Terraqua Barranca Business Plan A Graphical Presentation
September 18, 2011
This has been prepared as an addendum to the Terraqua Business Plan.
The Business Model in Graphs
This addendum to the Terraqua Business Plan is prepared for those persons having an interest in digging a little deeper into the financial model underlying the Terraqua Business Plan, but lacking the time to do so. The presentation has been prepared simply by copying and pasting into a PowerPoint format graphs that already exist in the underlying Terraqua Barranca business model Excel Spreadsheet
Those electing to view this PowerPoint are urged also to read the business plan itself, as well as the two documents: The Terraqua System and the Terraqua Barranca Business Model – that have been prepared to accompany the plan.
Suggestions as to graphs that might also be added are welcome.
Cash Invested, $8,123,775
Term Loan, $ 12,313,372
Working Loan, $ 1,666,667
Terraqua Barranca Capital Structure
An approximate 60/40 debt/equity ratio
$ 165,000
$ 10,264,87
2
$ 550,000
$ 295,000
$ 240,000
$ 666,000
$ 743,750
$ 705,000
$ 2,060,000
$ 300,000
$ 800,000
$ 480,000
$ 1,080,000
$ 1,227,525
$ 510,000
$ 50,000
$ 50,000
$ 300,000
$ 166,667
$ 333,333
$ 1,166,667
Terraqua Barranca Capital Allocations
Tissue Culture Lab - AD and Stevia
Basic 18.8 l/s WWT Unit (including fish & worms)
Influent Pipeline & Hydraulics
Roads
Security
Electricity and Backup Power Units
Phase II Pilot Project - Santa Catalina
Building design and construction
Fertigation Infrastructure
Fertigation Infrastructure (station/overhead facilities)
Farm Infrastructure & Farm Rolling Stock
Non-Farm Rolling Stock
Extraction Units
Kenaf Equipment, Press and Infrastructure
Miscellaneous Equipment + Spare Parts
Closing Costs
Bridge Financing
Preliminary Expenses
Initial inventory
Initial accounts receivable
Initial operations, admin & sales costs
Labeling begins with the top center ($165,000 for Tissue Culture) and continues around sequentially to the right. For instance, $295,000 is budgeted for roads.
Raw Material; $1,471 Production Labor; $39,634 Production Costs; $39,634
Sales, marketing, & distribution; $1,501
R&D/Quality Assurance & Prelim Expendi-tures; $28,003
General & Admin.; $325,247
Depreciation; $788,564
Terraqua Barranca Year 1. Operating Cost Structure
Year 1, the Construction Year – but beginning operating on a number of fronts. Note absence of raw materials costs and disproportionately high relative costs for G&A and Depreciation, in particular.
Mon01 Mon02 Mon03 Mon04 Mon05 Mon06 Mon07 Mon08 Mon09 Mon10 Mon11 Mon12$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
Terraqua Barranca Year 1. Cost Distribution
Debt Service Depreciation General & Admin.
R&D/Quality Assurance & Prelim Expenditures Sales, marketing, & distribution Production Costs
Production Labor Raw Material
Monthly Operating Costs for Year 1 – the construction year – showing relative distribution across categories. Note that in December, with a big jump in production labor and production costs, “output” is beginning to occur, as are sales of product.
Raw Material; $3,051,822
Production Labor; $1,299,248
Production Costs; $1,299,248
Sales, marketing, & distribution; $857,078
R&D/Quality Assurance & Prelim Expenditures; $496,181
General & Admin.; $1,754,552
Depreciation; $941,560
Debt Service; $2,172,745
Taxes; $1,757,752
Terraqua Barranca Year 2 Operating Cost Structure
Production underway. Note the relatively high debt service, G&A and depreciation costs. Taxes, as stated, probably do not take advantage of tax holidays that should be available during this early phase.
Mon01 Mon02 Mon03 Mon04 Mon05 Mon06 Mon07 Mon08 Mon09 Mon10 Mon11 Mon12$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
Terraqua Barranca Year 2 Cost Distribution
Debt Service Depreciation General & Admin.
R&D/Quality Assurance & Prelim Expenditures Sales, marketing, & distribution Production Costs
Production Labor Raw Material
Production underway. Note the steep increase in Raw Materials costs during the middle of he year.
