fredonia Group, December 2004; NW internal

15 Types of biopolymers – Plant Based:Manufacturers: Polylactic acid (PLA)NatureWorks LLC Mitsui (Lacea) Toyota Polyhydroxyalkanoate s Procter & Gamble (Nodax), Metabolix Plant-based starchNovamont (MaterBi) Rodenburg Biopolymers (Solanyl) Plantic Technologies (Plantic) Oil Based:Manufacturers: PolyestersBASF (Ecoflex) Eastman (Eastar Bio) - now Novamont Blends:Manufacturers: Starch blendsNovamont (MaterBi) Source: IBAW

2 Current Market Share Frost & Sullivan, 2003

Biopolymers open up new options for an old problem -- disposal

WHERE IT COMES FROM WHERE IT GOES PET Bottles Recycling Trash/landfill Incineration NatureWorks PLA - sugar PET & PS FOAM - oil Product NatureWorks PLA Industrial compost Recycling Incineration Hydrolysis Trash/landfill PS Foam Trash/landfill Incineration

So what are the road blocks...?

15 Key Challenges Poor experiences in the past with bio- based materials –Starch / poly-olefin blends, inferior performance, etc. Risks of trying something new –PLA a virtual “drop in” on PET and PS lines Perception of higher costs (material, switching, etc.) –Efficiencies are improving so that high oil prices - while helpful - are not really required to “make the sale” –PLA density / down gauge advantages versus PET

Key Challenges (cont’d) Physical recycling & disposal –Large volumes are needed to develop a dedicated infrastructure, but some companies are finding solutions Lots of talk, not much action – –Governments need to move more from research to retail –Plenty of “eco” talk, little “eco” walk, lots of “eco” bullets GM Issue –No GM can be found in PLA (3rd-party certification) –There is no advantage to having GM in PLA –A road to a sustainable future is better than no road at all

Limited Market 300 Million Pounds BILLIONS OF POUNDS Branded Sustainability Retail action Modest, “niche” results Current Entire value chain to “value” / act upon environmental benefits - i.e. more “push” Consumer pull Needed If not now, when?

PLA is a significant step toward a better future. It uses an annually renewable resource, instead of petroleum, to make one of the world’s most common materials, plastic. PLA represents a significant step change that consumers seem to desire. -- PLA reduces petroleum dependency & GHGs, and is a positive step toward more sustainable manufacturing. -- PLA has distinct disposal advantages over comparable petroleum-based plastics. -- Raw material can be replenished every 100 days instead of every 100 million years. -- PLA represents an opportunity for positive change at major brand owners. --- NatureWorks is committed to continued process improvement to enhance the environmental profile of its operations and products. A product of fermentation and distillation, PLA only requires a commercially available source of plant sugar. PLA does not contain any genetic material. -- Like other plastics, PLA is carbon based. The ultimate carbon source is corn, not crude oil. -- PLA has been certified to be free of any genetic material by GeneScan Inc., recognized by both government and NGOs as the leading authority for testing food, feed and raw materials. -- If desired, customers can contract directly with growers for an offset amount of identity-preserved corn. -- To succeed in the global market, a large-scale, stable sugar source is needed that allows PLA to be price competitive today with PET, and eventually, PS. -- Corn is the least expensive and most abundant source of commercially available sugar in the world today. -- Even at full global capacity, NW will use less than.005 percent of the annual U.S. corn crop.

So where is this thing headed...?

Biopolymers like NatureWorks PLA can be points of inspiration and differentiation to help brand companies rethink material choices in order to build new (and better) brand attributes. 20

NATURAL, SAFE, FRESH - made from nature, ideal for food packaging END-OF-LIFE - corn-to-compost; burns cleaner, may be recycled BEAUTIFUL - can be transparent like glass, or opaque like ceramic DETAIL - can be easily and deeply embossed TEXTURE - easy to twist and fold; stiff PATINA - unique abrasion resistance 21 Brands are starting to pay attention to emotional attributes as much as they do the physical ones

POP Banners / Posters Your food comes from nature. Now so does your container.

Brands are starting to hear the call...

“Let me win; if I cannot, let me be brave in the attempt.” - Motto of the Special Olympics 20