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Value creation in bio-energy
Anton RobekPresident DSM Bio-based Products & Services
Bio-based business seminar - December 4, 2012 London Stock Exchange
Safe harbor statement
This presentation may contain forward-looking statements with respect to DSM’s future (financial) performance and position. Such statements are based on current expectations, estimates and projections of DSM and information currently available to the company. DSM cautions readers that such statements involve certain risks and uncertainties that are difficult to predict and therefore it should be understood that many factors can cause actual performance and position to differ materially from these statements. DSM has no obligation to update the statements contained in this presentation, unless required by law. The English language version of this document is leading.
A more comprehensive discussion of the risk factors affecting DSM’s business can be found in the company’s latest Annual Report, which can be found on the company's corporate website, www.dsm.com
Slide 1
Biobased market positions• Enzymes• Cultures• Yeast extracts• Pharma• Biologics
DSM has a broad range of bio-based platforms
Algae Fungi/Yeast Enzymes Advanced
ChemistryCell
Culture
In house bio-processes• Fermentation processes
• Anti-infectives• Several vitamins• Enzymes for Food, Feed• Enzymes for Pharma• Cultures
• Biocatalysis• Vitamins• Semi-synthetic antibiotics• APIs and building blocks
• Biopharmaceuticals
Microbial
Development• Advanced bioenergy• Bio chemicals• Renewable raw
materials for polymers
Slide 3
• Cellulosic Bioethanol • Renewable Diesel• Industrial Biogas
From technology to a total business model
• Biosuccinium™ Succinic Acid • Bio-based Adipic Acid• Emerging Portfolio
DSMBio-Based Products
& Services
Bio-energy Bio-based chemicals& materials
synergy
Slide 4
Building on proven biotechnology competences
BIOECONOMY(21st century)
• MethaPlus (Biogas)• Advanced Cellulosic
Yeast & Enzymes• Renewable bio-diesel• Biogas• Platform chemicals:
- Succinic acid- Adipic acid
• Microbial oil platform
• Yeast• Ethanol• Yeast extracts • Vitamins• Penicillin• Enzymes• Citric acid
CLASSICAL BIOTECH (19th century)
MODERN BIOTECH(20th century)
• Food & Feed enzymes (e.g. Phytase, Lactase, Proteases,... )
• Metabolic engineering(e.g. Vitamin B2, Cephalexin, Arachidonic acid)
• Biocatalysis(e.g. Pharma intermediates (PharmaPLE)
• Cell culture(e.g. Per C6TM cell line)
A unique track record of continuous innovation during 3 centuries
Slide 5
Biotechnology is a clear differentiator for DSM
• > 150 years of biotechnology experience (Nederlandsche Gist- en Spiritusfabriek, 1869)
• Clear biofuels focus from start of bio-based program:– Cellulosic ethanol– Enzymes & Yeast– Fit for use in specific environment (pre-treatment, feedstock focus, …)
• We know how to design, build & operate large scale installations
• DSM has solid scientific track record– 2011 R&D € 476m (5% of net sales), 2000 scientists– In 2011, 262 scientific papers in
peer-reviewed journals– Innovation Funnel & PMP process– Intellectual Asset Management
• 250+ patents filed per year• >100 professionals worldwide
Slide 6
Bio-energy at DSM: three exciting platforms
• Cellulosic bio-ethanol
• Renewable diesel
• Bio-gas
Slide 8
Cellulosic bio-ethanol: very attractive opportunity
0
5
10
15
20
2011 2015 2020 2022
US
China
Brazil
EU
Market expectations*cellulosic bio-ethanol
(global demand in billion gallons)
* derived from Hart’s Global Energy Study
’
Slide 9
• Global cellulosic bio-ethanol market expected to grow to 18bn gallons by 2022*
• Resulting in market value for enzymes & yeasts of ~ US$ 3-5bn by 2022
• US is the largest market, followed by China en Brazil
Strong commitment from US EPA
*: RFS2 update: U.S. EPA announced on Nov 16, 2012 that it would not waive the Renewable Fuel Standard, as had been officially requested mid-August due to drought conditions. This decision was well received by all advanced biofuels players
Slide 10
• EPA 2022 forecast: 7.8bn gallons of cellulosic bio-ethanol from corn crop residue (U.S.)
