Value creation in bio-energy

Steve HartigPresident Biofuels at DSM Bio-Based Products & Services

Carnegie Biofuels seminar - December 11, 2012 Copenhagen

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

Overview

• Introduction• Bio-energy• Value creation timeline

Slide 2

Process TechnologyNutrition

Biotechnology is one of DSM’s key competences

Materials Sciences

Advanced SynthesisMaterials ChemistryBiotechnology

Analysis & Characterization

Slide 3

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 4

• 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 5

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 6

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 7

• Introduction• Bio-energy• Value creation timeline

Slide 8

Bio-energy at DSM: three exciting platforms

• Cellulosic bio-ethanol

• Renewable diesel

• Bio-gas

Slide 9

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 10

• 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 11

• 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 12

Sugar sources• Starch (corn)• Cane• Beet

Enzy

mat

ic H

ydro

lysi

s

Chemo-catalyticconversion

Crucial role for enzymes and yeasts

Slide 13

Biomass as a source of fermentable sugars

Plant cells

Cellulose Hemi-cellulose

Lignin

Glucose

XyloseArabinoseGlucoseGalactoseMannose

Biomass

Slide 14

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 15

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 16

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 17

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 18

• 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 19

Successful tests of our yeasts on pilot-scale

Source:Bob Wooley (Abengoa Bioenergy)World Congress on Industrial Biotechnology & BioprocessingToronto, Ontario, CanadaMay 9, 2011

Slide 20

Resulting in >80 gallon/mt pre-treated corn stover

Slide 21

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 22

DSM creates enabling technology (“software”) to facilitate constructionof demo and commercial Plants

Project Liberty: Cellulosic bio-ethanol plant

Slide 23

• 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 24

Meanwhile, in Emmetsburg, IA….

Slide 25

• 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 26

Image source: IEA “BLUE Map”

Exaj

oule

(EJ

):1

EJ =

101

8 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 27

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 28

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 29

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 30

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 31

• 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 32

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 33

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 34

• Introduction• Bio-energy• Value creation timeline

Slide 35

The way forward

2010 2015 2020

Organic growth& partnerships

Slide 36

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 37

• 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)

Contact:

DSM Investor RelationsP.O. Box 6500, 6401 JH Heerlen, The Netherlands

(+31) 45 578 2864e-mail: investor.relations@dsm.com

internet: www.dsm.com

visiting address: Het Overloon 1, Heerlen, The Netherlands