1 investment opportunity in biodiesel in the valley of the são francisco river integrated...
TRANSCRIPT
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Investment Opportunity in Biodiesel in the Valley of the São Francisco River
INTEGRATED SUSTAINABLE BUSINESS PROJECT
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Project Team
PRESIDENT OF THE REPUBLIC MINISTER OF NATIONAL INTEGRATIONLuiz Inácio Lula da Silva Geddel Vieira Lima
CODEVASF DIRECTORY
President: Orlando Cezar da Costa Castro
Cabinet Chief: Manoel Geraldo Dayrell
Director of the area of Integrated Development and Infra-Structure: Clementino Souza Coelho
Executive Secretary: José Eduardo Borella
Director of the area of Irrigation Companies Management: Raimundo Deusdará Filho
Executive Secretary: Frederico Calazans Machado
Director of the Area of Hydrografic Basins Revitalization: Jonas Paulo de Oliveira Neres
Executive Secretary: Silas Macedo
Executive Manager of Strategic Administration: Alexandre Isaac Freire
Executive Secretary of Administrative Management and Logistic Support: João Honório Carvalho Ramos
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Agenda
• Introduction
• Business Model
• Profitability Analysis
• Irrigation Projects (CODEVASF)
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INTRODUCTION
• Project DescriptionThe project is a governmental initiative, aiming to attract investments to the Valley of the São Francisco River (web page: http://www.fundace.org.br/pins).
• PENSAAgribusiness Intelligence Center. PENSA researchers are responsible for the business models proposition, economic and marketing analysis and for the interaction with potential investors tailoring the analysis to their particular needs (web page: http://www.pensa.org.br).
• CODEVASFDevelopment agency associated to the Brazilian Ministry of Integration, which the mission is to develop economically and socially the Valley of the São Francisco and Parnaíba Rivers (web page : http://www.codevasf.gov.br).
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Scenario
• Considering the B5 scenario, the impact for the arable land n Brazil will be even more relevant depending on the chosen crop, and the production technology.
• It will create an additional demand of 13.7 million ha for soy, sunflower, cotton, castor and palm trees.
Crop Current area (ha)
Increase(ha) Percentage (%)
Additional Production
(ton)Soya 18,534,300 3,408,885 18.39 1,363,554
Sunflower 43,200 3,097,981 7171.25 1,548,990Cotton 739,200 4,437,500 600.31 1,331,250
Castor tree 128,000 2,454,787 1917.80 98,315Palm Tree 45,000 307,667 683.70 769,167
Total 13,706,820
Source: PENSA, based on CONAB, IBGE, FAESP.Obs.: Considered yields : Soya – 0,4 ton/ha; Sunflower – 0,5 ton/ha; Cotton – 0,3 ton/ha; Castor 0,4 ton/ha; Palm– 2,5 ton/ha;
This area may be entirely found at the Brazilian
northeastern
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Considered Chains for Biodiesel Production in this Project
Palm: • Brazil is the third largest producer of palm oil, and Para is the state in Brazil with
the largest production volume, however it does show some sanitary constraints;• Palm oil will have an important role at the biodiesel production: high yields (an
average of 31 ton/ha), high amounts of oil per bunch (22.5%) and long agricultural production cycle (average of 30 years);
Jatropha: • This oleaginous is being studied at several research centers in Brazil, including
EMBRAPA and EPAMIG, with the promise of oil supply for biodiesel;• It resists very well dry conditions and it has high yields per bunch per hectare
(average of 5 tons), high oil content per fruit (38%) and a long production cycle ( average of 30 years);
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Palm – Business Model
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• EMBRAPA has an extensive work aimed to increase the palm yields in the semi arid climate;
• Natural high potential for production of high yields seeds for the dry and high luminosity conditions;
• Fertile land in abundance (concession for 30 years), including the neighboring areas surrounding the irrigation projects;
• Good financing conditions (Banks: Banco do Nordeste, Banco do Brasil e BNDES);
• Infra-structure for production disposal (ports and roads) for the internal and external markets;
• Close to the European and North American markets;• Tax incentives for including small holders into the biodiesel chains• Perspective of B5 scenario already for 2010.
Why investing in Palm production in the Valley of the São Francisco River?
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Business Model
Vegetal Oil
Oil Extractors
Service Constracts
Shared Machinery and Implements
Anchor Company
Food and Chemistry Industry
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Small Holder
Vertical Integration
Anchor CompanyOil Extraction and Biodiesel Production
Food Industry
Chemical industry
Sales in Bunches Production :Refined Palm OilPalmist Oil CakeBiodiesel for Free Fatty Acid
Commercialization
Oil Industry
Business Model
For the agricultural area, the participation will be 30% will be vertically integrated by the anchor company and the other 70% will be occupied by small holders vertically coordinated and contracted with the anchor company.
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..
..
..
Business Model Opportunity
Grower AGrower A
Grower BGrower B
Grower nGrower n
CooperativeCooperativeSPESPE
(Biodiesel Plant +(Biodiesel Plant +
Crushing facility)Crushing facility)
A+B+CA+B+C
AA
BBAnchor
Other CC
Cooperative = 20%Cooperative = 20%
Anchor Company = 51%Anchor Company = 51%
Others = 29%Others = 29%
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Business Model
Crushing plant
Retailer
(Gas Stations)INPUTS
Payment for the seed bunches
(-) minus service and financial expenses (+) plus share of profit
Traders Exports
External Growers
Financing agentFinancing agent
Cooperative producers
Payment for the seed bunches
Distribution channelDistribution channel
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Players Role Definition
External Producers Small holders cooperatives Anchor company
- External growers may sell to the anchor company;
-Establish sales contracts;
-Anchor company may participate at harvesting.
