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Yellow-horn Biomass Fuel Base Project
CONTENT
• Project Background
• Industry Analysis
• Economic Benefits and Financial Forecast
• Potential Investment Valuation Growth
• Future Planning
Project Background
Project Description
Short-term Plan
• Plant Yellow-horn Tree as the feedstock for biofuel in Xinjiang Province • Oil extracted from Yellow-horn Tree will be initially processed and sold to
CNPC, CNOOC and other suppliers as bio-aviation fuel or bio-diesel fuel • Obtain the first batch of 50000 mu land development right for 70 years
Future Plan
• Increase the land area year by year • Establish an unprecedented scale of 1.78 million mu in next decade • Primary Processing Factory with 60,000 ton capacity
Vision
• The largest sustainable, cost-effective and scalable feedstock supplier in China and the world
Feedstock——Yellow-horn Tree (“Second Generation of Biofuel”)
Non-edible plant – Does not compete with Food!
• Grow well in sandy wasteland – Does not take up arable land
• Drought resistance hedge plant
• Resistance to low temperature up to -40℃ temperature
• According to State Forestry Administration, only species suitable for development of biomass energy in northern China
• Produce commercial seed yield in 2 years and 5 years into flourishing period lasting over 50 years
• Life span of tree can up to 300 years
• Excellent source of renewable energy – Oil content of 30% to 40%
First Generation Biofuel Feedstock
• Edible Plants compete directly with food source and pushing-up food prices • Occupies arable land • Large amount of water usage • Environment damaging: rainforest destruction in Malaysia and Indonesia to make way for palm cultivations • Not sufficient to satisfy long term consumer demand
Yellow-Horn (A typical local crop in Xinjiang)
VS
Palm
Soybean
Corn
Sugarcane
Yellow-horn Tree Land For Development
Industrial
Bio-aviation fuel Bio-diesel Paint Active carbon
Edible Edible oil Protein oral solution Tea drinks
Medical
Dementia
Rheumatism
Anti HIV
Infantile enuresis
Value-added By-products
Yellow-horn as Biofuel:
1. Good lubricating properties
2. Environment friendly
3. Low temperature for engine start
4. Good safety performance
5. High cetane number and better combustion performance
6. No additional effort on modification of diesel engine
7. Less residual heat after burning and hard to trace by infrared ray
Source: U.S Environmental Protection Agency (EPA),
Locate in Makit County, southern
Xinjiang, with Tarim Basin on its
east
Two rivers, Yarkand River and
Tizinafu River, pass across the
region, supply adequate water
resource together with other
ground water system
Sufficient geothermal energy,
adequate light and long frost-free
period
Only 165km away from Kashi
International Airport and 165km
away from Kashi Railway Station
Many national-level and provincial-
level highway intersect in the
County
Geographic Location
Chogori Summit
Altitude 8611m（Second in World）
Project
Location
Tarim Basin
Project Current Status：
Completed strict breeding selection and testing procedures for best seeds of yellow-horn tree
Obtained 70-year development right for the first-batch of land with 50,000 mu
Implementing the construction for the first 50,000 mu and plan to finish by 2015
Cooperate with CNPC, CNOOC and COFCO
Project Competitiveness Analysis
• 1.78 Million Mu Massive Land for Development
•Adequate geothermal •Sufficient sunlight •Long frost-free period •Adequate water resources
Good Environmental Condition
•Over 7 years' technology •Support from national departments (State Forestry Administration, Ministry of Science and Technology, Chinese Academy of Sciences)
•Cooperate with Chinese Academy of Forestry, Xinjiang Academy of Forestry, Kashi Academy of Forestry and Sichuan University on different aspects including planting technique, breeding cultivation, planting and production procedures.