Raw Material; $7,697,307
Production Labor; $1,961,243
Production Costs; $1,961,243
Sales, marketing, & distribution; $1,800,244
R&D/Quality Assurance & Prelim Expenditures; $698,250
General & Admin.; $2,361,201
Depreciation; $1,334,297
Debt Service; $2,890,619
Taxes; $6,617,501
Terraqua Barranca Year 5 Operating Cost Structure
A relatively mature business now. Note that taxes and raw materials occupy more than 50% of depicted costs. Note relative shrinking of debt service and depreciation – in particular.
2012 2013 2014 2015 2016$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
Terraqua Barranca 5-Year Operating Cost Distribution
Taxes Debt Service Depreciation General & Admin. R&D/Quality Assurance & Prelim Expenditures Sales, marketing, & distribution
Production Costs Production Labor Raw Material
A full, 5-year perspective on Operating Costs showing distribution and relative amounts, year to year.
2012 2013 2014 2015 2016
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
Terraqua Barranca Fixed versus Variable Cost Struc-ture
Total Variable Costs Total Fixed Costs
Predictable relative increase in Variable Costs (vs Fixed Costs) as the project matures.
Mon01 Mon02 Mon03 Mon04 Mon05 Mon06 Mon07 Mon08 Mon09 Mon10 Mon11 Mon120.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
Terraqua Barranca Year 2. Production (tonnes)
Engineered Board & Lumber Powder - Oil Adsorbent Seeds Aquameal Tilapia
Aquameal is a high protein product produced by combining harvested duckweed and aquatic worms – all product is fed, locally to tilapia (and subsequently barramundi and other fish produced on site
2012 2013 2014 2015 20160
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Terraqua Barranca 5-Year Production (tonnes)
Other Extractives Stevia Engineered Board & Lumber Seeds Powder - Oil Adsorbent Tilapia Aquameal
Note the growth in production of engineered board and lumber on a weight basis. Plant extract production barely registers as to tonnage.
Mon01 Mon02 Mon03 Mon04 Mon05 Mon06 Mon07 Mon08 Mon09 Mon10 Mon11 Mon12$ 0
$ 500,000
$ 1,000,000
$ 1,500,000
$ 2,000,000
$ 2,500,000
Terraqua Barranca Year 2. Sales (Dollars)
Other Extractives Stevia Engineered Board & Lumber Seeds Powder - Oil Adsorbent Tilapia
Growth in month-to-month sales during year two is instructive. Note that the lignocellulosic product sales are the last to “take off.” This reflects relative “ease of manufacturing.”
Mon01 Mon02 Mon03 Mon04 Mon05 Mon06 Mon07 Mon08 Mon09 Mon10 Mon11 Mon12$ 0
$ 500,000
$ 1,000,000
$ 1,500,000
$ 2,000,000
$ 2,500,000
$ 3,000,000
$ 3,500,000
$ 4,000,000
Terraqua Barranca Year 5 Sales (Dollars)
Other Extractives Stevia Engineered Board & Lumber Seeds Powder - Oil Adsorbent Tilapia
Year 5 month-to-month sales appear relatively stable, with production efficiency gains accounting for the continuing increase in industrial sales. .
Tilapia Powder - Oil Ad-sorbent
Seeds Engineered Board & Lumber
Stevia Other Extractives$ 0
$ 10,000,000
$ 20,000,000
$ 30,000,000
$ 40,000,000
$ 50,000,000
$ 60,000,000
Terraqua Barranca 5-Year Sales (Dollars)
2016 2015 2014 2013 2012
This format shows the annual distribution of sales by product category in each column. It also allows a quick appreciation of the relative importance of tilapia (and, eventually, other fish).
48.71%
6.70%2.57%8.19%
15.15%
18.69%
Tilapia
Powder - Oil Adsorbent
Seeds
Engineered Board & Lumber
Stevia
Other Extractives
Terraqua Barranca Sales Distribution 2013
35.05%
10.35%1.44%
20.59%
13.51%
19.06%Tilapia
Powder - Oil Adsorbent
Seeds
Engineered Board & Lumber
Stevia
Other Extractives
Terraqua Barranca Sales Distribution 2016Another approach to looking at the relative importance of product lines during the early, immediately post- commissioning phase in 2013, versus the relatively more mature circumstance in 2016. Note that fish fillet sales have gone down to 35% of total income in 2016.
