Ternopil Bio-diesel PlantFinal Presentation

Social Business Plan ContestShARE World Seminar 2010

Jointly organized by

Concept

• Significant deterioration of the socio-economic conditions

– 28 percent of people still live below the poverty line of UAH430 (USD90) per person a month

• Lack of employment possibilities,– Avg. (gross) wages: 267.5 USD (2007). 2.3%

unemployment rate

• Non-diversified economy– Low wages, low pensions, poor social aid

due to lack of funds• Absence of well-defined rural development

policy – Development initiatives of rural wellbeing

in Ukraine traditionally focus on bolstering the private sector or the state, while ignoring organizations that combine for-profit activities with social aims .

Social need Solution using a social business model

Geographic Demographic

Problems

Reasons of the problem

The project purpose is to pilot an innovative community-based approach for the provision of electricity through renewable energy sources in off-grid areas of Ternopil, Ukraine.

Establish sustainable revolving fund mechanism for electricity connection and livelihood development through production of biodiesel. Attract investment in the creation of biodiesel production plant and rape cultivation farming.

• Revenue generation - Provide full technological cycle of production: cultivation of oil seed (rape), processing them into oil and final production of biodiesel

• Social impact– Dramatic increase in percentage of the

community serviced with electricity from renewable energy systems

• Comparison with other models --Oelmühle Leer Connemann GmbH & Co, - Use of biodiesel in Germany increased from 10 million liters per year in 1992 to 300 million liters in 2001. –Small, stand-alone renewable energy

technologies meet electricity needs of rural areas more cheaply ;potential to displace costly diesel-powered generation . Main advantages for household scale applications, is comparatively low running costs (fuel costs are zero).

Component of the

solution

Why this is the best solution

Source: UNDP Europe & CIShttp://europeandcis.undp.org

Relevance to Social Community

• Benefits to the Local Community “How will the development of biodiesel bring direct

opportunities to our oblast for those not involved in cultivating the rape or in the production process?”

Oksana Kost, factory worker at Kozova Dairy

“How will us farmers become significant equity participants in the plant? What methods of financing will encourage our participation? How can we get ownership stakes in it?”

Bohdan Omelchyk, local farmer Kosova Region

• Sustainable Development“Won’t biodiesel production affect our natural ecosystem

and the quality of our land and food sources?”Iryna Solonenko, Transparency International employee,

Ternopil.

“Rape can be difficult to harvest. What steps will be taken to support us from these risks, and what will happen if better technologies are developed?”

Vitaly Boboshko, local farmer Kosova Region

Solution relevance Solution acceptance

• Revitalization of the Community “Biodiesel production offers higher paying jobs, such as engineering,

and infrastructure needs such as transportation and utilities, will increase, fostering growth of non-farm businesses by providing direct input and attracting labor. “

Michael Carl Bryan, Ethanol Producer Magazine, Contributor

“The plant can be a farmer-owned cooperative, and farmer-owners can participate in the profits through dividend payments. The payments will provide additional income to the rural investor. The additional income will be turned over in the local community and region, which should help revitalize a community. ”

Alan Robinson , assistant to administrator of Rural Business-Cooperative

• Ensuring Sustainable Production“Un-sustainable use of land for the production of bio-fuels can be avoided if efforts are concentrated on raising the yields of existing agricultural land , such as through crop rotation, instead of widespread deforestation. Proper application of crop protection products and fertilizers, can also increase the yield per hectare. Dirk Carrez, Public Policy Director – EuropaBio

“Cultivation conditions can be maintained by agricultural equipment, and insurance can be used to cover weather risks. New inventions concerning biodiesel fuels will be closely tracked, and cooperating with local scientific organizations in the region will minimize techn. risk.”Mykhaylo Spivak, engineer & consultant on biodiesel manufacturing

Business Model

$426 per ton

Variable cost

Fixed cost

Profit

Economics

Sales of one unit of product / service ($)

Nature

• Major variable cost: 199,000 US–176,000 US chemicals ,23,000 US variable

energy costs.