Leading Technology
•China National Petroleum Corporation (CNPC) •China National Offshore Oil Corporation (CNOOC) •China Oil & Foodstuffs Corporation (COFCO) •Boeing
Big Strategic Partners
•Financial subsidy from state and provincial government •Tax exemption --- Article 86 of “Provisional Regulations of the People’s Republic of China on Value-Added Tax” and Article 15 of “Regulation on the Implementation of the Enterprise Income Tax Law of the People's Republic of China”
Strong Government Support
Risk Factors and Mitigation Methods
Natural disaster risk
• Drought • Strong hot wind
• Mitigation:
• Planting Populus as wind shelter
• Strong drought resistance of Yellow-horn
• Insurance
Market risk
• Low degree of market awareness for yellow-horn
• Mitigation: • Establish strategic
partnership with large oil company to secure sales channel
• High awareness among oil companies
Politics risk
• Ethnic minorities
• Mitigation: • Bring social benefit to the
local society (boost GDP. create job opportunities )
• Establish good relationship with local government and ethnic minorities
Project Company Background
The project company is 100% held by Shenzhen China Petroleum Bio-Energy Company Limited (“CPE”), which is a research and development focused oleochemical biofuel refinery Company. CPE is dedicated to the development and commercialization of oil-bearing non-food crops for the production of clean energy sources and to capitalize opportunities arising from the undersupply of energy in China.
Mr. LiTie
• Start Jatropha research
• Establish research center in Hainan
• Cooperation with Sichuan University
2007
• Bio-fuel from Jatropha sold to Boeing
• Jointly host the “ Global Annual Conference on Jatropha” with Temasek
2010
• Discuss potential project in Xinjiang
• Xinjiang government visit CPE’s operation
2011
•Foundation of Project company
•Obtain first 50000 mu land use right
•Finish feasibility study
•Start construction work
2012
•The project is directly supervised by Ministry of Commerce of People’s Republic of China
2013
Relevant Experience Current Role at CPE
14
Li Tie Doctor in Clinical Medicine
Founder of CNPC Hauyou Cu Energy Investment Co. Ltd Board member of Guangdong Biomass Energy Technique Development Institute Assistant Director of Hainan Renewable Energy Institute Deputy member of Fengshun County Jatropha Development Leading Group
Chairman of the Board & CEO
Chen Bingqian Master in Geological Science
Former Vice-Chair of China National Offshore Oil Corporation (CNOOC) Former Assistant Director of Ministry of Oil in China Former Management in the Political Department of the Ministry of Oil - Ministry of
Oil Geological Survey Division Former Deputy Director of the Office of the Ministry of Oil in China Former Management of Daqing Petroleum Administration Bureau Former Management of Qinghai Petroleum Administration Bureau
Chief Technology Officer
Zheng Xueqin PhD in Biology
Director of China Society of Tropical Crops. Member of The Ministry of Agriculture Science and Technology Committee Member of The Ministry of Agriculture Biotechnology Advisory Group Member of National Agricultural Gene-Conversion Organisms Council Member of Chinese Academy of Tropical Agricultural Biotechnology Institute Member of Hainan Provincial People's Government Academic Commission Former Member of China’s State Council of Education Commission Former Vice Principal of South China University of Tropical Agriculture - Focus in
Crops Cultivation and Tilling Former Director of National Key Biotechnology Laboratory for Tropical Crops Former Technical Advisor of Food and Agricultural Organization (FAO) of United
Nation Received 1999’s National Scientific & Technological Progress First Award Received 1998’s National Scientific & Technological Progress Second Award
(First Honor) Received 1992’s National Scientific & Technological Progress Third Award Received 1981’s National Invention Award
Principal Scientist – Agronomy
Experienced Management Team with Strong Government Recognition
Chen Fang PhD in Life Science