• Which means, by 2022, ~ 150-200 plants to produce cellulosic bio-ethanol from corn crop residue could be required in the US according to the Renewable Fuel Standard*
• EPA has approved the use of E15 for vehicles built since 2001
DSM’s technology is the core enabler
Biomass Pretreatment Bioconversion RecoveryFurther
conversion
Cellulose sources• Corn stover• Bagasse• Wheat straw• Woodchips
Ferm
enta
tion
(yea
st)
C5+
C6
C6
Physical• Steam• CrushingChemical• Acid/base
General
• Distillation• Filtration• Absorption• Crystallization• Etc.
Final product• Building
block• Advanced
bioethanol
Conversion• Polymers• Compounds• Parts
• Biotechnology and chemical conversion expertise are key for highest overall yield
Slide 11
Sugar sources• Starch (corn)• Cane• Beet
Enzy
mat
ic H
ydro
lysi
s
Chemo-catalyticconversion
Biomass as a source of fermentable sugars
Plant cells
Cellulose Hemi-cellulose
Lignin
Glucose
XyloseArabinoseGlucoseGalactoseMannose
Biomass
Slide 13
DSM’s enzymes & yeasts suitable for broad residue range
Glucose Galactose Mannose Xylose Arabinose Lignin
Offering excellent conversion properties
AspenBagasseCane strawCorn branCorn cobsCorn fiberCorn stoverPineRape strawRice straw SpruceSwitch grassWheat straw
DSM cellulase enzyme cocktailproperties:• Fast liquefaction• Acidic conditions• High temperature• Single production strain, suitable
for on site manufacturing
DSM Advanced yeast properties:• Industrial strain• Ferments 5 most abundant sugars
in biomass
Slide 14
Thermostable enzymes are most cost effective
Parameters of Interest
• High dry matter
• Low enzyme dose
• No contamination
• Fast hydrolysis
• Fast fermentation
• High ethanol yield
• Cost effectiveness
Slide 15
Pretreatment is done at high temperature (~200 0C);Liquefaction/hydrolysis is then best done at high temperature as well.
DSM developed enzyme mix performing in high 60-70 0C temperature range
High performance in broad temperature range
Slide 16
DSM enzymes giving fast liquefaction – active above 600C
• Fast viscosity reduction enabling high dry matter level
• High tolerance for inhibitors
• Active at acidic pH
• Resistant to higher temperature
* Trichoderma and competitive enzymes operating at temperature range of 40-450C
*
Successful enzyme cost reduction
8-fold improved strain performanceFor enzyme production
Slide 17
• Strain improvement led to two new generations of enzyme production micro-organisms: strain 1 & 2
• These improved the productivity of the initial strain by a factor of 8, which correlates to an 8-fold reduction in enzyme cost
DSM’s outstanding “advanced yeast”
Hemicellulose 20-55% (C5) & Cellulose 20-45% (C6)
C5C5
C6C6
• Cellulose degradation yields mainly glucose
• Variation in biomass feedstock leads todifferent sugar mix in fermentation broth
• Hemicellulose consists of heteropolymeric C5and C6 sugars
• Lignin is a non-fermentable aromatic polymer
Slide 18
Successful tests of our yeasts on pilot-scale
Source:Bob Wooley (Abengoa Bioenergy)World Congress on Industrial Biotechnology & BioprocessingToronto, Ontario, CanadaMay 9, 2011
Slide 19
Resulting in >80 gallon/mt pre-treated corn stover
Slide 20
State of the art yeasts are ready to be used in large scale fermentation facilities
0
2
4
6
8
10
0 20 40 60 80 100 120 140
Ethanol Production
RN1001
RN1016
g/l
hours
0
4
8
12
16
20
0 20 40 60 80 100 120 140
Xylose consumption
RN1001
RN1016
g/l
hours• pH 4.5 • 3g/l acetate
Lab scale
Commercial
Lab scale
Commercial
DSM’s state of the art yeasts: commercially available
Our business model: DSM as “software provider”
Demo Plant
First Commercial (20-25 mG)
Value Creation
Enabling Technology
Time
RegionSpecific Biorefineries
License Model