• Major fixed cost: : 388 750 US-- 158,000 cultivation of rape (5000 ha,

tractors, ploughs, sowing) 28,000 energy cost, 202750 seed processing cost.

Social impactThrough Employees

Details of the social impact – Some 5,000 small-scale farmers will

have increased incomes through the development of selected crops and value chains.

–Suppliers of raw materials can receive biodiesel as a payment.

Through the product / service

• Details of the social impact brought by the service/product to the client

• A total of 4 rural regions of Ternopil Oblast (45,000 residents) will have improved service delivery practices in the areas of economic development, energy efficiency, and waste management.

• Revenue– 2,102,270 US turnover,

producing 825,525 US profit and a positive cash flow of 602,575 US. The weighted average return on investment is 23.5% from the fourth operational year.

Source: http://spivak.pl.ua/

$426

Competition Analysis

30%

3% 2%

45%

Market Share for Biodiesel Exportation from Ukraine – Russia Region

Strength

Weakness

One of largest producers of bio-diesel in Ukraine. Supplies products directly to European mineral oil corporations, mineral oil traders, gas stations and haulage companies.

High cost of materials, which could onlypartially be transferred into the market, have burdened profits.

Offers perspective cooperation on wholesale deliveries of bio-diesel fuel from Ukraine.

6 companies working in bio-fuel native market grouping and promotion of the Russian product on the international market

Largest Ukrainian producer of rape oil, has signed an initial cooperation agreement with specialist bio-fuels group Sunfuel Ukraine LLC.

Bio-diesel fuel production plants situated in the Lugansk (East Ukraine) and still needs modernizing. Only fraction sold thus far.

Only one plant fully operating b/c lack of subsidies, vague government policy for bio-fuel, and domestic market not functional b/c lack of equipment adopted for use of bio-diesel.

Had 17% price increase over the average rapeseed sales price in 2009, leaving room for competition domestically and aboard.

Price Analysis

30%3% 2%

45%20%

$2.2 per liter

$1.32 per liter

$0.79 per liter

$4.3 per liter

$0.65 per liter

Market sharePrice ($)

Price of competitors

Market prices of bio-diesel are 10-15 % higher than those of conventional diesel despite of tax exemptions for bio-fuels in many European countries (Germany, France, Czech), which is explained by high labor and energy costs in Europe. Since in Ukraine they are 30-35 times less than in Europe, our project will be able to generate competitive (5% less than market) prices for such sustainable fuel, as bio-diesel.

Income analysis of client

Income

6.174

2.205

2.793

.735

1.47

1.323 Saving

Education

Budget

Transport

Accomodation

Food

$14.7%

9%

10%

5%

19%

15%

42%

5 Years Business Plan

10 1420 24

57

-10-3

9

27

81

20

40

60

80

0

20

40

60

80

100

-20

0

20

40

60

80

100

2011 2012 2013 2014 2015

Revenues Net profit Social impact

Assu

mpti

ons

Revenues

•Profit Before Interest &Taxes - $ 825,525 after four years. Interest Expense - $79 500 . Taxes Incurred - $201 550. Short-term/Long-term Interest Rate %10%. Tax Rate %50%.

Net profit

• $ 708 983 initial year• Maintain Net Profit

Margin 30% with selling price no higher than that of conventional fuels.

Revenues

• $1 130.00 initial year. 23.5% increase per year.

• Increase the sales to more than 2 million USD by the third year.

Social impact

• 50% increase per year of client growth on farms. 1) portfolio diversification; 2) dividend payments; additional income to the rural investor. 3) community revitalization. Cooperative base for creating a suppliers’ network.