Dean - College of Life Science in Sichuan University China Assistant Director of Botanical Society of China Active member of the board of China Energy Research Society Member of China’s National People’s Congress Director of Biological Resources & Biological Engineering Pharmaceutical
Laboratory of Sichuan State Director of Sichuan University Biotechnology Research & Development Center Member of International Association of Sexual Plant Reproduction Research
(IASPRR) Member of Science & Technology Commission of Ministry of Education Member of Sichuan Provincial Advisory Commission of China Team Member of National Natural Science & Biological Assessment Award Chairman of the Sichuan Provincial Institute of Plant Science Member of the Science & Technology Team of Sichuan Province
Principal Scientist – Genetic
Ma Wai BA in Legal Study
Certified Asset Appraiser and Licensed Auctioneer in China Founder of JETCO Succession Asset Evaluations Company Limited Founder and President of Public Trust Auction House Company Limited Member of Fengshun County Jatropha Development Leading Group Co-founder of CNPC Hauyou Cu Energy Investment Co. Ltd
Board Member & COO
15
Relevant Experience Current Role at CPE
Experienced Management Team with Strong Government Recognition – (Continue)
Industry Analysis
Wind Energy
New Energy
Nuclear Renewable
Energy
Hydroelectric
Power
Geothermal
Energy
Bio-fuel
Energy Solar
Waste
Fuel Ethanol Bio-diesel
Bio-aviation
Fuel
Current Petroleum Market
High crude oil price
Wider gap between demand and domestic supply in China
Increasing demand for aviation fuel in China
Data extracted from U.S. Energy Information Administration
Unit Conversion：One barrel is around 159 Liters
0.00
20.00
40.00
60.00
80.00
100.00
120.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Crude Oil Price (US dollar per barrel)
0
2000
4000
6000
8000
10000
12000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Consumption
Production
China crude oil consumption and production
（Thousand barrel per day）
Trend line of consumption
Trend line of production
Data extracted from U.S. Energy Information Administration
Unit Conversion：One barrel is around 159 Liters
0
50
100
150
200
250
300
350
400
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Consumption
Prduction
China’s aviation fuel consumption and production (Thousand barrel per day)
Trend line of consumption
Trend line of production
Data extracted from U.S. Energy Information Administration
Unit Conversion：One barrel is around 159 Liters
Development of bio-fuel worldwide
Grow exponentially in past decade Trend: From the perspective of finished products, the proportion of bio-diesel production (mainly bio-diesel and bio-aviation fuel) is gradually catching up that of bio-ethanol
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1 2 3 4 5 6 7 8 9 10 11
Data extracted from U.S. Energy Information Administration
Unit Conversion：One barrel is around 159 Liters
Global Bio-Fuel Production
Year Total Production Fuel Ethanol Bio-diesel Proportion of
Bio-diesel
Thousand
Barrels Per Day
Thousand
Barrels Per Day
Thousand
Barrels Per Day
2001 342 323 19 5.6%
2002 403 377 26 6.5%
2003 499 465 34 6.8%
2004 554 510 44 7.9%
2005 656 586 70 10.7%
2006 840 715 125 14.9%
2007 1103 924 179 16.2%
2008 1477 1215 262 17.7%
2009 1635 1326 309 18.9%
2010 1865 1527 338 18.1%
2011 1897 1493 404 21.3%
----- Total Production of Biofuel ----- Total Production of Bio-diesel Proportion of bio-diesel in the total
production is increasing!
China – The Most Favorable Market Environment Towards Alternative Energy Initiatives
China’s 12th Five Year Plan – Top Priorities and Targets
• Reduce the country’s dependence on imported
crude oil
• Additional $140B investment in biomass industry
• The annual consumption of bio-fuel derived from
oil-bearing non- food crops shall reach 5 and 12
million tons by 2015 and 2020 respectively
• To finish construction of 5 to10 large-scale non-
food crop biomass feedstock base by 2015
Favorable Policies & Subsidies
• Chinese government has mandates that oil
companies in China have to buy all the bio-fuel
produce in China (Article 16 Rule 3 and Article 31 of China
Renewable Energy Law)
