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2017 Trends in Production Efficiencies
2017 ACE Conference John Christianson, Managing Partner
Connie Lindstrom, Senior Biofuels Analyst
Christianson Biofuels Benchmarking > One third of US production; data
from 2003 to present.
> 2016: collected data on 5 billion production gallons.
> Representative sample of the industry: all regions, sizes and organization types; allows peer grouping and trend identification.
3.0
3.5
4.0
4.5
5.0
5.5
2012 2013 2014 2015 2016
Ethanol Production Gallons Benchmarked (In Billions)
Trends in Production Efficiencies
•Why is efficiency important? •Data on efficiency improvements • Plant operations • Yields
•New efficiency information needs •How to evaluate investments
in efficiency enhancement
Why is efficiency important? More than just $/gallon….
• Nearly three-fourths (72%) of US 15-20 year olds (new drivers!) willing to pay more when companies are committed to positive social and environmental impact, up from 55% in 2014. (51% of Baby Boomers age 50-64 agree)
• 66% of global respondents say they’re willing to pay more when companies are committed to positive social and environmental impact.
• Consumer goods trends, driven by younger consumers, are all impacted by measures that we may put under the “efficiency” umbrella: sustainability, image, social value and transparency.
Sustainability=Social/Environmental Awareness=Efficiency
Sources: 2015 Nielson Global Corporate Sustainability Report; Forbes/2016 FutureCast American Millennials Report
Efficiency Gains: Yields
2.5
2.55
2.6
2.65
2.7
2.75
2.8
2.85
2.9
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Undenatured Ethanol Yield (Gallons Per Bushel)
Average Leaders Laggards
2004 Average: 2.66 gal/bu
2016 Average: 2.86 gal/bu
Efficiency Gains: Yields
10
11
12
13
14
15
16
17
18
19
20
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Distillers Equivalent Yield (Pounds Per Feedstock Bushel)
Average Leaders Laggards
2004 Average: 17.0 lbs/bu 2016 Average:
14.8 lbs/bu
Efficiency Gains: Yields
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Distillers Corn Oil Yield (Pounds Per Bushel)
Average Leaders Avg Laggards Avg
2008 Average: .13 lbs/bu
2016 Average: .68 lbs/bu
Efficiency Gains: Yields
40
45
50
55
60
65
70
75
80
2011 2012 2013 2014 2015 2016
Average Feedstock Starch % -Corn
Average Leaders Laggards
Efficiency Gains: Plant Operations
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
BTU
's/P
rod
uct
ion
Gal
lon
Energy Usage
Ethanol Industry Avg Leaders Laggards Linear (Ethanol Industry Avg)
2004 Average: 33,214 BTU/gal 2016 Average:
26,429 BTU/gal
Efficiency Gains: Plant Operations
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
kWh
/Pro
du
ctio
n G
allo
n
Electricity Usage
Ethanol Industry Avg Leaders Laggards Linear (Ethanol Industry Avg)
2004 Average: .82 kWh/gal
2016 Average: .66 BTU/gal
Efficiency Gains: Plant Operations
20,000
22,000
24,000
26,000
28,000
30,000
32,000
34,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Natural Gas Usage (BTUS Per Ethanol Production Gallon)
Average Linear (Average)
Efficiency Gains: Plant Operations
20,000
22,000
24,000
26,000
28,000
2014 2015 2016
Energy Usage (BTUs per Ethanol Production Gallon)
DDGS > 90% Average MW or WDGS > 70% Average US Average
Efficiency Gains: Plant Operations
0
2
4
6
8
2012 2013 2014 2015 2016
Water Usage (Incoming H2O Per Gallon of Ethanol Produced)
Average Leaders Laggards Zero Discharge
Other Metrics Related to Efficient Operation
$0.05
$0.06
$0.07
$0.08
$0.09
$0.10
2010 2011 2012 2013 2014 2015 2016
Chemicals/Ingredients (Except Denaturant) $/Production Gallon
Average Leaders Laggards
0%
10%
20%
30%
40%
50%
2009 2010 2011 2012 2013 2014 2015 2016
Percent of Participants Recapturing CO2 as a Coproduct
Most-Requested New Data for Benchmarks
•Plants using zero-liquid discharge technology: added Q1 2017 •Residual starch (efficiency in extraction of starch):
added Q2 2017 •CI scores: fields added Q2 2017 All fields added for 2017 relate to efficiency—plants want to know if they are keeping up with efficiency gains in the marketplace. Data is used to build peer groups and provide averages to plants that share this data.
Financial Considerations for Project Analysis: Liquidity 2016
US
Average
Top Quartile
Average
Low Quartile
Average
Current Ratio 2.54 8.63 1.56
Working Capital
Per Gallon $0.24 $0.51 $0.09
Financial Considerations for Project Analysis: Leverage 2016
US
Average
Top Quartile
Average
Low Quartile
Average
Equity to
Total Assets .77 .96 .61
Liabilities to
Net Worth .29 .04 .63
Long-Term
Liabilities
Per Gallon
$.16 $.00 $.42
•Board = Strategy
•Management = Execution
Leadership Begins With the Board of Directors
•Review company mission •Develop strategy to fulfill mission • Investment decision model •Develop decision making process • Evaluate risks – market, governmental • Long-term vs. short-term decisions •Diversification •What is the market demanding?
How Does Plant Leadership Decide When to Invest in Efficiency-Enhancing Technology?
SWOT Assessment Strengths Weaknesses
Opportunities Threats
Internal Factors
Negative
Positive
External Factors
Opportunities are key: proactive evaluation ensures opportunities don’t become: -weaknesses (your plant becomes less efficient than the norm) -threats (competitors have access to markets you don’t).
Trends that are Increasing
•Production
• Efficiency
•Carbon Index reductions
•Diversification
Know Your Short- and Long-Term Goals
•Markets evolve: how important will your CI score be five years from now? Ten years from now? •Consumers change: what will your consumers drive five
years from now? Ten years from now? What will they eat? And what will they care about? •How can your efficiency investments today change your
profitability equation and competitiveness in the current AND future marketplace?
Conclusions and Questions
•Key message: ethanol producers drive efficiency and sustainability across ag and energy sectors.
• Efficiency will get more and more important as: • industry matures • competitiveness increases • consumers demand ever-increasing
sustainability, transparency and value.
Thank you!
John Christianson, Managing Partner [email protected]
Connie Lindstrom, Sr. Biofuels Analyst
