1
THE POWER OF INNOVATION
Biodiesel Processing Using Supercritical Technology
Employing Supercritical, Catalyst-Free,
Transesterification Technology to Produce
High Quality, Clear, Biodiesel Using Low Cost
Oils With Up To 100% Free Fatty Acid
ExecutiveSummary
November 9, 2015 v1
2
3 Confidentiality Notice
How we make biodiesel
Where we take it
Tip issues we face
4 About Jatrodiesel How we make biodiesel
Where we take it
Tip issues we face
6 About Jatrodiesel How we make biodiesel Where we take it Tip issues we face
7 Why Biodiesel (7-14)
Unparalleled Technology
Biodiesel/Ethanol Plant Diagram
Table of Contents
3 Confidentiality Notice How we make biodiesel Where we take it Tip issues we face
4 About Jatrodiesel
Why Biodiesel (1-6)
Why Biodiesel (7-14)
Unparalleled Technology
Biodiesel/Ethanol Plant Diagram
THE POWER OF INNOVATION
3
he information in this document, and electronically transmitted to you, is legally
privileged and the confidential information is intended only for the use of the
individual(s) or entities named in the email “To” or “CC” lines.
Please do not disseminate, distribute or copy this document and/or its accompanying
email transmission. Additionally, if the reader of this message is not the intended
recipient, you are hereby notified that any dissemination, distribution or copying of the
transmission is strictly prohibited. If you have received this transmission in error, please
delete the message and notify us immediately.
Thank You!
Confidentiality
T
Ian M. Lawson, Director, Business Development. JatroDiesel, 845 North Main Street, Miamisburg, OH 45342 - Phone: (937) 310-5490
THE POWER OF INNOVATION
4
1. Core Business Activities
Business Overview
• Design, engineering and construction management ¹ of biodiesel processing plants in the U.S. and worldwide
• Continued scientific development of biodiesel processing technology.
• Production operations of plants on a JV or other basis
• Biodiesel production of plants owned and operated by JatroDiesel
• Feedstock procurement through sales.
Typical isometric drawing of a biodiesel plant (generic) that
JatroDiesel provides its customers
THE POWER OF INNOVATION
Note (1): JatroDiesel does not typically manage actual plant construction. This is the responsibility of the customer. JatroDiesel provides engineering management (to insure plant is built to plans and specs.), and eventual start-up and training of operators
5
2. A Technology Innovation Opportunity
• A “supercritical” process called Super®
• Allows processing of feedstock oils very high in free fatty acids (FFA), to 100%
• Almost every existing biodiesel plant unable to use over 15% FFA feedstock
• High FFA oils available at half cost of traditionally used oils
• Process uses no catalyst, so no contam- ination of glycerin or formation of soaps
• Super® is easy to use with 4 main processors vs. 10 for traditional plants
• Super® changes how biodiesel is produced!
JatroDiesel’s Super® plant in Illinois, USA at the
former Patriot Renewable Energy plant
(110mmgy). The Nameplate is 7.5 million gallons
per year. Plant is owned by CHS, Inc.
THE POWER OF INNOVATIONBusiness Overview
6
3. Twelve Years in Biodiesel
• 2004 to 2012: produced biodiesel at their own 5mmgy plant in Ohio
• 2006 to present: engineered or upgraded 18 biodiesel plants
• 2012 to 2014: Developed the “supercritical” technology
• 2014: Began construction of a 7.5mmgy Super® plant co-located at a 110mmgy ethanol plant in Illinois
• November 2015: First commercial Super® plant commercialized.
Beginning in 2006, Jatrodiesel produced
biodiesel and began servicing the greater
Dayton, OH diesel fuel retail market
Note (1): RINs are Renewable Identification Numbers and a number is applied to each gallon of biodiesel as they are tradable under the EPA’s Renewable Fuels Standard
Company Background
THE POWER OF INNOVATION
7
6. About the Company’s Pioneering Technology
• Single Reactor operates at 5800° F. and
52,200 psi
• Processes up to 100% FFA oils
• Blend oils for processing
• No catalyst used (therefore no soap to
clean up)
• No sulfuric acid used (as no esterification)
• Uses only 2,000 gals of recycled water
• Final biodiesel is distilled and clear
• 95% pure glycerin by-product.