• Chinese government prohibits activities that use
edible crops as feedstocks
• Tax Exemption for value-added tax and
enterprise income tax on Plantation (Article 86 of
“Provisional Regulations of the People’s Republic of China on Value-Added Tax” and Article 15 of “Regulation on the Implementation of the Enterprise Income Tax Law of the People's Republic of China”)
• Subsidies:
• RMB300 per mu for forest product
• RMB0.2 per kg for wheat product
Economic Benefits and Financial Forecast
Benefit of the Project
•Annual sales over $7.4B •Annual carbon emission
trading over 500,000 ton
Economic Benefit
•Over 4000 job opportunities
•Annual per capita income over $40,000
•Talents import
•Development of supporting industries
Social Benefit
•Landscaping ratio over 5%
•Reduction of SO2 and CO2 emission by 83700t and 42mt per annum
•Reduction of wind speed by 50%
•Prevent desertification
Environment Benefit
Source of revenue（first batch of 50000 mu）
Year 2014
• Crop Sales (Wheat and oil sunflowers)
• Government Subsidy • Agriculture-related
service income
Year 2016
• Yellow-horn sales (stable profit over 100 million after year 2018)
Year 2021
• Other forestry income (Xinjiang Populus)
Profit forecast of Yellow-horn tree (first 50000 mu)
Yellow-horn Tree Profit Forecast (in RMB ’0000)
Year 1 2 3 4 5 6 7 8 9 10 Total
Sales 0 0 2113 4226 8452 16904 16904 16904 16904 16904 99311
Production
costs 1111 1111 1698 2157 2763 6194 6206 6222 6245 6292 39997
Other costs 182 132 374 367 451 470 470 470 470 470 3857
Profit (1293) (1243) 41 1703 5238 10239 10228 10212 10189 10142 55457
Profit
Margin N/A N/A 2% 40% 62% 61% 61% 60% 60% 60% 56%
-5000
0
5000
10000
15000
20000
1 2 3 4 5 6 7 8 9 10
Profit
Sales
Yellow-horn will start making profit from the third year, and after entering the flourishing period, stable profits around 101 million will be generated. Total sales over 10 years are about 993 million achieving total profits around 534 million with 56% profit margin.
* The factor of inflation on price is ignored for both sales and costs for the above calculation.
Profit forecast of crops (first 50000 mu)
Total Crops Profit Forecast (in RMB’0000)
Year 1 2 3 4 5 6 7 8 9 10 Total
Wheat 2339 4679 7018 7018 7018 3509 3509 3509 3509 3509 45617
Oil
sunflower
2911 5822 8734 8734 8734 4367 4367 4367 4367 4367 56768
Total sales 5250 10501 15752 15752 15752 7876 7876 7876 7876 7876 102385
Cost of
wheat
1264 1311 1358 1358 1358 1288 1288 1288 1288 1288 13087
Cost of oil
sunflower
2463 2521 2579 2579 2579 2492 2492 2492 2492 2492 25182
Total
profits
1523 6669 11814 11814 11814 4096 4096 4096 4096 4096 64116
Profit
margin
29% 64% 75% 75% 75% 52% 52% 52% 52% 52% 63%
0
5000
10000
15000
20000
1 2 3 4 5 6 7 8 9 10
Total sales
Total profits
Wheat and oil sunflower will be intercropped in the same piece of land.
The maximum profit margin can reach 75% after three years when the land becomes maturely arable. After year six, the crops can contribute $40 million profits every year.
* The factor of inflation on price is ignored for both sales and costs for the above calculation.
Key Financial Highlights of the Project
(Based on 50,000 mu with 10 years investment period)
Items Figures(RMB)
Budgeted initial investment costs 158 million
Total estimated sales 2.02 billion
Total estimated costs 866 million
Total estimated government subsidy 30 million
Total estimated profits 1.1 billion
Internal Rate of Return (IRR) 86.99%
Net present value (extracted from feasibility study) 525 million
Valuation amount (from independent valuer) 223 million
Payback period 2.49 Years
Potential Investment Valuation Growth
Project Group Structure
China Petroleum Energy Holdings
Company Limited (“CPEH”)
Jilin Chengde Energy Development
Company Limited
（HK Co.） （PRC Co.）
99% 1%
Shenzhen China Petroleum Bio-Energy
Company Limited (“CPE”)
(Sino-foreign equity joint venture )
100%
Project Company
Xinjiang China Petroleum Forestry
Development Limited Company
（PRC Co）
Invest
0
20
40
60
80
100
120
140
160
180
1 2 3 4 5 6 7 8 9 10
(Unit: in '0000 mu)
Accumulated Land Area over 10 years
Estimated timeline for land acquisition (unit: in ‘0000 mu)