Social impact metrics

-29

4.9 4.8 4.9 5.2

-500

50 Investment

$

1st Year• Microloans from Ukrainian banks• Investment from Horizon Capital private equity fund manager• Grants: CRDF Global Grants, Euro Resources Small Grants Fund• Agrarian Fund- stability fund from Ministry of Agriculture• Use of alternative approaches for collateralizing loans, unlocking under-utilized equity in rural

areas: The investment capacity of rural residents is substantial and relatively untapped. Local investors tend to bring ‘patient’ capital of investments with a longer payback timeframe ,the type of funding typically required by emerging technologies and market development, such as bio ethanol. They often view such investment not only as an avenue to increase personal wealth but as a way of supporting their communities.

• How to start operation• Obtain license from Ministry of Agrarian Policy. Cultivate rape on 5,000 ha of rented fields. Average

yield from winter oil-seed rape in Ukraine is around 3 tons of seed per hectare during a 270 day growing season. The seed is pressed to extract the oil content of about 30% by weight, the remaining cake (rape meal) being used either as high protein content cattle fodder or burnt as an energy source for the production of electricity. Final output, therefore is 1 ton of biodiesel per hectare.

• How to start commercialization• Plan to be sold using direct mail, seminars, promotion programs and advertising in business

newspapers. Since biodiesel is a valuable fuel for in-city transportation companies, direct mail to these and other companies would be effective tool in promotion. Ecology, energy, technology related seminars are effective in finding regional representatives, partners, suppliers and buyers of our product. Promotion programs are: discounts to those carrying our trademark and symbolic, support to ecology and renewable energy concerned organizations, participation in regional fairs and events.

• Creation of distribution network with Poltavanafto, biggest fuel trader in the region. Company has selling capacity (gas filling stations, delivery services, certification laboratories, etc.) of 5 million tons of fuel per year. Also cooperation with one of the biggest distributor of biodiesel in Germany, Oelmühle Leer Connemann GmbH & Co, to sell products on European market.

Fund raising

How to start

1st Year

Obstacles and Key Success FactorsMajor obstacles

Risks

Key success factors (KSF)

• KSF 1– Market prices of bio-diesel are 10-15 %

higher than those of conventional diesel despite of tax exemptions for bio-fuels in many European countries (Germany, France, Czech), which is explained by high labor and energy costs in Europe. Because in Ukraine they are 30-35 times less than in Europe, our project will be able to generate competitive (5% less than market) prices for such sustainable fuel, as biodiesel.

• Petro-diesel–Main competitors in Ukraine are the producers of

petro-diesel. As long as the sale of petro-diesel is subject to excise and other taxes, our product would remain competitive on the Ukrainian market.

• Taxes–Biggest problem may appear if state imposes the

above-mentioned taxes for bio-diesel, which however, is highly unlikely, because of the strategic importance of alternative fuels for the country.

Main sector risk is the unpredictable output of the rape in each year. The necessary measures are assured in the project budget to cover this risk. The appropriate cultivation conditions can be maintained by the proposed agricultural equipment, moreover, insurance was also planned to cover weather risks. Second risk comes from latest developments in the bio-diesel processing. A more cost effective production method requiring totally new equipment could make our plant obsolete. Therefore new inventions concerning the biodiesel fuels should be closely tracked, the cooperation with the local scientific organizations in the region is primarily aimed at minimizing this type of technological risk.

Scalability• Future Growth

–Glycerol is a by-product, but it needs further cleaning. We are not planning to install glycerol processing equipment in the first 3 years, because this equipment requires additional 40% investment and we want to ensure quality and uninterrupted production of biodiesel, as a flagship product. However, after successful implementation of this bio-diesel project, we are also planning to sell cleaned glycerol, which could generate an additional 10% turnover.