- It consolidates the area of small holders;
- It receives for the fruits and pays for the services related to agricultural operations;
- Assist the grower with technical assistance;
- It manages the input purchases;
-It manages the irrigation systems;
-It follows the agricultural plan of the anchor company.
- It coordinates all agricultural activities;
-It receives the right of use regarding the land (CDRU);
- It will share the land for the small holders and will select the growers;
- It will provide guidance for the cooperative technicians considering ag technical assistance.
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Ag Production Processing
PINS – BIODIESELPalm oil
Refinment
Assumptions & Summary
Machinery and Implements Investment
Graphs
Biodiesel Plan
1 Hectare
"n" Hectar(s)
Other Cultures
Simulations "n"
Ag Cost
100% Own Capital
Scenario
PAL
M
Logistics and Production
100% Own Capital
50% Own Capital
50% Bank Loan
Tax
Participation in the Project (%)
Assumptions
Sensitivity analysis
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Agricultural Production
Source: PENSA.
0%
10%
20%
30%
40%
50%
60%
Participation (%)
Vertical Integration
Cooperative Area
Others
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Assumptions
Data based on EMBRAPA
Palm ConsiderationsUS$ 1.00 ==> R$ 1.85
Area ("n" há(s)) ==> 5,000.00
In Between Crops
Crops ======>
Area ("n" há(s)) ==> 4,500.00Correction factor for the production area 10%
Banana
Pineapple
Manioc
MAIN REVENUE SOURCE ==> 3
3 POTENTIAL REVENUE
1 Palm oil; Palmiste; Cake
2 Biodiesel (50%); Palm (50%); Palmiste; Cake
3 Biodiesel (100%), Palmiste and Cake
4 Palma; Palmiste; Cake; Biodiesel
available revenue options
IMPORTANT
Revenue is obtained from the sales of biodiesel and the cake.
Minimum Level of Return on Capital ==> 15%
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Assumptions
Historical prices 1.101.20
Historical Prices
US$/TON ReviewedHistorical Prices
(US$)
Reviewed Price (R$)
FFB 93 77.5 172.05 R$/tonCPO 540.00 450.00 999.00 22.50%PK 225.00 187.50 416.25 R$/tonPKO 900.00 750.00 1,665.00 R$/tonCake 63.00 52.50 116.55 R$/ton
F Proce 1.20 Biodiesel 1.08 0.90 2.01 LiterAuction 1 0.95Auction 2 0.9Auction 3 0.875Auction 4 0.87Auction 5 0.925
AVERAGE EXTRACTION FOR REVENUE CALCULATIONCPO 22.50% FFB PK 5.00% FFBPKO 39.00% PKCake 54.00% PKOil for sale (minus Free Fatty Acid) 92.50% Free Fatty Acid generated from Gegetal Oil 7.50% Biodiesel Desity (KG/L) 0.88 Biodiesel production per Free Fatty Acid 1.1
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PESSOA FÍSICA PESSOA JURÍDICA
Real profit Assumed Profit Real Profict
PINS 0.00% 0.65% 0.65%
COFINS 0.00% 3.00% 3.00%FUNRURAL 2.30% 2.85% 2.85%
IMPOSTO DE RENDA ==>According to
revenueAccording to revenue According to
revenueCSLL 0.00% 1.08% 9.00%CPMF 0.38% 0.38% 0.38%
“Pessoa Física” – REAL PROFIT“Pessoa Jurídica” – ASSUMED
PROFIT
“Pessoa Jurídica” – REAL PROFIT
OPTIONS
PARAMETERS
TAX SYSTEM SELECTION
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Pessoa Jurídica – “Assumed Profit”
There is the right to use the Social Stamp
Plant area ==>SIM
Share of Profit & Losses
Agricultural Vertically integrated area 50%Cooperative Area 50%Other 0%Total ==> 100%
1
Processing Anchor Investor 100%Growers 0%Outhers 0%Total ==> 100%
0
SOCIAL SEAL
TRIBUTOS
1 0
agricultural processingPIS PIS
0.65% 0.65%
COFINS COFINS
3.00% 3.00%
ASSUMPTIONS
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Assumptions
IRRIGAÇÃO UNITY R$ US$
Irrigation Investment
R$/ha 5,000 2,702.70 Drains 1,000 540.54
Aditional Investments for renewing Pipes 15 YEARS 50,0%
2,500.00 4,625.00
OPERATIONAL COST - WATER 1 ha
# DAYS 150.00
# HOURS PER DAY (h) 12
Water price
K1 R$ / ha / mês R$ 8.00 96.00 51.89
K2 a R$/ ha/mês R$ 26.0 312.00 168.65K2b R$ / m3 R$ 0.05 Evaporation mm / day 8.00 Evaporation mm / year 1,200 Precipitation mm / year 350
Evaporation balance mm / year 850 Water need yearly m3 / year 8,500 Water consumption Yearly m3 / year 12,000
Efficience 95% 11,400 425.00 229.73