Year 1 2 3 4 5 6 7 8 9 10
Additional
land area
5 10 15 15 20 20 20 25 25 23
Total land
area
5 15 30 45 65 85 105 130 155 178
Note: The initial valuation
amount of the 50000 mu land is
around 220 million, with an
estimated growing rate of 30%
each year until the sixth year,
then no growth of valuation is
expected from year 7
22,000
72,600
160,380
274,494
444,842
647,445
873,127
1,131,964
1,411,901
1,691,617
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
14 15 16 17 18 19 20 21 22 23
Project Valuation（Unit：in RMB '0000）
Valuation forecast of the project over next decade
Capital Budgeting for the Project（Unit: in’RMB0000）
Year 1 2 3 4 5 6 7 8 9 10 Total
5% holdings 540 1080 1620 1620 2160 2160 2160 2700 2700 2484 19224
30% holdings 540 3162 9720 9720 12960 12960 12960 16200 16200 14904 109326
Capital Budgeting [A]
Share of Project Value* [B]
Capital Gain [B]-[A]
5%holdings 192,240,000 845,808,700 653,568,700
30%holdings 1,093,260,000 5,074,852,200 3,981,592,200
*Total forecasted project value is RMB$16,916,174,000
Net Asset and Share Price Forecast of the Listed Company with 5% stake in the Project
Percentage Share Price Share Price
Holding for Total Net Net Asset Calculate at Calculate at
Year The project Assets Per Share 4 times of PB ratio 10 times of PE ratio
In’0000 HKD HKD HKD HKD
1 5% 3,409 0.0529 0.2115 0.0416
2 5% 6,572 0.1019 0.4076 0.1949
3 5% 12,058 0.1870 0.7479 0.5022
4 5% 19,190 0.2976 1.1903 0.9620
5 5% 29,837 0.4627 1.8508 1.5873
6 5% 42,499 0.6591 2.6362 2.2968
7 5% 56,604 0.8778 3.5112 2.9776
8 5% 72,782 1.1287 4.5146 3.6276
9 5% 90,278 1.4000 5.5999 4.3440
10 5% 107,760 1.6711 6.6843 5.0188
Net Asset and Share Price Forecast of the Listed Company with 30% stake in the Project
Accumulated Share Price Share Price
Percentage Net Asset Calculate at Calculate at
Year Holding Net Asset Per Share 4 times of PB ratio 10 times of PE ratio
In’0000 HKD HKD HKD HKD
1 5.0% 3,409 0.0529 0.2115 0.0416
2 14.6% 6,572 0.1019 0.4076 0.5705
3 30.0% 28,078 0.4354 1.7416 3.0131
4 30.0% 70,870 1.0990 4.3961 5.7722
5 30.0% 134,751 2.0896 8.3586 9.5235
6 30.0% 210,727 3.2678 13.0714 13.7809
7 30.0% 295,358 4.5803 18.3210 17.8657
8 30.0% 392,422 6.0855 24.3419 21.7658
9 30.0% 497,398 7.7134 30.8535 26.0641
10 30.0% 602,292 9.3400 37.3601 30.1126
Future Planning
Timeline for pilot planting the first batch of 50000 mu
# Item 2013 2014
1 Nursery Base 300 mu -
2 Basic Infrastructure 50000 mu -
3 Field Planting - 50000 mu
4 Tending - Tend 7 times
Irrigate 10 times
5 Water and Fertilization 1 time
6 Farm and Insecticide 1 time
7 Training 100 people 200 people
8 Completion Check Finish
Timeline 2013 2014 2015 2016 2017-
2022 2023
Plan
1. Obtain 300K
Land right
2. 1.78M mu
Planting Plan
3. 1.78M mu
Infrastructure Plan
Obtain 500K Land right Obtain 500K Land right Obtain 1.78M Land right
within 4 years
Pilot Planting 10000 mu pilot
planting area Finish 50000 mu
Business
Spin-off
Establish different sector
1.Seedling
2.Water
3.Fertilization
4.Electricity
5.Logisticcs
Construction 10000mu
Phase I
1. 50000 mu plantation
2. Other supporting
infrastructure
3. Interplant crops
Phase II
1. 100K mu plantation
2. Other supporting
infrastructure
3. Interplant crops
Phase III
1.150K mu plantation
2.Other supporting
infrastructure
3. Interplant crops
……………… Finish 1.78M mu
biomass base
Partnership Establish 150K mu
co-development
1. Start the first 150K
mu
2. Another 150K mu
Oleochemical
Refinery Construction Begin Production Begin
Plantation Timeline for the whole project
Thank You
Appendix
Production forecast:
Year 1 2 3 4 5 6 onward
Production per plant（kg） 0 0 0.5 1 2 4
Production per mu（kg） 0 0 37 74 148 296
10 years’ production forecast
Construction Growing Normal Flourishing
Year 1 2 3 4 5 6 7 8 9 10
Per mu
(kg)
-
-
37
74
148
296
296
296
296
296
The economic value of primarily processed seeds of yellow horn tree
Product Bio-aviation fuel Bran Shell Powder
Sales price (yuan/kg) 10 2 8
Output from one kg of seed(kg) 0.3 0.7 1
Economic value 3 1.4 8
Total economic value for one seed 12.4
Total Sales Forecasts
Year 1 2 3 4 5 6 7 8 9 10
Sales for 1 mu
-
-
459
918
1835
3670
3670
3670
3670
3670.