Appendix 1: Projected 1st Year Milestones

Milestone Start Datedd.mm.yy

End Datedd.mm.yy

Capital expenses

1 Equipment order 1.01.11 676,0002 Purchase of tools and tractors 1.01.11 158,0003 Site preparation 1.02.11 1.03.11 110,0004 Installation of oil processing equipment 1.03.11 1.04.11 30,0005 Farm preparation 1.03.11 1.04.11 6 Rape-seed stage 1 1.04.11 30.04.11 7 Rape-seed stage 2 1.06.11 1.07.11 8 Rape-seed stage 3 1.07.11 1.08.11 9 Rape-seed stage 4 1.08.11 1.09.11

10 Rape-seed stage 5 1.09.11 1.10.11 11 Rape-seed harvesting 1.10.11 1.11.11 12 Equipment payment 50%, installation 1.06.11 1.10.11 676,00013 Equipment and maintenance 1.07.11 1.11.11 14 Oil processing 1.04.11 31.12.11 15 Bio-diesel processing 1.12.11 31.12.11 16 Sales of bio-diesel 15.12.11

Total capital expenses in USD 1,650,000

•Processing of bio-diesel is possible when sufficient (100 tons) quantity of oil will be pressed. Costs include chemicals, energy, labor force. Sales are possible when minimum railway transporting quantity (60 tons) produced. By that time, we’ll find clients, sign sales agreements and plan delivery for the next 3 months.

The following table lists the first year milestones with dates and budgets. The schedule emphasizes planning implementation. Most important programs are rape-seed cultivation (Stage 1 - Harvesting) and equipment installation. Omitted are inferior purchases like office preparation or stationery purchase.

No. Name Quantity required per ton

Unit Price

Total quantity required

USD / year

1 Energy for production: electricity, hot water, compressed air

100 kWh 0.046 500,000 23,000

2 Fixed energy costs   0.046 108,700 5,000

  Total energy costs       28,000

Cost of Goods SoldEnergy Costs

Rape-seedTotal area of farm: 5,000 ha, Productivity: 15,000 tons of rape-seed or 5,000 tons of bio-diesel per year. Rape meal is a by-product of rape-seed processing.

No. Name Quantity per ha Total quantity Price USD / year

1 Fuel 300 kg 150 t 305 45,750

2 Seeds 15 kg 75 t 1,700 127,500

3 Fertilizers 30 kg 150 t 230 34,500

4 Herbicides 20 kg 100 t 230 23,000

  Total       230,750

From year 2013 a +3.4% inflation has been built in the sales plans.

Appendix 2: Projected Costs

NORMAL SCENARIO 2011 2012 2013-

Assets

Cash and Securities 7,690 602,575 1,328,010

Accounts Receivable 13,000 170,000 160,000

Inventories 34,000 32,000 32,000

Total Short-term Assets 54,690 804,575 1,520,010

Capital Assets 1,700,000 1,712,000 1,724,000

Accumulated Depreciation 50,000 186,360 322,720

Total Long-term Assets 1,650,000 1,525,640 1,401,280

Total Assets 1,704,690 2,330,215 2,921,290

Liabilities and Capital

Accounts Payable 16,000 16,000 16,000

Short-term Loans 200,000 0 0

Other Short-term Liabilities 0 0 0

Total Short-term Liabilities 216,000 16,000 16,000

Long-term Liabilities 0 0 0

Total Liabilities 216,000 16,000 16,000

Paid in Capital 2,000,000 2,000,000 2,000,000

Retained Earnings 0 -511,310 314,215

Earnings -511,310 825,525 591,075

Total Equity 1,488,690 2,314,215 2,905,290

Total Liabilities and Capital 1,704,690 2,330,215 2,921,290

Appendix 3: Projected Balance Sheets – Normal Scenario

• Please note that in the first two years of the pessimistic scenario, additional loans would be necessary to borrow. However, in the third operational year, all these loans would be paid back.