Water expenses total 833.00 450.27Operational Cost 1 ha 0,5 CV Kwa/h 0.3675 Consumption Kwa/year 661.5 Energy cost R$/Kwa 0.10645
Energy cost R$/há/year 70.42 R$
38.06 Total energy expenditures R$ 70.42 38.06
Equipament maintainance 5.00% 250 R$ 135.14
Operational Irrigation Cost (R$/ha)
1,153.42
623.47
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Yield
Average Yield without Irrigation (t FFB/ha) 21.00
Factor for increasing the yields with Irrigation 1.50Expected Average Yileds with Irrigation (t FFB/ha) 31.50
PREMISSAS
BASIC PLANNED YIELDS
Year WITHOUT IRRIG WITH IRRIG
FFB/tn FFB/tn
1 0 0
2 0 0
n+0 3 0 0
n+1 4 0 0
n+2 5 0 0
n+3 6 6 9
n+4 7 12 18
n+5 8 15 22.5
n+6 9 18 27
n+7 10 21 31.5
n+8 11 21 31.5
n+9 12 21 31.5
n+10 13 21 31.5
n+11 14 21 31.5
n+12 15 21 31.5
n+23 26 21 31.5
n+24 27 21 31.5
n+25 28 21 31.5
n+26 29 20 30
n+27 30 19 28.5
n+28 31 18 27
n+29 32 17 25.5AVERAGE
=>16.38 24.56
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Processing Plant Ownership
Source: PENSA
0%
20%
40%
60%
80%
100%
120%
Participation (%)
Processing Plant
Anchor Company
Growers
Other
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Processing CostsR$/Ton
FFBUS$/Ton
FFB Variable Costs Chemic: Steam Ton/ ton FFB 0.27 R$/ton 42 11.34 6.13 Electrical Energy Kwh/ ton FFB 50 R$/Kwh 0.09 4.5 2.43 Wood for drying Water Ton/ton FFB 0.063 R$/ton 0,09 0.006 0.00 Services Maintenance costs R$/ton FFB 0.05 0.05 0.03Other costs R$/ton FFB 0.6 0.5 0.93
TOTAL (R$/ton FFB) 16.4 8.86
Fixed Costs Labor R$/ton FFB 2.65 1.43
Total fixed (R$/ton FFB) 2.65 1.43
Total 19.05 10.30
Processing Assumptions
Source: GreenTec - UFRJ
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Variabel Cost of the Processing Plant (transesterification and esterification). Cost per Unit R$/TON BDVariable Cost 316.14Gross Material: Third parties oil kg/Ton BD - R$/kg - -Methanol kg/Ton BD 96 R$/kg 1174.00 112.7
Chamical Inputs :
CH3ONA kg/Ton BD
20 R$/Ton 4,657.00 93.14
H2SO4
kg/Ton BD1 R$/Ton 430.00 0.43
Caustic kg/Ton BD 1 R$/Ton 730.00 0.73Citric Acid kg/Ton BD 0.07 R$/Ton 2,000.00 0.14HCl kg/Ton BD 12 R$/Ton 660.00 7.92Process Water kg/Ton BD 10 R$/Ton 0.01 0.0001
Industrial Water kg/Ton BD 1.4 R$/Ton 0.01 0.000014Cooling Water m3/Ton BD 0.8 R$/Ton 0.01 0.000008Electricity kW/Ton BD 25 R$/Kwh 0.09 2.25
Steam kg/Ton BD 310 R$/Ton 50 15.5
Air of instrumentNm3h/Ton BD
6 R$/Nm3h 0.001 0.006Nitrogenous m³/ ton BD 2 R$/ m³ 0.88 1.76
Other costs (Services) General expenses ( Including insurance)
R$/Ton BD 5050
Maintenance costs R$/Ton BD 31.56 31.56FIXED COST LABOR R$/Ton BD 25 Total Cost (R$/ton BD) 340.71
Total cost (R$/ton BD AGL) 239.94Total Cost (R$/liter BD) 0.30
Total Cost (R$/liter BD FFA) 0.21
Source: GreenTec - UFRJ
Processing Assumptions
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Investments – Processing Plant
• 1 Vegetal Oil Extractor (25 ton/FFB/h): R$ 31,336,738.62;
• 1 Biodiesel Plant (Vegetable Oils => Biodiesel): R$ 47,334,000.00;
• Individual production capacity : 30,000 ton/year;
• 1 Biodiesel Plant (AGL => Biodiesel): R$ 4,733,400.00;
• Individual production capacity : 3,000 tpa;
• Life Spam : 30 years;
• Residual Coefficient of Processing unities: 10%;
• Exchange Rate (R$/US$) considered : R$1.85;
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Assumptions for Transportation Costs
Destine DISTANCE (In Km) FREIGHT iR$/Ton
Salvador 511 47Fortaleza 878 64
Recife 721 65Rio de Janeiro 1,928 160
São Paulo 2,241 186
'PRODUCT
Source of Revenue 3
1 Palm; Palmiste; Cake2 Biodiesel; Palm (50%); Palmiste; Cake3 Biodiesel; (100%) Cake4 Palm; Palmiste; Cake; Biodiesel (AGL)
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Synthesis
Agriculture
Processing Product Unity Volume Price Gross Revenue
Biodiesel (100%) Litros 30,561,300.00 R$ 2.01 R$ 80,816,829.55 Palmist oil Ton 3,071.25 R$ 1,665.00 R$ 5,113,631.25
Cake Ton 4,252.50 R$ 116.55 R$ 111,516.50
Product Unity Volume Price Gross Revenue Palm Bunches (FFB) Ton 157,500 R$ 172.05 R$ 27,097,875.00
Biodiesel (100%), Palmist e Cake
Producing Area ("n" há(s)) ==> 5,000.00