2012 2013 2014 2015 20160
50
100
150
200
250
Total G&A Labor Total Manufacturing Labor
Terraqua Barranca Labor Summary
1 2 3 4 50
50
100
150
200
250
Total Fixed Cost Labor Total Variable Cost Labor
Terraqua Barranca Labor Summary
The Company effectively reaches “full employment” during year 2013, with the balance between Fixed and Variable Cost Labor, as well as Manufacturing Labor and G&A labor thereafter remaining fairly constant through 2016.
2012 2013 2014 2015 2016
-4
-2
0
2
4
6
8
10
12
14
Terraqua Barranca After Tax Net Income
($ millions)
The Bottom Line . . . . Note that expansion into other areas of Barranca Province are not depicted in the attendant plan, or the result depicted here. Logically, the slope of the increase in profits should remain fairly constant through 2016
Mon
01
Mon
02
Mon
03
Mon
04
Mon
05
Mon
06
Mon
07
Mon
08
Mon
09
Mon
10
Mon
11
Mon
12
$ 0
$ 1,000,000
$ 2,000,000
$ 3,000,000
$ 4,000,000
$ 5,000,000
$ 6,000,000
$ 7,000,000
$ 8,000,000
Terraqua Barranca Year 1 Cash Flow
First year cash in hand . . . prudent
2012 2013 2014 2015 20160
2
4
6
8
10
12
14
16
Terr. Barranca 5-Year Cash Flow ($ millions)
Five year cash in hand . . . exhilarating
Cash & short-term investments; $
1,905,452
Accounts re-ceivable; $ 20
Inventories; $ 60
Plant & Equipment; $ 14,043,359
Terraqua BarrancaYear 1. Assets
Short-term debt and notes payable; $ 1,579,741
Accounts payable; $ 35,313
Long Term Debt; $ 8,108,591
Equity; $ 6,225,245
Terraqua Barranca Year 1. Liabilities
Classic Year One Balance Sheet – no receivables, accounts payable or inventories.
Cash & short-term investments; $
2,265,923
Accounts re-ceivable; $ 2,203,670
Inventories; $ 190,471
Plant & Equipment; $ 18,222,405
Terraqua Barranca Year 2. Assets
Short-term debt and notes payable; $ 1,197,873
Accounts payable; $ 461,640
Long Term Debt; $ 12,259,613
Equity; $ 8,963,343
Terraqua BarrancaYear 2. Liabilities
Classic Year Two Balance Sheet – receivables, payables and inventories becoming apparent as production ramps up
Cash & short-term investments; $
14,703,396
Accounts re-ceivable; $ 3,449,780
Inventories; $ 2,279,757
Plant & Equipment; $ 21,766,523
Terraqua BarrancaYear 5 Assets
Short-term debt and notes payable; -$ 606,125 Accounts payable; $
2,666,356
Long Term Debt; $ 10,162,071
Equity; $ 29,977,153
Terraqua Barranca Year 5. Liabilities
Classic Year Five Balance Sheet for a successful company – debt way down, cash and retained earnings (equity) way up. Inventories creeping - now close to a par with payables and receivables.
2012 2013 2014 2015 20160
5
10
15
20
25
Terraqua Barranca Current and Quick Ratios
Current ratio Quick ratio
Two useful Liquidity indicators. The current ratio is current assets divided by current liabilities. The quick ratio is cash and receivables divided by current liabilities. Both ratios follow a healthy trend.
2012 2013 2014 2015 20160
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Terraqua Barranca Profit Ratios
Gross margin Operating margin Profit margin on total sales Return on assets
Return on equity
Profit Ratios provide good indicators of system profitability and trends in that direction. The return on equity indicator simply reflects the model’s decision to sequester profits in the “retained earnings category.” In practice, these will be distributed as dividends to stakeholders.