Alliance Partners• Co-development/ Commercial• Co-development/Feedstock • Application Developers• Off take Partners/Customers
Slide 21
DSM creates enabling technology (“software”) to facilitate constructionof demo and commercial Plants
Project Liberty: Cellulosic bio-ethanol plant
Slide 22
• Currently being constructed in Emmetsburg, Iowa• Total investment US$250 million • Designed to produce more than 20-25 million gallons• Replicate technology throughout POET’s existing network of 27
corn ethanol plants
One of the first commercial scale plants in the world
Production costs comparison & development
Source: Poet and DSM
2012 2008 2012 Future
$4.13
~ $3
POET Pilot Plant
POET - DSM Plant
Cellulosic bio-ethanol Corn ethanol
POET - DSM Goal
Source: POET and DSM
Slide 23
Meanwhile, in Emmetsburg, IA….
Slide 24
• Ground Breaking March 13, 2012• Vertical construction in progress• Start-up expected end 2013• Moving to commercial volumes in 2014
Advanced biodiesel: another huge opportunity
• Recent EU-directive on Biodiesel has put a cap on vegetable oils (rapeseed, palm, soy, cooking oils)• Standards now exist (ASTM D7566-11: 50% biofuel blend)• Airlines now using biofuels (eg. Aeromexico, Finnair, KLM, Lufthansa, Thai Airways,
United Airlines and Alaska Airlines)• EU Emission Trading Scheme (ETS) now include airlines (in theory!)
Routes to renewable diesel
Slide 25
Image source: IEA “BLUE Map”Ex
ajou
le (
EJ):
1 EJ
= 1
018 J
Vegetable oils
Processed cooking oils
non-photo synthetic
SugarSource to diesel
Hydroprocessingto diesel specification
Conventional biodiesel
Photo synthetic
Advanced biodiesel
Thermo/Catalytic
BP-DSM advanced biodiesel pathway
• DSM and BP extended and deepened their collaboration on the development of microbial oils
• Technology: Non photosynthetic conversion of sugars into oils for transportation fuels (biodiesel, aviation fuels)
• Access cost effective, sustainable sugar juice extracted from sugar cane or ligno-cellulosic material
• Use proprietary heterotrophic microorganism to convert sugars into lipids/oils
• Lipids produced have profiles and/or properties similar to conventional vegetable oils (rape seed, soya bean oil), or tailored to specific applications
• “Upgrade” lipids/oils to FAME or hydrocarbons through existing chemical or thermo-catalytic conversions
Slide 26
Renewable diesel offering exciting advantages
Advantages over conventional biodiesel from vegetable oils:
• Access to wide variety of biomass feedstocks which can be produced at scale and in high yield
• Ability to tailor the product for variety of diesel and aviation-fuel needs
• Reduced exposure to fluctuations in price of vegetable oils
• Avoidance of availability and sustainability concerns surrounding conventional biodiesels
Advantages over alternative “advanced” biodiesel options:
• Built on technologies already proven at scale (rather than technologies that are still in lab-stage of development)
• Less capital extensive than thermo-catalytic / thermo-chemical biomass conversion alternatives
• Has potential to produce sugars and oils at higher yields than photosynthetic approaches, and at lower costs
Slide 27
Biogas: renewable energy with high potential
• Biogas has a wide range of end-use applications
• Strong green credentials: mitigating GHG emissions from organic side & residue streams
• Benefits from infrastructure for natural gas and vehicles powered by (bio)methane
• Increasing number of government incentives to stimulate biogas or bio-methane production
• Biogas market expected to grow by ~7% p.a. to ~100 BCM in 2020 (US$ 35bn)
• Market for biogas enzymes and process improvement: ~US$ 1bn by 2020
Market expectations(*) biogas(US$ billion)