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Bunch production (FFB) and Oil Equivalent (in Tons)
• Source: PENSA
0
50.000
100.000
150.000
200.000
250.000
ANO 1
ANO 3
ANO 5
ANO 7
ANO 9
ANO 11
ANO 13
ANO 15
ANO 17
ANO 19
ANO 21
ANO 23
ANO 25
ANO 27
ANO 29
Oil Production vs Bunch Production in tons
Bunches Palm Oil
Years
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Agricultural Cost (Stabilized – 7º. Year on)
• Source: PENSA
R$ 0.00
R$ 500.00
R$ 1,000.00
R$ 1,500.00
R$ 2,000.00
R$ 2,500.00
R$ 3,000.00
R$ 3,500.00
R$ 4,000.00
Year 7
Agricultural Cost (R$/ha)
Expenses after harvest
Administrative expenses
harvest
irrigation
Inputs and materials
Crop Treats
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Agricultural Results
• Source: PENSA
R$ 0.00
R$ 5,000,000.00
R$ 10,000,000.00
R$ 15,000,000.00
R$ 20,000,000.00
R$ 25,000,000.00
R$ 30,000,000.00
Total Revenues x Total Cost
Total Revenue Palm total cost
In Between Crop Total Cost In between crop revenue
Years
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Agricultural investments
• Source: PENSA
R$ 0.00
R$ 5,000,000.00
R$ 10,000,000.00
R$ 15,000,000.00
R$ 20,000,000.00
R$ 25,000,000.00
R$ 30,000,000.00
R$ 35,000,000.00
Year -2 Year -1 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Agricultural Investments
Machinery and Implements Crop implementation Irrigation
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Oil, Biodiesel and By Products Production in Tons
• Source: PENSA
0.005,000.00
10,000.0015,000.0020,000.0025,000.0030,000.0035,000.0040,000.00
Oil, Biodiesel and By Products Production in Tons
Palm Oil Palmist Oil Biodiesel Biodiesel FFA Cake
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R$ 0.00
R$ 20,000,000.00
R$ 40,000,000.00
R$ 60,000,000.00
R$ 80,000,000.00
R$ 100,000,000.00
Processing Revenue and Costs
Biodiesel (100%), Palmist and Cake Raw Material
Extraction Oil Cost Biodiesel Processing cost
Processing Results
• Source: PENSA
Years 1- 30
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Processing Investment
• Source: PENSA
R$ 0.00R$ 5,000,000.00
R$ 10,000,000.00R$ 15,000,000.00
R$ 20,000,000.00R$ 25,000,000.00R$ 30,000,000.00R$ 35,000,000.00
R$ 40,000,000.00R$ 45,000,000.00R$ 50,000,000.00
YEAR -2 YEAR -1 YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
Processing Investment
Oil Extraction Biodiesel Plant
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Incidence of Logistics Costs
• Source: PENSA
0%
20%
40%
60%
80%
100%
Year 0 Year 3 Year 6 Year 9 Year 12 Year 15 Year 18 Year 21 Year 24 Year 27 Year 30
Production Cost XTransportation Costs
Transportation Cost Total Production Cost
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Consolidated Results
• Source: PENSA
- R$ 20,000,000.00
R$ 0.00
R$ 20,000,000.00
R$ 40,000,000.00
R$ 60,000,000.00
R$ 80,000,000.00
R$ 100,000,000.00
ANO
0
ANO
2
ANO
4
ANO
6
ANO
8
ANO
10
ANO
12
ANO
14
ANO
16
ANO
18
ANO
20
ANO
22
ANO
24
ANO
26
ANO
28
ANO
30
Revenue Analysis X Consolidated Costs
Transportation Costs Gross Revenue
Total Production Costs Net Profit
Years
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Financial Analysis
Source: PENSA
Palm Agricultural Activity Processing Consolidated
Internal Rate of Return (IRR)
6.01% 37.08% 20.5%
Scenario 100% Own Cap
NPV: ($22,906.646.47) NPV: $152,776,846.38 NPV: $134,489,918.32
Scenario 50% Own Cap NPV: $6,328,356.33 NPV: $248,857,463.34 NPV: $278,579,378.45
Scenario 100% Loan NPV: $99,608,319.22 NPV: $419,911,390.26 NPV: $732,290,025.85
Investment R$ 130,121,483.50 R$ 76,956,657.05 R$ 207,075,140.55
Operational R$ 446,81,564.59 R$ 436,730,390.72 R$ 903,541,955.31
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Production Cost Comparative Analysis at the Formation Phase
Source: PENSA
473154
530
909
300500
500
675500 500 500
250
307
363
475 575 575277
388
469
631
265
250
235332
441
1.153
1.153
1.1531.153
50
108
460
307 308
38
R$ 0.00
R$ 500.00
R$ 1,000.00
R$ 1,500.00
R$ 2,000.00
R$ 2,500.00
R$ 3,000.00
Year -2 Year -1 Year 0 Year +1 Year +2 Year +3 Year -2 Year-1 Year 0 Year +1 Year +2 Year +3
