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Agenda Perpetual Energy Group Recommendation Overview Why Biodiesel? Production Process Market Distribution Performance Evaluation Recommendation

Perpetual Energy Group West Texas Biodiesel Facility Profit (Financial) People (Social) Planet (Ecological) The Perpetual Energy Group is a business built on the foundation of sustainability. With that in mind, the newest investment to further enhance their sustainability is the West Texas Biodiesel Facility. By operating the facility, Perpetual looks forward to increasing their contribution to the Three Ps: planet, people, and profit. Building a sustainable business practice requires environmentally friendly practices along with, adding a revenue stream, using economical raw materials, implementing a safe and eco-friendly processes, and increasing profitability. Thesis - In this presentation we will analyze the new facility in terms of social, financial, and ecological impact.

Recommendations West Texas Biodiesel Facility People Planet Profit Today, we as SKY Consulting have analyzed the Perpetual’s sustainable business strategy through different options for the West Texas Biodiesel Facility. Our analysis focused on three main criteria that Perpetual looks forward to contribute: people, profit, and planet. With this in mind, we recommend 50-50 Production method of animal fat and vegetable oil. Through doing this, Perpetual can better recycle waste to generate energy. We also recommend that Perpetual Energy group distribute its biodiesel to greyhound and Sun Metro to contribute back to the people in society and improve the environment of this planet. Additionally, we added a new revenue stream to sell biodiesel to the lighter fluid market. This would help Perpetual energy group to increase profit and at the same time, provide people an ecological product to use when they go camping or just doing barbeque in the backyard. Based on our cost, revenue and NPV analysis, these options we recommended are actually very feasible and profitable. Finally, in the future, we recommend perpetual to further develop and use glycerin byproduct. Perpetual can build a refinery for glycerin to further increase revenue. Distribution Market 50-50 Production Additional Revenue Stream

Waste Energy Why Biodiesel? So why Biodiesel? Why not hydropower or solar power? Biodiesel is the best alternative energy because we’re taking waste from other productions and creating a fuel alternative for an affordable price and it is done safely with the environment in mind. We’ve considered hydropower but it is both costly to build the dam needed and the dams can cause serious ecological damage. Solar energy was also considered, but we opted out of it because its low efficiency

(4.5 million at full capacity) Production Process 3.825 million gallons (4.5 million at full capacity) Glycerin 50% Waste Vegetable Oil 50% Animal Fat (Tallow) Animal fat and oil blend- “We’ll being using a 50% animal fat, 50% vegetable oil blend; therefore our biodiesel would be made completely from waste. We opted out of using soybeans because of the negative social effects that would be caused by our mass consumption. For example, we would be driving the price of soybeans, negatively affecting consumers. According to the Southwest Farm Press in May 2013, the soybean price has increased 74 cents on average due to the increased consumption of biodiesel producers. Instead, with the use of animal fat, we would be using the most economical raw materials for production, while maintaining a high profit. What we’ll do with our by products- glycerin- In keeping with our enthusiasm for sustainability and increasing profit, we will be selling crude glycerin to refineries, which will add a revenue stream, at virtually no cost to us. Produce 4.5 million gallons / year 375,000 gallons / month Projected 85% sales of capacity 50 – 50 Raw Material 50% - waste vegetable oil 50% - animal fat waste (tallow) Price of soybeans increases $0.74 May, 2013 Byproduct – Glycerin Add revenue stream

Acquisition of Raw Materials Used Vegetable Oil (50%) Local Restaurants Subsidized container and pick up expense Eco-friendly way of disposing local waste Animal Fat Waste (50%) Long-term contract with Tyson Subsidize cost for delivery from Tyson With the 50-50 Production method, we must acquire slightly over 1.9million gallons of used vegetable oil and animal fat waste each. In order to give back to the community, we will acquire our used vegetable from local restaurants, offering free container and pick-up. It provides a profit for both companies with benefits for the environment. For our animal fat waste, we will sign a contract with Tyson Foods located in Dallas. Currently, Tyson has few of its own biodiesel factories and distributes the rest of the fat waste to third party manufacturers. Through acquiring the wastes, we hope to generate a positive impact for the community and environment.

Distribution of Biodiesel Main Point 2- Market Distribution Overview - Our primary distribution will consist of the transportation market and the fluid lighter. We will distribute 2 million gallons to the Sun Metro of El Paso, 1 million gallons to producing lighter fluids, and 825,000 gallons to Greyhound for the use as a B20. Our selection of distribution is based on the opportunity costs as well as the consideration of making a profit while giving back to the community and improving the environment.

