The Future of Biodiesel – Will it Be Sustainable?

POC Conference, March 10th-12th 2009

Developed ByFrost & Sullivan Consulting Team

Frost & Sullivanwww.frost.com

The Future of Biodiesel – Will it Be Sustainable?

Price Outlook for 2009

212th March 2007, © Frost & Sullivan

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312th March 2007, © Frost & Sullivan

Frost & Sullivan expertise in biofuels : we provide strategic advice over the whole palm to biofuels value chain

• Technology Analysis Biodiesel Market

• European Biodiesel Market

• Asian Biodiesel Market

• US Biodiesel Market

• Brazilian Biofuels Market

• Several Due Diligence Projects for Investors

• Market Assessment and Strategy for Players

• Business Planning and Fund Raising

• Information Memorandum for Several Players

• Feedstock and Off-take Sourcing

•Reports •Consulting

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….. What we said last year at the POC (Feb. 2008)

We could get to 4000 RM quicker than we think

Written 5 days prior to POC 2008

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….. What we said last year at the POC (Feb. 2008)

4500 RM is now not out of reach at this rate

Written 1 day prior to POC 2008

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….. What we have been saying for the last 2-3 years

Same as internet lifecycle!

Infancy Boom Bust Reality

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2007, early 2008 : lessons from the past – we will see some or all of this again, 2007 was just a warning

High Crude Oil Price Bad Weather

Commodity Price Shift Biofuels

Extra Demand

Subprime

HIGH PRICES!

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Indeed palm prices are high due to the soy situation in South America at the moment – crops are now more interlinked

Frost & Sullivan estimates

1

?

• PriceIncrease

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Sustainability issue....

Q. Are Biofuels therefore sustainable, or can we expect more of this?

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Sustainability issue....

A. Yes, but …

They will only be part of the mix for fuels until cellulosic kicks in, or non-food crops in the case of biodiesel,

They will be prone to swings in profitability (“swing market”),

They are a financial game where hedging is of utmost importance,

It will thus be a game played by the big boys, esp, with plantations

The big suppliers will push the product onto the market – it is supply led rather than demand led, until proper legislation is put into place

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Sustainability issue....

This is still a market that needs:

Low feed stock prices,

Government mandates and subsidies,

High crude oil prices.

And all 3 need to ideally happen at the right time…..

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Profitability assessment : We can thus expect a lot of volatility in the market in line with crude oil!

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Profitability assessment : causing wild swing

Source : FC Stone

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Biodiesel production is not the most profitable part of the value chain

Feedstock

Refining

Biodiesel Logistics Distribution

Blending/Retail *

Relative Profitability

• *With Rebate• Refining Traditionally Tough Business

+ve

-ve

Mills

• The value chain is unbalanced and typical of the chemical industry. To be successful one needs to piece value chain together, and work with partners

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So why such an interest still in biodiesel

“It is a political market from a Government perspective, and for plantation companies it is a great way to keep palm oil prices high”.

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Market will continue to look for ways to grow especially bioethanol – energy security/ politics will be a key reason behind this

Frost & Sullivan estimates

Millions of Litres

BIOETHANOL

120

40

20

60

120

BIODIESEL

2000

2000 2020 2040

20202010

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…whether this model is sustainable over the mid to long term we will see.

Growing population

Crops Competing for Land

Energy needs

Water stress

1 2

3 4

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Thank you

chris.delavigne@frost.com

+65 9615 8293