SEEDLING TREES SOIL PREPARATIONPLANTING CROP TREATSAG INPUTS IRRIGATION
Pará Vale S. Francisco
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Production Cost Comparative Analysis (From 7th year on)
Pará Vale do São Francisco
• Source: PENSA
473.60855.00
505.05
544.35893.55
480.00
1,153.42
R$ -
R$ 500
R$ 1,000
R$ 1,500
R$ 2,000
R$ 2,500
R$ 3,000
R$ 3,500
Irrigation
Harvest
Ag Inputs
Crop treats
Pará Vale S. Francisco
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Natural Conditions
Source: EMBRAPA and PENSA
Characteristic Ideal Valley of the São Francisco River
Temperature 25 to 27 oC 26.3 oC
Precipitation 1800 – 2000 mm (Year) 400 - 1000 mm (Year)
Luminosity 5 (daily light hours) 7 (daily light hours)
Altitude 400 m 370 m
Soil Depth >90 cm 90 cm
Soil Texture Clay Sandy
Humidity 80% 65 to 70%
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• Tax generation:– Total: R$ 23,484,242.00;
– Agricultural Production: R$ 5,624,659.00;
– Processing plant: R$ 17,859,583.00;
• Job Generation: 6 workers/ha (CERU/EMBRAPA CPAA);
• Agriculture: 9.000 jobs for an area of 1,500 hectares (Anchor Company);
• For Oil Extraction : 25 direct jobs and 8 indirect jobs (Algoden);
• For the Biodiesel Plant : 30 direct jobs and 10 indirect jobs (Dedini);
Benefits for the Social and Economic Development
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• Additional revenues for the Ag input Forms : R$ 2,721,750.00;
• Additional revenues for transportation firms : R$ 2,161,900.13¹;
• Diversification of economic activities;– Produced together with pineapple, banana and manioc;
• ¹ Using Port of Aratu (Salvador, BA).
Benefits for the Social and Economical Development
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Sensitivity Analysis
38,29 36,47 34,73 33,08 31,50 29,93 28,43 27,01 25,66883.20 25.05% 23.88% 22.73% 21.60% 20.50% 19.36% 18.25% 17.16% 16.09%857,48 25.05% 23.88% 22.73% 21.60% 20.50% 19.36% 18.25% 17.16% 16.09%832.50 25.05% 23.88% 22.73% 21.60% 20.50% 19.36% 18.25% 17.16% 16.09%807.53 25.05% 23.88% 22.73% 21.60% 20.50% 19.36% 18.25% 17.16% 16.09%783.30 25.05% 23.88% 22.73% 21.60% 20.50% 19.36% 18.25% 17.16% 16.09%
20.50%
38.29 36.47 34.73 33.08 31.50 29.93 28.43 27.01 25.662.13 26.66% 25.46% 24.28% 23.12% 21.99% 20.83% 19.69% 18.57% 17.48%2.07 25.85% 24.66% 23.49% 22.35% 21.24% 20.09% 18.96% 17.86% 16.78%2.01 25.04% 23.87% 22.72% 21.59% 20.49% 19.35% 18.24% 17.15% 16.08%1.95 24.22% 23.06% 21.92% 20.81% 19.72% 18.60% 17.50% 16.43% 15.37%1.89 23.40% 22.26% 21.14% 20.04% 18.96% 17.86% 16.77% 15.71% 14.66%
20.50%
38.29 36.47 34.73 33.08 31.50 29.93 28.43 27.01 25.661.96 26.78% 25.57% 24.39% 23.23% 22.10% 20.93% 19.79% 18.67% 17.57%1.91 25.91% 24.72% 23.56% 22.41% 21.30% 20.14% 19.02% 17.91% 16.83%1.85 25.05% 23.88% 22.73% 21.60% 20.50% 19.36% 18.25% 17.16% 16.09%1.79 24.17% 23.02% 21.88% 20.77% 19.69% 18.56% 17.47% 16.39% 15.33%1.74 23.30% 22.16% 21.04% 19.95% 18.87% 17.77% 16.68% 15.62% 14.57%
20.50%
IRR 100% own Capital =>
TIRYields (ton fruto/ha)
IRRYield (ton fruto/ha)
Vegetable Oil Price
TIRYields (ton fruto/ha)
Exchange Rate
(R$/ US$)
IRR 100% own Capital =>
Biodiesel Price
(R$/ton)
IRR 100% own Capital =>
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Jatropha
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Why Investing in Jatropha in the Valley of the São Francisco River ?
• EPAMIG has an extensive work aimed to increase the palm yields in the semi arid climate;
• Natural high potential for production of high yields seeds for the dry and high luminosity conditions;
• Fertile land in abundance (concession for 30 years), including the neighboring areas surrounding the irrigation projects;
• Good financing conditions (Banks: Banco do Nordeste, Banco do Brasil e BNDES);
• Infra structure for production disposal (ports and roads) for the internal and external markets;
• Close to the European and North American markets;
• Tax incentives for including small holders into the biodiesel chains;
• Perspective of B5 scenario for 2010.