Greyhound Greyhound - The Greyhound headquarters is located in Dallas, Texas. With 5.5 billion passenger miles per year, Greyhound displays an attractive fuel market for the ecological producers. As a major destination and shortstop, Dallas is a top candidate for our distribution to the transportation market. We will distribute our biodiesel to be consumed as a B20 and since the mixing process does not require any production, Greyhound has an incentive to go green without any additional costs. Thinking about our sustainable business practice, Greyhound operates nationally and if we can reduce the pollution little by little, it can lead to a national distribution.

Sun Metro Sun Metra - As the biggest public transportation company in El Paso, we believe we must give back to the community. Currently, the Sun Metro is consuming natural gas for their buses. But we believe that the natural gas is an unstable market with many hazards to the environment and people. The natural gas emits CO2 and is explosive and potentially dangerous. Also the fracking process to extract the gas is creating many environmental concerns such as water pollution, creating earthquakes and more. With that in mind, we will work with Sun Metro to provide a safer and cleaner means of transportation. We will sell lower than the market cost in order to ensure a strong relationship with Sun Metra. We look forward to contributing to our community and enhancing the ecological contribution.

Lighter Fluids Lighter Fluid - Our greatest stream of revenue is the distribution of the lighter fluids. Because the lighter fluids do not require any production, costs to produce are minimal with only bottling and packaging costs. The lighter fluid will be made by simply combining 40% biodiesel and 60% ethanol. Ethanol is made from the distillation of corn; therefore both components of our lighter fluid are completely natural. We will be making a safe, odorless, and healthy alternative to the regular charcoal lighters. Our lighter fluid would be ideal for things like grilling, because the regular lighter fluid can potentially make your food taste less desirable. In addition to the health benefits, an extensive breakdown of costs and investment show that the high profitability of this investment, while maintaining a competitive price. Therefore, the lighter fluids provide more than 75% of our revenue.

Performance Evaluation Revenue Profit NPV Now that we have covered the social and ecological aspect of the sustain strategy, I will analyze the performance evaluation of the new facility and their projected revenue, profit, cost per unit, and finally NPV

Revenue Revenue - By year 3, we expect to increase our revenue to 37.5 million. As you can see from the graph, our revenue stream consists of four sources. The fluid lighter consists of 75.3% of revenue while the Greyhound distribution consists of 8%. Also, the distribution to Sun Metro contributes 16% of our revenue. FInally, the sales of crude glycerin generates about less than 1% of our revenue.

Profit Sustainable Strategy Profit $10 Million Glycerin Refinery Profit - Our bottom line profit is slightly over $10 million. In order to increase future revenue streams, we may increase our production of lighter fluid and also add a facility to refine the crude glycerin to be sold at a higher price. With the production and distribution reaching a stable point, Perpetual can consider potential expansion to strengthen their sustainable strategy. Also, we have used conservatism when calculating our subsidy for tax expenses to $1. Since the subsidy can increase to as high $1.5, we may see an increase in the profit from there as well. Glycerin Refinery Potential Expansion Increase Production

NPV Analysis After taking a consideration of all the options we suggested, we ran an NPV analysis to have an general idea of profitability and feasibility for biodiesel project. As you can see from this chart, the red line (which is the cash inflow) is much higher than the blue line (which is the cash outflow), and it keeps increasing every year during the 10 year-period we projected. These cash flows generates a positive NPV of $45,000, indicating that West Texas Biodiesel Facility will be able to earn a large profit adopting options we suggested.

Recommendations West Texas Biodiesel Facility Planet People Profit Today, we as SKY Consulting have analyzed the sustainable business strategy for Perpetual Energy Group and we have discussed different options for West Texas Biodiesel Facility. Our analysis focused on three main criteria that Perpetual looks forward to contribute: people, planet, and profit. With this in mind, we recommend a 50-50 Production method of animal fat and vegetable oil to better recycle waste into energy we can use. We also recommend distributing biodiesel to greyhound and Sun Metro to contribute back to the people in society and improve the environment of this planet. Additionally, we added a new revenue stream to sell biodiesel to the lighter fluid market. This would not only help Perpetual to increase profit but at the same time, provide people an ecological product to use when they go camping or just doing barbeque in the backyard. Based on our cost, revenue and NPV analysis, the options we recommended are actually feasible and profitable. Finally, if perpetual want to further increase revenue in the future, we would recommend perpetual to build a refinery to develop glycerin byproduct. 50-50 Production Distribution Market Additional Revenue Stream