Total Sales for the
50000 mu (in’0000)
- -
2113
4226
8452
16904
16904
16904
16904
16904
Sales Forecast for Yellow-horn
Appendix Cost breakdown for Yellow-horn tree
Production cost of Yellow-horn Tree (in’0000)
Year 1 2 3 4 5 6 7 8 9 10 Total
Depreciation 451 451 451 451 451 451 451 451 451 451 4513
Factory Operation 277 277 277 277 277 277 277 277 277 277 2770
Nursery Operation 382 382 382 382 382 382 382 382 382 382 3825
Tending cost1 0 0 0 0 0 728 728 728 728 728 3638
Fertilization1 0 0 0 0 0 1840 1840 1840 1840 1840 9202
Plucking2 0 0 85 170 341 682 682 682 682 682 4004
Yellow-horn tree
costing 3
0 0 440 807 1235 1748 1748 1748 1748 1748 11223
Populus costing4 0 0 62 69 76 86 97 113 136 183 822
Total 1111 1111 1698 2157 2763 6194 6206 6222 6245 6292 39997
1: From year 1 to year 5, the tending above tending cost will be capitalized and recognized as biological assets. From
year 6, as the Yellow-horn Tree become mature, thus no additional cost will be capitalized. Relevant tending cost will be
expensed off immediately during the year they incurred.
2: The plucking cost is at $0.5 per kg.
3: The cost of yellow-horn tree is the amortized cost of capitalized tending and fertilization expenses as described in item
1, for detail, please refer to Appendix “Biological Asset Movement”
4: Xinjiang Populus will be planted surrounding the area for around 2947 mu for the purpose of protecting the crops and
yellow-horn tree. The relevant costs will be capitalized and amortized in line with the pattern of yellow-horn tree as in
item 3 , for detail, please refer to Appendix “Biological Asset Movement”
* The factor of inflation on price is ignored for the costs for the calculation.
Appendix Cost breakdown for Yellow-horn tree
Other cost of Yellow-horn Tree (in’0000)
Year 1 2 3 4 5 6 7 8 9 10 Total
Selling Expense 0 0 42 85 169 338 338 338 338 338 1986
Insurance 92 92 92 92 92 92 92 92 92 92 921
R&D 90 40 240 190 190 40 40 40 40 40 950
Total 182 132 374 367 451 470 470 470 470 470 3857
The sales costs is charged on 2% of total sales amounts
The insurance expenses is estimated at $20 per mu
* The factor of inflation on price is ignored for the costs for the calculation.