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Business Model
Vegetal Oil
Oil Extractors
Service Constracts
Shared Machinery and Implements
Anchor Company
Fod and Chemistry Industry
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Small Holder
Vertical Integration
Anchor CompanyOil Extraction and Biodiesel Production
Food Industry
Chemical industry
Sales in Bunches (jatropha) Production :Vegetable Oil Biodiesel
Commercialization
Oil Industry
Business Model
For the agricultural area, the participation will be 50% will be vertically integrated by the anchor company and the other 50% will be occupied by small holders vertically coordinated and contracted with the anchor firm.
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..
..
..
Business Model Opportunity
Grower AGrower A
Grower BGrower B
Grower nGrower n
CooperativeCooperativeSPESPE
(Biodiesel Plant +(Biodiesel Plant +
Crushing facility)Crushing facility)
A+B+CA+B+C
AA
BBAnchor
Other CC
Cooperative = 20%Cooperative = 20%
Anchor Company = 51%Anchor Company = 51%
Others = 29%Others = 29%
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Business Model
Crushing plant
Retailer
(Gas Stations)INPUTS
Payment for the seed fruits
(-) minus service and financial expenses (+) plus share of profit
Traders Exports
External Growers
Financing agentFinancing agent
Cooperative producers
Payment for fruits
Distribution channelDistribution channel
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Players’ Role Definition
External Producers Small holders cooperatives Anchor company
- External growers may sell to the anchor company;
-Establish sales contracts;
-Anchor company may participate at harvesting.
- It consolidates the area of small holders;
- It receives for the fruits and pays for the services related to agricultural operations;
- Assist the grower with technical assistance;
- It manages the input purchases;
-It manages the irrigation systems;
-It follows the agricultural plan of the anchor company.
- It coordinates all agricultural activities;
-It receives the right if use regarding the land (CDRU);
- It will share the land for the small holders and will select the growers;
- It will give some guidance for the cooperative technicians considering ag technical assistance.
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Ag Production Processing
PINS – BIODIESEL Jatropha
Refinment
Assumptions & Summary
Machinary and Implements Investment
Graphs
Biodiesel Plan
1 Hectare
"n" Hectare(s)
Other Cultures
Simulations "n"
Ag Cost
100% Own Capital
Scenarium
JATROPHA
Logistics and Production
100% Own Capital
50% Own Capital
50% Bank Loan
Tax
Participation in the Project (%)
Assumptions
Sensitivity analysis
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Data from EPAMIG
Jatropha US$ 1.00 => R$ 1.85
Area for Production (há) => 50,000 Yields 5 ton/haIrrigation (Irrigation Factor) 1.50 FALSOFINAL YIELD 5 ton/háOIL CONTENT 38% háFRUIT PRICE 0.39 R$/kgPRICE PER TON R$/tonOIL PRICE 1.54 R$/kg
MEAL PRICE
R$/tonBIODIESEL PRICE PER LITER 1.84 R$/LBIODIESEL DENSITY 0.88 Kg/LBIODIESEL PRICE PER KILO 2.09 R$/kg
JATROPHA OIL (100%)BIODIESEL PRODUCTION (100%)
JATROPHA OIL(50%) AND BIODIESEL PRODUCTION (50%)
Revenue options
Assumptions
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Historical Prices
Biodiesel Historical Prices (US$/litro)1 1.102 1.20
F Price 1.10 US$Biodiesel 0.99 0.90Auction 1 0.95Auction 2 0.9Auction 3 0.875Auction 4 0.87Auction 5 0.925Estimation price base of Oil (R$/liter) 1.40 Estimation price base of Fruit (R$/KG) 0.35 Biodiesel Price Base (R$/litro) 1.67
Assumptions
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IRRIGATION COST Irrigation – Driping
Investments Unities R$ US$
Investment R$/ha 5,000.0
2,702.7
Drains 1,000.0
540.5
Aditional Investment Pipes Renewal 15 years 50,0% 2,500.0
1,351.4 Water 1 ha # days 150,00 Daily irrigation time (h) 12 Water price
K1 R$ / ha / month R$
8,00 96.0
51.9
K2a R$/ ha / month R$
26,00 312.0
168.6
K2b R$ / m3 R$
0,050 Evaporation mm / day 8,00 Evaporation mm / year 1.200 Rain mm / Year 350 Evaporation balance mm / year 850
Yearly water need m3 / year
8.500
Water supply capacity yearly - 80m3/dia/há m3 / year 12,000
Efficiency of 95% 11,400 425,0 229,729,729.7
Total Water expenses 833.0
450.3 Operational enery costs 1 ha
0.5 CV Kwa/h
0,37
Energy consumption Kwa/year
661,50
Energy cost R$/kwa R$
0,106
Electricity cost R$/ha/year 70.4
38.1
Total Energy Cost 70.4
38.1
Equipment Maintainance 5,0% 250.0
135.1
Source: NetafimTarifa Energia
R$1,153.4
US$ 623.5
Irrigation Cost
Assumptions
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YEAR KG/HÁ (non irrigated) TOTAL KG/HÁ TOTAL OIL (KG/HÁ)
1 250.00 250 95 2 1000.00 1000 380 3 2500.00 2500 950 4 5000.00 5000 1900
Estabilized
Production Plan
Assumptions
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Agricultural Production
0%
10%
20%
30%
40%
50%
60%
Participation (%)
Verti. Integrated
Cooperative
Others
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Synthesis (after production stabilization)