2012 2013 2014 2015 20160
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Terraqua Barranca Sales to Fixed Assets
The Sales to Fixed Assets ratio (Total Sales divided by Fixed Assets) provides a good indicator of fixed asset “leverage.” The trend demonstratedhere is a good one.
2012 2013 2014 2015 2016
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
Terraqua Barranca Debt Ratios
Debt to total assets Debt to total capitalization Debt to equity
While the project has reasonable leverage at inception, the strong downward trend for all debt ratios is healthy. The project will be well positioned, five years hence, to attract considerably more debt for expansion purposes.
2012 2013 2014 2015 2016
-0.5
-0.3
-0.1
0.1
0.3
0.5
0.7
0.9
Terraqua Barranca Efficiency Ratios
Production Sales, Marketing & Distribution R&D/Quality Assurance General & Administration
Efficiency ratios show a healthy downward trend – albeit only marginally so. This suggests an assumption of no managerial or technological breakthroughs that might increase efficiencies dramatically. This is, we believe a prudent assumption.
2012 2013 2014 2015 20160
0.2
0.4
0.6
0.8
1
1.2
1.4
Terraqua Barranca Asset Turnover
Asset turnover, which is Total Sales divided by Total Assets shows a decline after 2014 because of retained earnings.
2012 2013 2014 2015 2016$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
Terraqua Barranca Frozen Tilapia Fillets Break Even Price ($/ton)
Break Even Price Target Price
In the latter half of 2013, the profitability of growing and processing Tilapia fish becomes immense.
2012 2013 2014 2015 20160.0
500.0
1000.0
1500.0
2000.0
2500.0
Terraqua Barranca Frozen Tilapia Filets Break Even Volume (tons/yr)
Break Even Volume Target Volume
2012 2013 2014 2015 2016$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
Terraqua Barranca Other Extractives Break Even Price ($/ton)
Break Even Price Target Price
2012 2013 2014 2015 20160.0
50.0
100.0
150.0
200.0
250.0
Terraqua Barranca Other Extractives Break Even Volume (tons/yr)
Break Even Volume Target Volume
Use of fertigation and onsite processing with most common extractive crops provides excellent margins.
2012 2013 2014 2015 2016$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Terraqua Barranca Powdered Kenaf Oil AdsorbentBreak Even Price ($/ton)
Break Even Price Target Price
1 2 3 40.0
200.0
400.0
600.0
800.0
1000.0
1200.0
1400.0
1600.0
1800.0
Terraqua Barranca Powdered Kenaf Oil Adsorbent Break Even Volume (tons/yr)
Break Even Volume Target Volume
As with all of the products selected for production in the Terraqua Barranca project, margins are extremely favorable
2012 2013 2014 2015 2016$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
Terraqua Barranca Kenaf Seeds Break Even Price ($/ton)
Break Even Price Target Price
2012 2013 2014 2015 20160
10
20
30
40
50
60
70
80
Terraqua Barranca Kenaf SeedsBreak Even Volume (tons/yr)
Break Even Volume Target Volume
As the only major kenaf seed producer in the Southern Hemisphere, the Company expect to enjoy robust sales.
2012 2013 2014 2015 2016$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Terraqua Barranca Engineered Board & LumberBreak Even Price ($/ton)
Break Even Price Target Price
2012 2013 2014 2015 20160.0
1000.0
2000.0
3000.0
4000.0
5000.0
6000.0
Terraqua Barranca Engineered Board & Lumber Break Even Volume (tons/yr)
Break Even Volume Target Volume
With favorably priced high quality lumber almost non-existent in the Peruvian coastal market, there is room for creative pricing with this product.
2012 2013 2014 2015 2016$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Terraqua Barranca Stevia ExtractBreak Even Price ($/ton)
Break Even Price Target Price
2012 2013 2014 2015 20160
10
20
30
40
50
60
70
80
Terraqua Barranca Stevia Extract Break Even Volume (tons/yr)
Break Even Volume Target Volume
With the global market for stevia exploding, and existing margins extremely high, the Company believes it has excellent prospects to work with several major grocery retailers (Wholefoods and HEB) to develop branded products.