*: Source : DSM analysis, conservative scenario for biogas based on: Pike Research (’12)
Slide 28
35
25
18
2012 2017 2022
+7%
40
30
20
10
0
DSM, first mover in advanced biogas
Enzymes:• Leading supplier of advanced biogas enzymes for conversion of agricultural and
industrial residue streams• Over 100 years of innovation has made DSM a world leader in the formulation,
production and supply of enzymesProcess /Equipment:• DSM developed advanced biogas process (high intensity industrial Biogas Plant of the
Future) Exciting synergies:• Commercial cellulosic bio-ethanol plant in US, offering exciting synergies for biogas
Slide 29
DSM leading supplier of enzymes for biogas
Much more power in the fermenter
• A highly active biocatalyst capable of increasing capacity in the biogas operation• DSM’s MethaPlus® S/L Enzyme is able to hydrolyse plant fibers (polysaccharides such
as cellulose and hemicellulose) and so makes them more accessible for gas-forming microorganisms
• Safe ride to higher energy and resource efficiency for improved productivity of the whole plant
Slide 30
• Hydrolyze (waste) organic solids to a liquid slurry which can be processed in a standard waste water treatment system
• Pre-treatment (Mechanical, Chemical, Enzymatic)• Fermentation (Microbial)• Increased efficiency & speed of conversion• Decreased footprint
Lower cost per m3 biogas
Equipment development key: Biogas Plant of Future
Slide 31
Advanced biogas process: high intensity industrial BPoF™ Biogas Plant of the Future
Emerging partnerships through value chain
Enzyme Producers
Feedstock (residue) producers
e.g. Breweries, pulp & paper
Equipment producers
Energy suppliers& distributors
Waste streams
IndustrialAgricultural
Slide 32
Example: Improved eco-footprint for breweries
• Waste streams and GHG emissions are increasing concerns for breweries
• Producing energy out of waste streams is an emerging opportunity
• Applying DSM’s Biogas Plant of the Future concept and using DSM’s biogas enzymes results in a total production cost of ~ €0.45 / m3 CH4 equivalent while simultaneously reducing GHG emission and waste streams
Global trend of Climate & Energy will drive growth in biogas in the coming decade
Slide 33
The way forward
2010 2015 2020
Organic growth& partnerships
Slide 35
Sales
• First commercial batch of advanced C5 yeasts produced in 2012
• First revenues from advanced biogas enzymes in 2012
• Partnership with BP in advanced biofuels extended in 2012
• Bio-succinic acid plant (Italy) being started up end of 2012, moving to commercial volumes in 2013
• Start-up cellulosic bio-ethanol plant in Emmetsburg (US) in 2013, moving to commercial volumes in 2014. Projected sales (cellulosic bio-ethanol, biogas and later on licensing) from JV to grow to > US$ 200m*. Future license income could add up to several tens of millions of US$.
* Due to IFRS rules as of 2013 DSM will consolidate the JV using the equity method
Wrap-up: bio-energy, an exciting potential
Slide 36
• Huge market potentials, driven by global megatrend of climate & energy
• Exciting partnerships established - POET: leader in bio-ethanol- BP: leader in bio-based energy
• DSM holding leading biotechnology positions:- Yeasts (cellulosic bio-ethanol, renewable diesel, industrial biogas)- Enzymes (cellulosic bio-ethanol and biogas)
• Leadership is building on 150 years of experience and innovation in enzymes and yeast
• DSM’s business model is:• Demonstrate technology (bioconversion ‘software’) through strategic
investments and partnerships along the value chain• License integrated process (hardware + ‘software’) to bio-based entrepreneurs• Sell conversion technology (yeasts, enzymes)
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