PESSIMISTIC SCENARIO 2011 2012 2013 -

Profit Margin Ratio -639.0% 9.2% 9.2%

Total Assets Turnover Ratio 4.9% 63.4% 63.4%

Rate of Return on Assets (ROA) -31.5% 5.8% 5.8%

Leverage Ratio 1.08 1.15 1.06

Rate of Return on Equity -34.0% 6.7% 6.2%

Return on Investment Ratio -29.0% 4.9% 4.8%

Days Accounts Receivable 26.1 17.0 28.7

Days Accounts Payable 11.2 14.4 14.1

Days Inventories Held 13.6 15.3 14.1

Current Ratio 0.13 0.95 14.32

Quick Ratio (Acid Test) 0.06 0.85 13.32

Total Debt to Equity Ratio 15.8% 9.9% 1.0%

Appendix 4: Projected Balance Sheets – Pessimistic Scenario

Break-Even Analysis

• According to the normal scenario, we can regard 2013 as the reference year for the normal production:– Total sales 2,130,680 USD– Production quantity: 5,000 tons

• Unit sales price: 426 USD / ton• Total costs are 538,060 USD• Variable costs can include chemicals and energy (see Appendix 2), since

farm cultivation costs are fixed costs. These variable costs are: 176,000 USD chemicals and 23,000 USD variable energy costs, 199,000 USD in total. – Labor is not regarded as a variable cost, as co-op.

• Thereby the unit variable cost: 39.8 USD / ton• Fixed costs are 339,060 USD• As a result, the break-even quantity of the bio-diesel production is 878

tons / year.• The gross margin / sales ratio is above 80%, that’s why the break-even

quantity is so low, due to the exceptional conditions of the project.

Appendix 5: Break-Even Analysis

Exit Scenarios

Exit may take place in several possible ways:

• Normal Exit: The project starts generating profit in the second year of operations and positive cash flow appears in same year. Once spent, money can be fully recovered by investors. This creates very good chances for the co-op shareholders to sell their participation at a very good price for other investors.

• Project Failure: The total cost of the initial equipment is 1,540,000 USD (including already owned farm equipment which would be volunteered by co-op farmers), with an annual depreciation of approximately 154,000 USD. The market value of the assets differs type by type.

– Agricultural machinery of farmers can be sold at least for 70% of book value, oil processing equipment for 90-110% of book value (it’s already delivered, installed and buyer can start exploiting it), while market price of biodiesel production equipment is under question.

• Selling price of the equipment may vary from 20% (valued only such general parts as pumps, reservoirs, pipes, etc) to 110% (we found buyer, who is interested to start the production on the existing facilities). The sale of other current assets, such as final and by-products (bio-diesel, rape meal, rape-oil, and rape-seeds), chemicals/herbicides/fertilizers are possible at full market price in one month maximum.

• As a summary, we estimate that the investors could collect 30-100% of their initial investments, if they suddenly decide to sell everything.

• The two project initiators require 10% of the initial investment at the end of the third year of the project and 10% of net profits thereafter. If the exit of investors was made due to unexpected causes (irrelevant from the project results) before the end of 2013, the 10% share will be still required. The only reason to cancel the share transfer can be a cumulated result below the pessimistic scenario. The payment of 10% of the net profits starting from the fourth operational year cannot be ceased.

Appendix 6: Exit Scenarios

Appendix 7: Market Segmentation – Additional Revenue Potential

Potential Customers Growth 2011 2012 2013 2014 2015

In-city 15% 2,200 2,530 2,910 3,347 3,849

Farm 50% 500 750 1,125 1,688 2,532

Other 10% 3,600 3,960 4,356 4,792 5,271

Total 16,62% 6,300 7,240 8,391 9,827 11,652

Market segmentationRape meal is a by-product of oil extraction and is valued for high protein content. We are planning also to sell rape-seeds in order to stabilize cash position in the periods when production of bio-diesel would be insufficient: at the end of season, between production cycles. Primary target customers for these two types of products are agricultural enterprises of Ternopil region and exporters. The demand in this market segment can be regarded practically as unlimited.

• The project is planned to serve Ternopil and neighboring regions (see map). Total project’s area is approximately 30,000 square km, of which the total arable land is 18,000 square km, that includes 3,000 square km (300,000 ha) for rape cultivation.

• Physical location of the processing plant is 30 km from Ternopil City, near a railroad station and an elevator with total storage and processing capacity of 10,000,000 tons of grain per year. Cultivation of rape-seed requires 5,000 ha of arable land and will take place on the co-op fields of local agricultural enterprises.