Yea
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r 5
$ 0
$ 500,000
$ 1,000,000
$ 1,500,000
$ 2,000,000
$ 2,500,000
$ 3,000,000
$ 3,500,000
$ 4,000,000
Terraqua Barranca Accounts Receivable
Accounts receivable shows healthy growth, reflecting a continuing growth in demand for the company’s products.
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$ 0
$ 500,000
$ 1,000,000
$ 1,500,000
$ 2,000,000
$ 2,500,000
Terraqua Barranca Finished Inventories
Finished Inventories shows healthy growth, reflecting a continuing growth in demand for all the company’s signature products.
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0.00
1.00
2.00
3.00
4.00
5.00
6.00
Terraqua Barranca Wastewater Treated (MGDs)
The Company projects reasonably flat supply of wastewater until such time as the new University/Hospital complex has been completed in Eastern Barranca.
Yea
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r 4
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r 5
$ 0
$ 500,000
$ 1,000,000
$ 1,500,000
$ 2,000,000
$ 2,500,000
$ 3,000,000
$ 3,500,000
Terraqua Barranca Capital Spending
Capital spending is heavily skewed towards years one and two. The Company projects that a SNIPs process will finance the infrastructure for the new University/Hospital complex WWT system in Year 4. Hence no extraordinary capital outlays are projected for that year
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r 4
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$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
Terraqua Barranca Outstanding Debt
Debt shows predictable growth during the first 2 years of the endeavor, and hence a steady, very healthy decline.
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r 4
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$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
Terraqua Barranca Special Project and R&D Spending
Special Projects and R&D spending is targeted at around $70,000 per month. This is adequate for site-specific developments “within” the larger Terraqua framework. Major R&D remains a province of the parent companies, Terraqua, Peru and Agriquatics.
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r 3
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r 4
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r 5
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
Terraqua Barranca Frozen Tilapia Fillet Sales
Tilapia fillet sales represent around 40% of Company sales. Increases through Year 3 demonstrate construction and a gradual optimization of production and associated processes. Thereafter, “flat sales” for years 4 and 5 reflect “no increase in capacity” during that period.
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r 2
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r 4
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r 5
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Terraqua Barranca Kenaf Fiber Sales
Increases in Year 5 kenaf fiber sales represent an assumption that kenaf fibers will be incorporated into SIP production, sales of which will be driven by an increase in sales of domes to the Peruvian public.
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$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Terraqua Barranca Kenaf Seed Sales
Sales of kenaf seeds fit a tiny, window immediately following the crop harvest cleaning and packaging. Exports to all parts of the world are anticipated.
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$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
Terraqua Barranca Engineered Lumber and Board Sales
Increases in Year 5 sales represent an assumption that SIP production and strut production increase significantly in year 5 – sales of which will be driven by an increase in sales of domes to the Peruvian public.
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$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
Terraqua Barranca Stevia Sales
The company expects continuing increase in both the volume and price of Stevia sales – driven, in part, by relationships now being formed with grocery retailer Wholefoods Market and HEB in Texas.
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r 5
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
Terraqua Barranca Other Extractives Sales
The company expects to develop a strong comparative advantage in production, processing and sale of non-stevia plant extracts. TJVA provides a mechanism by which to continue on a steep growth path for the foreseeable future.
Year 1
Year 2
Year 3
Year 4
Year 5
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
Terraqua Barranca Sales
Other Extractives Stevia Engineered Board & Lumber Seeds Powder - Oil Adsorbent Tilapia Aquameal
Year
Do
llars
in S
ales
Combined total sales for the Company through Year 5 shows healthy growth in all sectors – notably sales of Engineered Board & Lumber. The latter will be driven primarily by internal sales within the Terraqua “family,” but it also represents an increase in sale of dome “kits” to outside buyers in years 4 and 5.
2012 2013 2014 2015 2016 2017$0.000
$2.000
$4.000
$6.000
$8.000
$10.000
$12.000
$14.000
Terraqua Barranca Share Prices
Share prices reflect a “3x” after tax earnings for 2014 – 2016. The 2017 price reflects a “probable market valuation” in the event the company should have an opportunity to do an IPO. In reality this is unlikely to happen. The Company intends remaining a “cash cow” for the foreseeable future.