Appendix
Sales forecast for Wheat
Production Volume Forecast per mu (Unit: kg)
Year 1 2 3 4 5 6 7 8 9 10
Wheat
grain
133 267 400 400 400 200 200 200 200 200
Wheat
Straw
247 495 743 743 743 371 371 371 371 371
Sales Forecast (Unit: yuan)
Year 1 2 3 4 5 6 7 8 9 10
Sales of
Wheat grain
($2/kg)
266 534 800 800 800 400 400 400 400 400
Sales of
Wheat Straw
($2/kg)
494 990 1486 1486 1486 742 742 742 742 742
Total Sales
per mu
760 1524 2286 2286 2286 1142 1142 1142 1142 1142
Total Sales
per 30703 mu
(in’0000)
2339 4679 7018 7018 7018 3509 3509 3509 3509 3509
Appendix
Sales forecast for Sunflower
Production Volume Forecast per mu (Unit: kg)
Year 1 2 3 4 5 6 7 8 9 10
Sunflower
oil
55 110 165 82.5 82.5 82.5 82.5 82.5 82.5 82.5
Sunflower
Bran
38.25 76.5 114.75 57.3 57.3 57.3 57.3 57.3 57.3 57.3
Sunflower
Straw
77.6 155.3 233 116.5 116.5 116.5 116.5 116.5 116.5 116.5
Sales Forecast (Unit: yuan)
Year 1 2 3 4 5 6 7 8 9 10
Sales of
Sunflower oil
($15/kg)
825 1650 2475 2475 2475 1238 1238 1238 1238 1238
Sales of
Sunflower bran
($2/kg)
76.5 153 229.5 229.5 229.5 114.6 114.6 114.6 114.6 114.6
Sales of
Sunflower Straw
($0.2/kg)
15.52 31 46.6 46.6 46.6 23.3 23.3 23.3 23.3 23.3
Total Sales per
mu
917 1834 2751 2751 2751 1376 1376 1376 1376 1376
Total Sales per
30703 mu
(in’0000)
2911 5822 8734 8734 8734 4367 4367 4367 4367 4367
Appendix
Cost breakdown for Crops (exclude selling expense and assume unchanged for 10 years)
Items Unit cost per mu
1 Tractor plowing 30.00
2 Seedling 23.80
3 Water and electricity 37.52
4 Insecticide 10.00
5 Drip tube 63.2
6 Fertilization 69.00
7 Salaries 116.00
8 Transportation 29.00
9 Insurance 18.00
Total expenses per mu 396.52
Total expenses for 30703
mu (in’0000)
1217
Items Unit cost per mu
1 Tractor plowing 65.00
2 Seedling 65.00
3 Water and electricity 60.00
4 Insecticide 30.00
5 Drip tube 63.2
6 Fertilization 304.00
7 Salaries 150.00
8 Transportation 26.00
9 Insurance 20.00
Total expenses per mu 783.2
Total expenses for 30703
mu (in’0000)
2405
Sunflowers Wheat
Appendix
Cash Flow Forecast
Cash Flow Forecast (in’0000)
Year 1 2 3 4 5 6 7 8 9 10
Operation Cash Flow 5332 5833 9651 12174 16146 16397 16397 16397 16397 16397
Initial Investment (15868)
Total Cash Flow (10536) 5833 9651 12174 16146 16397 16397 16397 16397 16397
Payback Period (in $’0000)
Year 1 2 3 4 5 6 7 8 9 10
Total cash flow (10536) 5833 9651 12174 16146 16397 16397 16397 16397 16397
Accumulated
cash flow
(10536) (4703) 4948 17122 33268 49665 66061 82458 98855 115252
Payback Period 2.49
Payback Period and IRR Calculation
IRR (in $’0000)
Year 1 2 3 4 5 6 7 8 9 10
Total cash flow (10536) 5833 9651 12174 16146 16397 16397 16397 16397 16397
IRR (%) 86.99 86.99/ 86.99 86.99 86.99 86.99 86.99 86.99 86.99 86.99
Discounted value (5634) 1668 1476 996 706 384 205 110 59 31
Accumulated
discounted value
(5634) (3966) (2490) (1494) (788) (405) (200) (90) (31) 0
Appendix
Construction cost Seedling Acquisition Cost Others
Direct Construction Cost 8562.07 1012.02 0.00 9574.09
1 Land Leveling Mu 46055 600.00 2763.31 2763.31
2 Forest road construction Meter 182992 12.50 228.74 228.74
3 Welling Digging Hole 92 60000 552.00 552.00
4 Drip Tubes Mu 46055 400 1842.21 1842.21
5 Transmission Lining Kilometer 30.70 70000 214.92 214.92
6 Accommodation m2 2303 1200.00 276.33 276.33
7 Punching and Planting Hole 3408081 2.00 681.62 681.62
8 Seedling Plant 4260101 1.90 809.42 809.42
9 Basic Fertilizer n 3408081 1.34 456.68 456.68
10 Processing Factory 1 783.70 783.70
11 Nursery Base 1 217.50 217.50