Biodiesel (100%)Production Area (ha(s)) ==> 50,000.00
Agriculture
Processing
FRUITS
Revenue R$
Total Gross Sales 96,250,000.00
Production Costs 43,440,000.00
BIODIESEL 100 %
Revenue R$
Gross Total Sales (liter oil)
194,625,550.00
Processing Cost 37,129,582.00
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Agricultural Cost(after production stabilization)
• Source: PENSA
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
900.00
1
Agricultural cost (R$/ha) after the first year
Fungicide
Insecticide
Fertilizer
Treats and harvest
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Agricultural and Processing Production
• Source: PENSA
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
ANO0
ANO 2
ANO 4
ANO 6
ANO 8
ANO 10
ANO 12
ANO 14
ANO 16
ANO 18
ANO 20
ANO 22
ANO 24
ANO 26
ANO 28
ANO 30
Oil and Fruit Production (Kg)
Oil Production Fruit Production
YEARS
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Agricultural Revenue and Costs
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
Fruit Revenue x Agricultural Costs (R$)
Agricultural Costs Fruit Revenue
YEAR
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Processing Plant Ownership
0%
20%
40%
60%
80%
100%
120%
Participation (%)
Processing Plant
Anchor Company
Cooperative
Other
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Synthesis (after production stabilization)
Oil Extractor Plant (CAPACIty of 150 ton/day)DEPRECIATION FACTOR 10%
PERIOD 30 YEARS
Plant Installation Schedule Year # Plants Investment Total # of Plants Total Investment
0 1 8,879,220.74 1 8,879,220.74 1 1 8,879,220.74 2 17,758,441.48 2 2 17,758,441.48 4 35,516,882.97 3 1.5 13,318,831.11 5.5 48,835,714.08
Irrigation Investment (R$) R$ 6,000.00 Rate 10%Reinvestment 10 YEARS
BIODIESEL PLANT- 100,000 ton/year
Plant Installation ScheduleYear # Plants Investment Total # of Plants Total Investmentano 2 1 R$ 42,257,600.00 1 R$ 42,257,600.00
Agriculture
Processing
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Total Investment
• Source: PENSA
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
Year 0 Year 1 Year 2 Year 3
Total Investment (R$)
Agric Investiment
Extraction Investment
Biodiesel Investment
Crop Implementation Investment
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Processing Revenue and Costs
• Source: PENSA
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
Total Revenue x Total Processing Cost for Biodiesel (R$)
Oil Extraction Cost Biodiesel Cost Biodiesel Revenue Oleaginous Revenue
YEAR 1 -30
65 www.codevasf.gov.br• Source: PENSA
Transportation Cost
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Ano 0 Ano 2 Ano 4 Ano 6 Ano 8 Ano 10 Ano 12 Ano 14 Ano 16 Ano 18 Ano 20 Ano 22 Ano 24 Ano 26 Ano 28 Ano 30
Total Costs X Transportation Costs
Transp Cost Total Cost
YEARS 1 -30
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Consolidated Analysis
• Source: PENSA
- R$ 50,000,000.00
R$ 0,00
R$ 50,000,000.00
R$ 100,000,000.00
R$ 150,000,000.00
R$ 200,000,000.00
R$ 250,000,000.00
ANO 0
ANO 2
ANO 4
ANO 6
ANO 8
ANO 10
ANO 12
ANO 14
ANO 16
ANO 18
ANO 20
ANO 22
ANO 24
ANO 26
ANO 28
ANO 30
Gross Sales X Transportation Costs X Net Profit
Trabsp Costs Gross Sales Total Cost Net profit
YEAR 1 - 30
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Financial Analysis
Source: PENSA
Jatropha Agriculture Processing Consolidated
IRR IRR: 36.62% IRR: 41.31 % IRR: 38.90 %
100% Own Capital NPV: R$ 233,621,565.47 NPV : R$ 270,271,090.26 NPV: R$ 502,203,902.80
50% Own Capital NPV: R$ 464,130,305.30 NPV: R$ 406,606,107.32 NPV: R$ 829,930,605.91
Cenário 100% Loam NPV : R$ 1,023,530,492.47
NPV: R$ 636,457,440.14 NPV: R$ 1,761,838,563.94
Total Investment R$ 180,065,000 R$ 86,653,704 R$ 224,461,104.00
Total Cost R$ 1,063,800,000 R$ 898,186,514 R$ 2,083,412,189
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Natural Conditions
Source: EMBRAPA and PENSA
Characteristic Ideal Valley of the São Francisco River
Temperature 25 a 30 oC 26.3 oC
Precipitation 350 - 850 mm 400 - 1000 mm (Year)
Luminosity 5 (hours of light per day)
6 (hours of light per day)
Altitude 200 – 400 m 370 m
Soil Depth > 80m 90 cm
Soil Texture Medium Medium
Humidity >40% 65 a 70%
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Agricultural Production Cost Comparative Analysis
Source: PENSA
Valley of the São Francisco River X São Paulo
Comparative Agricultural Cost (R$/ha)
R$ -R$ 200R$ 400R$ 600R$ 800
R$ 1,000R$ 1,200R$ 1,400R$ 1,600
Ano 1
Ano 3
Ano 5
Ano 7
Ano 9
Ano 1
1
Ano 1
3
Ano 1
5
Ano 1
7
Ano 1
9
Ano 2
1
Ano 2
3
Ano 2
5
Ano 2
7
Ano 2
9
São Paulo Valley of the São Francisco River
70 www.codevasf.gov.brSource: PENSA
São Paulo
621.90 547.90
837.17
585.00
50.00
113.29
R$ -
R$ 200
R$ 400
R$ 600
R$ 800
R$ 1,000
R$ 1,200
R$ 1,400
R$ 1,600
Despesas Adm
Insumos
Operções
São Paulo Vale S. Francisco
Implementation Year – Year 1
Agricultural Production Cost Comparative Analysis
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São PauloYear 2 – First Production Year
369.05
659.50
397.40
320.00
65.95
50.00
R$ -
R$ 200
R$ 400
R$ 600
R$ 800
R$ 1,000
R$ 1,200
Admin Expen.