Appendix 8: Plant Location

Plant has the following facilities: garage for agricultural machinery with a total surface of 1,000 square meters, an administrative building of 100 square meters, the plant building for the biodiesel production of 1,000 square meters. Territory of the plant is fenced; available for storage and other equipment in 5,000 square meters.

Plant is situated with good highway and railroad access which is critical for bio-fuel plants. Locally grown feedstock be most economically brought in by truck. In the event of local shortages the plant may need to source feedstock from greater distances where rail is more cost-effective. In many cases, bio-diesel will likely be shipped a considerable distance and rail access will be important for this purpose.

Plant located in region with an abundant source of clean water which is essential for ethanol plants which consume approximately 3-4 liters of water for every liter of ethanol produced.

Cost of bio-diesel production: 1,318,000 USD

Appendix 9: Plant Facilities

Exhibit 2. Bio-diesel Plant

• Type of Renewable Energy (derived from the Sun).

• Bio-fuels are liquid fuels made from esters, alcohols, ethers, and other biomass chemicals (Source: US Dept. of Energy).

• Common bio-fuels include: ethanol and bio-diesel.

• Ethanol is made from starches / sugars.

• Bio-diesel is an ester made from vegetable oils, animal fats or other types of biomass.

Appendix 10: What is Bio-Fuel?

• B100 = 100% bio-diesel / B20 = 20% / B5 = 5% / B2 = 2%

• Production process: Transesterification (of oil)

• Main crops used for producing bio-diesel:

• Rapeseed (Europe)• Soybean (US)• Jatropha (Africa, India)• Castor Bean (Africa, China, S. America)• Palm Oil (Tropical areas)• More

• Other oil-enriched crops: Coconut, Brazil nuts, Jojoba, Peanuts, Cotton seed, Sunflower, and many more.

Bio-diesel (bio-petroleum diesel)

Biodiesel 100%

Glycerin

Bio-diesel Final Product

Appendix 11: Why Ukraine for Bio-diesel Production?

• Ukraine possesses a huge capacity for development of bio-fuel market and rich resource base. Large agricultural areas may be used for growing crops, which are necessary for bio-fuel production without considerable decrease in production volumes for other agricultural products (CRAMON-TAUBADEL, 2004).

• Each year, the area of land under oilseed rape and oilseed crops increases.

• The prospects for producing bio-diesel could secure Ukraine lucrative export earnings for ethanol fuel additives to Europe in the short-term.

• Bio-diesel, as oilseed rape, for technical purposes are not subject to import duty, when they are exported from Ukraine. Therefore, any Ukrainian producer of the bio-diesel directly competes with EU bio-diesel producers.

Perfect Agricultural & Export Conditions Government and International Support

• Subsidies have been introduced for the farmers, who grow oilseed rape and other oilseed crops.

• Arrival of European investors backing bio-diesel refineries, such as Austria’s BioDiesel Vienna, is starting to provide a boost to get biodiesel production in Ukraine onto its feet.

• European countries are the leading consumers of bio-diesel but demand is high, driving European biodiesel companies to launch larger production facilities of their own in Ukraine.

• EU regulations require that petrol sold at the pump consists of more than 5 percent bio-diesel additives. This regulation alone drives as much as 5 million tons of bio-diesel imports into the EU each year.

World Production of Bio-diesel2005 - 2010

2005

Western Europe (D, FR, IT, UK, etc.) – main producers and consumers – 75% of world

Eastern Europe & N. America – 2nd largest markets

Asia – although significant market yet, relatively small

2010

Western Europe (D, FR, IT, UK) – main producers and consumers – 38% of world

Asia – will become the 2nd largest market (China, India – consumption & production)

Eastern Europe & N. America – 3rd largest markets, with US as the single largest consumer – 18% of world

75%

38%

30%

US – 18%

Source:Biodiesel 2020Global Market Survey,Oct. 2006

Appendix 12: Growing Market for Exportation

Projections:

2006 – 5B L/yr 2010 – 12B L/yr 2020 – 25B L/yr

Total European Biodiesel Market: Unit Shipment and Revenue Forecasts (Europe), 1997-2007

0

500

1000

1500

2000

2500

3000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Year

Rev

enu

es (

$ M

illi

on

)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Un

its

(Mil

lio

n T

on

nes

)

Revenues ($ Million) Units (Million Tonnes)

Source: European Biodiesel Board, 2006

The EU Bio-diesel Market

In order to achieve the ambitious goals of bio-fuel use set by the European Union (5.75% in 2010 and 10% in 2020) in a sustainable and competitive way, the available biomass in Europe will need to increase. Cultivating energy crops on set-aside and non-cultivated land will contribute, but this won’t be sufficient to fulfill all the demand, and the EU is looking to Eastern Europe and Ukraine to help fulfill their bio-fuel production goals.

№ ParameterASTMD-6751

EN 14214 Utilized technology

1Methyl ester content, % (m/m)

- >96,5 97

2 Density (at 15°С), kg/cm - 860-900 885

3 Viscosity (at 40°С), mm2/s 1,9-6,0 3,5-5,0 4,67

4 Flashpoint, °С >130 >120 130

In ecologically sensitive segments and at equal pricing, Bio-diesel will have a competitive advantage against regular Diesel. Advantages of our Bio-diesel are based on it’s quality and costs. To illustrate product quality, we compare major indicators of bio-diesel manufactured with our technology (column Utilized technology) and industry standards. Obviously, manufactured product meets the highest industry standards and can be supplied at the lowest possible costs.

Appendix 13: Product Advantages

Higher cetane Greater lubricity Superior detergency Higher flash point

More mileage Greater horsepower Less smoke Smoother running engines Quicker starts Longer engine life Reduced maintenance

BenefitsFeatures

Bio-Diesel – A better fuel vs. Diesel

• Bio-diesel is the only alternative fuel that runs in any conventional, unmodified diesel engine. It can be stored exactly like petroleum diesel.

• Bio-diesel can be used alone or mixed in any ratio with petroleum diesel.

• Use of bio-diesel can extend the life of diesel engines because it is more lubricating than petroleum diesel fuel, while fuel consumption, auto ignition, power output, and engine torque are relatively unaffected.

• Bio-diesel is safe to handle and transport because it is as biodegradable as sugar (pure bio-diesel degrades 85% to 88% in water within 28 days), 10 times less toxic than table salt (lethal dose is greater than 17.4 g/kg body weight, while for salt (NaCL) it is 1.8 g/Kg), and has a high flashpoint of about 200°C compared to petroleum diesel fuel, which has a flash point of 70°C.

• Bio-diesel is a proven fuel with over 20 years of use in Europe, 30 million successful US road miles.

• Combustion of bio-diesel provides over a 75- 90% reduction in environmental pollution, 90% reduction in cancer risks.

• Eligible for CDM (Clean Development Mechanism - Kyoto Treaty).

Key Advantages of Bio-diesel

• Major planned source of raw material is rape-seed. To ensure stability of supply, we plan to cultivate on 5,000 ha of co-op fields.

• Average yield from winter oil-seed rape in Ukraine is around 3 tons of seed per hectare during a 270 day growing season. The seed is pressed to extract the oil content of about 30% by weight, the remaining cake (rape meal) being used either as high protein content cattle fodder or burnt as an energy source for the production of electricity. Final output, therefore is 1 ton of biodiesel per hectare.

• The energy cost of producing the crop is about 15% of the yield - the same as fossil oil. The main difference is that the energy is renewable and come from the eco-friendly crop itself.

Appendix 14: Sourcing

Energy CropR&D

Farming

OilseedMeal

Crushing Crop Oil

Bio-diesel Production

Biodiesel

MarketGlycerin

From the Farmer to the Fuel Tank

Appendix 15: Ternopil Co-Op’s Production