System Operator draws sample for testing
to be sent to an 3rd party lab in order to
insure meeting ASTM 6751 biodiesel
specifications
Production Features:
• Allows use of very low cost feedstocks
• Process all types of feedstocks
• Saves cost of chemicals (uses only methanol and
Magnesol)
• Glycerin yields 3 to 4 times value vs. traditional
plants
• Final biodiesel is clear (regardless of feedstock)
• System easy to operate with minimum training
• System costs about $1/annual production
gallon.¹
Production Benefits:
Note (1): Not including land, building, rail, roads, utility hook-ups and permits
Core Technology
THE POWER OF INNOVATION
8
4. What Drives the Market for Super
• Trap grease has a very high FFA, about 60% to 85% and is not usable by 99% of biodiesel plants. Not to be confused with grease collected from restaurants..
Jatrodiesel’s biodiesel processing technology fulfills an important changeby providing Producers access to processing much lower cost sources of feedstock
Feedstock Max FFA %Feed-stockCost/lb
Feed-stockCost/gal²
Process/gal
TotalCost/g+ freight
EBITDA Selling³ @$2.30/g
Soy Oil 1 $0.26 $1.99 $0.45 $2.44 $0.36
Yellow Grease (YG), Corn Oil, UCO etc
15 $0.18 $1.38 $0.60 $1.98 $0.82
100% Brn. Grease w/Super®
100 $0.08 $0.61 $0.38 $1.08 $1.72
Table I. Feedstock Cost Comparison
Note (1) Sold with RINs. Producer and distributors assume $1 credit approval for 2015+ and splitting it 50/50. (2) All computations converting lbs to gals.: 7.66 lbs per gal. of feedstock
• The cost to a biodiesel Producer for trap
grease (also called brown grease) is less than
half that for typically used feedstocks such as
yellow grease, used cooking oil (UCO) and
corn oil.
Market DriverTHE POWER OF INNOVATION
9
Production Forecast
20182019
20202021
2022
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$29,925,000.00$32,062,500.00
$34,200,000.00$36,337,500.00
$38,475,000.00
$199,500,000$213,750,000$228,000,000$242,250,000$256,500,000
EBITDA
TOTAL REVENUE
GLYCERIN
BIODIESEL
4. Six Super Plants of Production by Year for Biodiesel and GlycerinThe projection is based on 85% to 100% production maximum for six 15mmgy plants. Revenue is
$2.85/gallon delivered, which includes RINs and splitting $1.00 credit 50/50 with distributor. Margin target is 15%. Blend of feedstock is 70% corn and 30% trap grease.
Note (1) Based on current market conditions for November 2015.
THE POWER OF INNOVATION
10
Cost Analysis
$2.85 B100$1.38 $0.55
$0.08$0.15
$0.69
B100
Feedstock
Processing
G&A
Freight
EBITDA 59%
29%
23%
¹
$2.85B100
$1.07 $0.38$0.08
$0.15$1.20
B100
Feedstock
Processing
G&A
Freight
EBITDA 45%
51%
16%
¹
5. Biodiesel Margin @ <15% FFA Feedstock vs. Super @ 50%/50% BlendThe advantage of handling very high FFA oils is apparent from the comparison below:
Traditional process with a <15% FFA Feedstock Super® process with 50% @ < 100% FFA and 50% <15% FFA
Note (1) Price includes RINs. Producer and Distributors splitting $1.00 credit 50/50. (Congressional approval expected by 12/31/15 for 2015-2017).
THE POWER OF INNOVATION
11
Note (1) Price includes RINs. Producer and Distributors splitting $1.00 credit 50/50. (Congressional approval expected by 12/31/15 for 2015-2017).