Ag inputs
Operations
São Paulo São Francisco
Agricultural Production Cost Comparative Analysis
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• Tax Generatation:– Total: R$ 51,299,090.00;
– Produção Agrícola: R$ 16,974,775;
– Produção Industrial: R$ 34,324,315;
• Job Generation: 0,8 employees/há (direct),(based on interviews);
• Agricultural : 20 thousand jobs for na area os 25,000 hectars (Vertically integrated areas);
• Vegetal Oil Extractor: 25 direct jobs and 8 indirect (Algoden);• Biodiesel Plant : 30 direct jobs and 10 inderect (Dedini);
Benefits for the Social and Economic Development
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• Additional Revenues for Agricultural Input Firms: R$ 16,000,000.00;
• Additional Revenues for Transportation Firms : R$ 4,375,700.00¹;
• Economic diversification;
• ¹ using the Port of Aratu (Salvador, Bahia State).
Benefits for the Social and Economic Development
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Sensitivity Analysis
6.00 5.75 5.50 5.25 5.00 4.75 4.50 4.25 4.00
1.74 44.22% 42.06% 39.88% 37.67% 35.42% 33.13% 30.80% 28.41% 25.98%
1.70 42.88% 40.77% 38.63% 36.45% 34.24% 31.99% 29.69% 27.35% 24.95%
1.67 41.56% 39.49% 37.38% 35.24% 33.07% 30.85% 28.60% 26.29% 23.93%
1.64 40.23% 38.19% 36.13% 34.02% 31.89% 29.71% 27.49% 25.23% 22,91%
1.60 38.92% 36.92% 34.88% 32.82% 30.72% 28.58% 26.40% 24.17% 21.88%
38.90%
6.00 5.75 5.50 5.25 5.00 4.75 4.50 4.25 4.00
1.46 48.15% 45.89% 43.59% 41.26% 38.90% 36.49% 34.05% 31.55% 29.00%
1.43 48.15% 45.89% 43.59% 41.26% 38.90% 36.49% 34.05% 31.55% 29.00%
1.40 48.15% 45.89% 43.59% 41.26% 38.90% 36.49% 34.05% 31.55% 29.00%
1.37 48.15% 45.89% 43.59% 41.26% 38.90% 36.49% 34.05% 31.55% 29.00%
1.34 48.15% 45.89% 43.59% 41.26% 38.90% 36.49% 34.05% 31.55% 29.00%
38.90%
6.00 5.75 5.50 5.25 5.00 4.75 4.50 4.25 4.00
1.92 50.96% 48.61% 46.24% 43.83% 41.38% 38.89% 36.36% 33.78% 31.14%
1.89 49.55% 47.24% 44.91% 42.54% 40.13% 37.69% 35.20% 32.66% 30.06%
1.85 48.15% 45.89% 43.59% 41.26% 38.90% 36.49% 34.05% 31.55% 29.00%
1.81 46.74% 44.52% 42.27% 39.98% 37.66% 35.29% 32.88% 30.43% 27.92%
1.78 45.35% 43.17% 40.96% 38.71% 36.43% 34.10% 31.74% 29.32% 26.85%
38.90%
IRRYields (ton fruit/ha)
Biodiesel Price (R$/litro)
IRR 100% Own Capital
IRRYields (ton fruit/ha)
Exchange Rate (R$/US$)
Vegetal Oil (R$/kg)
IRRYields (ton fruit/ha)
IRR 100% Own Capital
IRR 100% Own Capital
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CODEVASFDirector of the area of Integrated Development and Infra-StructureClementino de Souza Coelho
Board Assistant of the area of Integrated Development and Infra-StructureAlvane Ribeiro Soares First Secretary of the area of Integrated Development and Infra-StructureGuilherme Almeida Gonçalves de Oliveira
PENSACoordinator: Prof. Dr. Marcos Fava NevesExecutive Manager of the Project: Luciano Thomé e CastroExecutive Manager of the Project : Ricardo Messias RossiExecutive Assistant of the Project: Vinicius Mazza da SilvaExecutive Assistant of the Project : Marina Darahem Mafud
Technical TeamResponsible Researcher: Marco Antônio ConejeroAssistant Researcher: José Carlos de Lima JuniorContributor: César Augusto Mendonça Zambrano e Eduardo José Sia
Translation: Central de Traduções
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For further Information:
E-mail: [email protected]
Mail Address:Av. Pres. Vargas, 2001- Conj. 143/144, Jardim AméricaRibeirão Preto - SP - CEP: 14.020-260Tel.: +55 (16) 3911 6088
Responsible Team