Questions or Comments

Acquisition of Animal Fat Waste from Tyson

Acquisition of Vegetable Oil

Bottling Machines

Cost of Containers

Delivery Truck Costs

Depreciation

Glycerin Revenue

Income Statement Net Income

Income Statement Expenses

Income Statement Revenue

Lighter Fluid Expenses

Lighter Fluid Revenue

Per Unit Costs

Per Unit Product Contribution Margin

Raw Materials for Biodiesel Production

Revenue and Profit 2017

NPV Assumptions

NPV Calculation

Works Cited Animal Fat http://www.alice.cnptia.embrapa.br/bitstream/doc/908324/1/InTechAnimalfatVIVIANFEDERNwastesforbiodieselproduction.pdf Animal Fat – Distribution http://www.tysonfoodscareers.com/Production/Facility-Locations.aspx Biodiesel - Production http://www.energyfuturecoalition.org/biofuels/fact_biodiesel.htm Biodiesel – Defining http://www.uaex.edu/Other_Areas/publications/PDF/FSA-1050.pdf Biodiesel - Uses http://www.biodiesel.coop/uses.html Biodiesel – Market Price http://www.afdc.energy.gov/fuels/prices.html Biodiesel - Potentials http://www.biodieselmagazine.com/articles/3241/animal-fat-based-biodiesel-explore-its-untapped-potential

Works Cited Biodiesel – Advantages vs. Disadvantages http://www.fueleconomy.gov/feg/biodiesel.shtml Biodiesel – Increases price of Soybeans http://southeastfarmpress.com/soybeans/study-shows-biodiesel-has-increased-price-soybeans-074-bushel Biodiesel – Saving Costs for Consumers http://www.biodieselsustainability.com/faq/ Biodiesel – Uses http://gas2.org/2008/03/26/top-15-unexpected-uses-for-biodiesel/ Competitor’s Pricing for LNG http://www.cleanenergyfuels.com/stations/FuelPriceReport.php Competition with Megabus http://houston.culturemap.com/news/travel/10-18-12-bus-fight-greyhound-tries-to-run-over-megabus-with-new-express-routes-from-houston/ Diesel - Market Price http://www.eia.gov/petroleum/gasdiesel/ Delivery Truck – Price http://www.commercialtrucktrader.com/Freightliner-For-Sale/search-results?make=FREIGHTLINER%7C2310628

Works Cited Delivery from Tyson http://business.tenntom.org/why-use-the-waterway/shipping-comparisons/ Financial Statement (travel 5.6 billion miles per year *81% U.S., 2000 vehicles *81% http://report2012.firstgroup.com/ Glycerol – Potentially Valuable http://www.renewableenergyworld.com/rea/news/article/2008/07/the-byproducts-of-biodiesel-production-are-valuable-organic-acids-researchers-say-53116 Glycerol - Market http://biofuelstechnologyllc.com/Crude_Glycerine.html Greyhound – Cost / Gallon http://www.afdc.energy.gov/publications/search/keyword/?q=alternative%20fuel%20price%20report Market Prices of Competitive Fuels http://www.tbabz.com/wp/fuel/crude-oil-versus-diesel-prices NPV – Discount Rate http://www.fwallstreet.com/article/46-what-discount-rate-should-i-use NPV – WACC 16.94% http://www.window.state.tx.us/taxinfo/proptax/drs11/drs11.pdf

Works Cited NPV – Inflation Rate http://inflationdata.com/Inflation/Inflation_Rate/CurrentInflation.asp NPV – Growth Rate http://www.biodieselmagazine.com/articles/8572/report-us-biofuel-consumption-leading-firms-forecasts-revenue Natural Gas Hazards http://www.triplepundit.com/2012/04/natural-gas-pros-cons/ Sun Metro Current Fuel Usage http://investors.cleanenergyfuels.com/releasedetail.cfm?ReleaseID=585418 Used Cooking Oil - Container http://www.ebay.com/bhp/275-gallon-tank Used Cooking Oil – Price http://www.cnbc.com/id/46607261 Used Cooking Oil - Price http://smartfuelamerica.com/Services_files/paymentandquestions.pdf http://www.njbiz.com/article/20120404/NJBIZ01/120409918/Selling-cooking-oil-to-turn-profit-power-generators