A Case Study for using the Cooperative business

model for Biomass Aggregation

Randy Kyle, CPA, MBTKyle Consulting Group, Inc.

Office – 608-280-7541randy@kyleconsultinggroup.com

We are on a path of discovery to explore the market potential of commercializing the aggregation and densification of fibrous, mostly non-woody, biomass for use in the commercial generation of electricity using the Cooperative business model.

Where Cooperatives are/have been

• Ethanol investment

• Biodiesel investment

• Soy Crush Plant

• New opportunities with restructured ethanol plants

• Biomass?????

Biomass

• Typically waste wood and wood bi-products

• Likely high in moisture

• Likely average to low in BTU value

• Not products typically handled by Producer Cooperatives or its members

• Other non-woody sources

Why Consider getting into Biomass?

• Micro economics – local nature

• Access to the material

• Does not compete with food uses

• Producers have the equipment and experience

• Additional source of revenue for producers

• Carbon credit opportunity

Why Consider the Cooperative Model?

• Farmers dealing with farmers• Profits can be returned as patronage• Producer control• Membership/ownership can be tied to

supply agreements• Familiar Structure• Trust

BCAP is the Starting Point(Biomass Crop Assistance Program)

• Defines eligible material

• Sets a payment schedule

• Establishes criteria for conversion facilities

• Provides sample agreements

• Administered by FSA

• http://www.fsa.usda.gov/FSA/webapp? area=home&subject=ener&topic=bcap

Fibrous Biomass Characteristics

• 7,500 to 8,000 BTU per pound

• Coal - 13,500 BTU per pound

• When processed, fibrous biomass can be very consistent in energy content

• Control of moisture content

• Renewable – annual crops

Financial Summary

• Need to pay farmer $45 to $60 per ton

• BCAP payment – additional $45 per ton

• Possible patronage

• 5-7 Tons/acre - $100/ton

• Attract acres/aggregation????

Operating Model

• Rural location – accommodates delivery

• Rail – accommodates shipping

• Distributed storage and delivery of raw materials

• Limited on-site storage

• Local support for permitting and construction

Off Take Agreements and Other Uses

• Long-term vs. short-term

• Fixed vs. variable

• Mandates vs. lowest cost producer

• Viability without BCAP

• Carbon trading

• Alternative uses for off take

• It’s time to negotiate

The following material is being used with the permission of Show Me Energy Cooperative

• Show Me Energy Contacts– Steve Flick, Chairman of the Board

• steveaflick@earthlink.net

– Kurt Herman, CEO• kherman@goshowmeenergy.com

– Office phone - 660-656-3780– www.goshowmeenergy.com