6. Biodiesel Margins From Diverse Feedstock Blends – Traditional vs. Super
< 2% FFA Soy < 15% FFA YG, Corn, UCO < 50% FFA Brn Grease, 25% Corn Oil, 25% UCO & YG
< 100% FFA Brn Grease
SELLING PRICE 2.95 2.85 2.85 2.85
Feedstock 2.07 1.38 1.07 0.76
Processing 0.45 0.6 0.35 0.35
G&A 0.08 0.08 0.08 0.08
Freight 0.15 0.15 0.15 0.15
EBITDA¹ 0.7 1.24 1.8 2.11
$0.25
$0.75
$1.25
$1.75
$2.25
$2.75
Cost Analysis
Traditional Processing Super® Processing
THE POWER OF INNOVATION
12
7. Five Year Proforma - Biodiesel Plant Sales
Business Overview
THE POWER OF INNOVATION
Methanol injection system for Super. No catalyst is used, so no chance of any soap
formation. Also, no contamination of the glycerin by-product and worth three times that typically
produced at traditional plants
Plants Cost Each TOTAL Margin
Systems to Ethanol Plants 4 $9,000,000 $36,000,000 $7,000,000
Stand-alone BD plants 3 9,000,000 27,000,000 5,250,000
To existing BD plants 3 6,500,000 19,500,000 5,250,000
Plants for Export 4 6,500,000 26,000,000 7,000,000
TOTAL - 5 YEARS 14 $108,500,000 $24,500,000¹
Note (1): Fixed margin as construction and 70% of parts cost procured and installed by customer
13
8. Five-Year Production Projections (6 plants)
Business Overview
Notes (1): Includes RINs and $1.00 credit at 50% split with distributor (2): Based on market index at time of development of this this document
THE POWER OF INNOVATION
1
REVENUE¹Annual Gallons Per Gal 15,000,000Biodiesel $2.85 42,750,000Glycerin 0.14 2,100,000TOTAL 44,850,000
COST OF GOODS SOLD FFA % % of Total Per lb
Feedstock 12 70% 0.18 0.9651680 30% 0.09 0.20682
Processing (chems, labor, energy, maint., test.) 0.38Freight 0.15G&A 0.06CAPEX 0.15TOTAL/gal 1.91198EBITDA/gal $0.94²ANNUAL $16,170,300# of Plants 6 $97,021,800
Years 5 $485,109,000Since the major oil companies will not allow stand-
alone pumps for biodiesel (or ethanol) while still serving the station fuel, a number of companies
such as Propel have struck out on their own offering all blends of biodiesel and ethanol
14
2009 2010 2011 2012 2013 2014 2015 2016$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$2.47
$2.99
$3.85 $3.97 $3.92
2.93
2.42 $2.77
$2.74
$3.27
$4.08 $4.12 $4.00
$3.85
$2.73$2.73
2010 2011 2012 2013 2014 2015 2016
$80 $87 $102 $104 $88 $48 $44
9. Price of Biodiesel and ULSD vs. Crude Oil
Core Technology
THE POWER OF INNOVATION
Note: Includes RINs and on $1 credit a 50/50 split with distributor
15
$104.00 $75.00 $65.00 $45.00$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$4.05
$3.25
$2.95
$1.75
$3.80
$3.20$2.90
$0.98
$2.98
$2.29
$1.68$1.15
$1.95
$1.14
$0.00$0.00
$0.95
$0.75 $0.40
Diesel FuelBiodieselFeedstockRINsEBITDALCFS
2013 2014 2015
Crude Oil
8. Effects of Removing Subsidies From Biodiesel
Core Technology
THE POWER OF INNOVATION
16
9. Business Development Activities
• Developing a joint venture partnership for a
15mmgy biodiesel plant with a major ethanol
company with 400mmgy of ethanol production
at two plants
• Moving forward with a joint venture to operate a
15mmgy biodiesel plant in Carlisle, OH. The
project has been approved for a loan guarantee
by the USDA under Section 906 Rules
• Signed exclusive marketing arrangement with a
Chinese machinery manufacturing company in
Jining, Shandong Province, China. (Jatrodiesel
will be showing at a biofuels trade show in
Shanghai, China, December 10-16, 2015)
• Marketing Super® to 212 ethanol plants in the
U.S. and Canada. Also as a potential upgrade to
194 biodiesel plants in the U.S. and Canada
• Establishing exclusive distributors in Europe,
Africa, S.E. Asian, Japan and India.
Ethanol plants such as the one above see the value in increasing
margins by adding biodiesel processing. The feedstock is corn oil
taken from distiller dried grain (DDGs), the by-product from making
ethanol. A number of existing plant assets can be leveraged in the
biodiesel plant such as process steam and power. . .
The following are on-going events:
Current Initiatives
THE POWER OF INNOVATION
17
EPA Actual and Projected Volumes Through 2017
Table III. The EPA’s actual and required %age of biodiesel blended with ULSD by refiners:2014 2015 2016 2017
1.42% 1.41% TBD TBD
The renewable fuel standard will run through 2022. Each year the EPA will designate the renewable fuel volumes for the following year. Due to political issues, 2015 and 2016 will be announced in November 2015.