12 Populus Shelterbelt 2947 2537.07 545.06 202.60 747.66
Working Capital 5538.38 5538.38
1 Management Office 300.40 300.40
2 Factory operation 277.00 277.00
3 Nursery operation 382.49 382.49
4 Tending fee Mu 46055 60 276.33 276.33
5 Water Mu 46055 30 138.17 138.17
6 Drip Tube Replacement Mu 46055 48 221.06 221.06
7 Farm Insecticide Mu 46055 20 92.11 92.11
8 Populus management Mu 2947 158 46.56 46.56
9 R&D 90.00 90.00
10 Crops operation cost 3514.68 3514.68
11 Insurance 199.58 199.58
Contingent Cost 755.62 755.62
Total 8562.07 1012.02 755.62 15868.10
Initial Budgeted Investment CostUnit：in '0000
No. Items Unit Volume Unit cost
Breakdown
Total
Appendix
Year 1 2 3 4 5 6 7 8 9 10
Beginning Bal. 2675 3519 6087 8655 11223 11223 11223 11223 11223
Addition during the year
Punching and Planting 682
Seedling 809
Basic Fertilization 457
Director Labour 276 276 276 276 276
Water and Electricity 138 138 138 138 138
Drip Tube Replacement 221 221 221 221 221
Farm Insecticide 92 92 92 92 92
Annual Fertilization 116 1840 1840 1840
Total Addition 2675 844 2568 2568 2568 0 0 0 0 0
Total Cost 2675 3519 6087 8655 11223 11223 11223 11223 11223 11223
Amortized Cost 761 1128 1556 1556 1556 1556 1556 1556
Accumulated Amortized Cost 761 1889 3444 5000 6556 8112 9667 11223
Ending Bal. 2675 3519 5326 6766 7779 6223 4667 3111 1556 0
Year 1 2 3 4 5 6 7 8 9 10
Beginning Bal. 402 449 496 542 589 635 682 728 775
Addition during the year
Punching and Planting 130
Seedling 178
Basic Fertilization 48
Director Labour 18 18 18 18 18 18 18 18 18 18
Water and Electricity 9 9 9 9 9 9 9 9 9 9
Drip Tube Replacement 14 14 14 14 14 14 14 14 14 14
Farm Insecticide 6 6 6 6 6 6 6 6 6 6
Total Addition 402 47 47 47 47 47 47 47 47 47
Total Cost 402 449 496 542 589 635 682 728 775 822
Amortized Cost 0 0 62 69 76 86 97 113 136 183
Accumulated Amortized Cost 0 0 62 131 207 293 390 503 639 822
Ending Bal. 402 449 434 412 382 343 292 226 136 0
Note: The tending cost of Populus will be amortised from year 3 onwards.
Yellow-Horn Tree Movement (in '0000)
Xinjiang Populus Movement (in '0000)
Biological Asset Movement
Note: From year 1 to year 5, the tending cost will be capitalized and recogised as biological assets. From year 6, as the Yellow-horn Tree
become mature, thus no additional cost will be capitalized. Relevent tending cost will be expensed off immediately during the year they incurred.
Assumptions for investment
The number of issued shares of the Listed Company remains unchanged over next decade
Any convertible bonds issued by the List Company in next decade have not been converted
into shares
The listed Company can acquire approximately 5% of the total shares in the Project at a 45%
discount on the current value of the project.
The listed company has completed the investment of the Project at the consideration of HK$6.8
million (approximately RMB$5.4 million) and has successfully acquired 5% holdings in the
equity interest in the Project
No profit will be generated and loss will be incurred of the Listed Company over the next
decade except the valuation and profits increment derived from the Project’s land value and
profit forecast
The project company will unconditionally grant the Listed Company the first right of refusal to
further invest not more than 30% of the total enlarged share capital in the Project. (The listed
company is regulated under Chapter 21 of HKEX listing rule whereby in any event the listed
company will not own or control more than 30% of the voting rights in any one company)