EPA Fuel Volumes
2012 2013 2014 2015 2016 20170
200
400
600
800
1000
1200
1400
1600
1800
2000
Actual
Table II. The EPA’s actual and projected renewable fuel volumes (to be announced 11/15)
Proposed
THE POWER OF INNOVATION
18
The majority of biodiesel is purchased by large trading companies
who typically sell to refiners to meet their RFS obligation for
blending renewables. Not so common, but slowly emerging, are
retail renewable fuel outlets that sell an 100% unblended, or a
variety of biodiesel blends with #2 diesel fuel (ULSD)
Offtake AgreementsSpot Buys, Forward Strips and Long Term Contracts
Buyers of biodiesel purchase material three ways:
• SPOT BUYS: Where anything from truck, rail
or barge loads are purchased on a cash (or up
to 10 days net terms) based on a negotiated
one time price
• STRIPS: A price is negotiated against heating
oil and remains constant over a three month
period, typically. For instance, heating oil plus
10 cents would be the price Buyer pays whether
heating oil goes up or down over the period.
The Buyer would hedge this with an “options”
facilitator such as F.C. Stone
• CONTRACTS: Much the same as strips, but the
price agreed to might not follow heating oil, but
rather the cost of feedstock that maintains a
pre-agreed upon margin for the Producer
• Producers and Buyers universally agree to a
price and terms that can not be changed if the
market turns one way or the other
unexpectedly.
THE POWER OF INNOVATION
Incentives & Subsidies
19
Typically it takes two operators to run
a 5 to 20 mmgy plant with one to two
utility personnel
A brief explanation of how theses incentives and subsidies work in the biodiesel industry and specifically for Jatrodiesel:
• RINs:
o These are Renewable Identification Numbers and a single number (38 digits) is assigned to each gallon of biodiesel produced
o The program is managed by the EPA
o Called the Renewable Fuels Standard and by law sunsets on Dec. 31, ‘22
o The program is designed to drive the use of renewable fuels
o When Jatrodiesel sells a gallon, the value of the RIN is part of the sale
o The Buyer then sells the RIN to a broker or directly (if quantity is very large) to a refiner (called by the EPA, “an obligated party”)
o When the Buyer, if a refiner, purchases RINs it relieves them from blending a like amount of renewable fuel into their diesel inventory
o If the RINs are sold to a broker, they can resell to others, but eventually the RIN must be purchased by a refiner
o In order for RINs to be valid at sale, the original Buyer of the fuel MUST blend with a like quantity of diesel fuel
o Biodiesel RINs are worth 1.5 times the market value of RINs
RINs, $1.00 Credit & LCFS – How They Work
Continued . . .
THE POWER OF INNOVATION
Incentives & Subsidies
20
Typically it takes two operators to run
a 5 to 20 mmgy plant with one to two
utility personnel
A brief explanation of how theses incentives and subsidies work in the biodiesel industry and specifically for Jatrodiesel:
• RINs: (continued)
o In practice the Producer doesn’t actually get monetized
directly by the RIN value; rather, when the RIN is sold by
the Distributor, it reduces the Buyer’s cost to have parity
with #2 ultra-low sulfur diesel fuel (ULSD) for its
marketability. This keeps Jatrodiesel’s sales flowing.
For example (11/5/15 market numbers for Houston):
1. Biodiesel sold to Buyer for $2.35 delivered
2. RIN value: $0.56/gal x 1.5 = $0.84/gal
3. ULSD rack price: $1.55
4. RIN adjusted cost of the biodiesel: $1.51
5. From 5% to 20% is blended with ULSD.
RINs, $1.00 Credit & LCFS – How They Work
Continued . . .
• $1.00 Blenders’ Credit:
o I
o n practice the Producer doesn’t get monetized directly by
the RIN value; rather, when the RIN is sold by the
Distributor, it reduces the Buyer’s cost to have parity with
#2 ultra-low sulfur diesel fuel (ULSD) for its marketability.
For example (11/5/15 market numbers for Houston):
THE POWER OF INNOVATION
Incentives & Subsidies
21
Typically it takes two operators to run
a 5 to 20 mmgy plant with one to two
utility personnel
A brief explanation of how theses incentives and subsidies work in the biodiesel industry and specifically for Jatrodiesel:
• RINs: (continued)
o In practice the Producer doesn’t get monetized directly by the RIN value; rather, when the RIN is sold by the Distrbutor, it reduces the Buyer’s cost to have parity with #2 ultra-low sulfur diesel fuel (ULSD) for its marketability. For example (11/5/15 market numbers for Houston):1. Biodiesel sold to Buyer for $2.35 delivered2. RIN value: $0.56/gal x 1.5 = $0.84/gal3. ULSD rack price: $1.554. RIN adjusted cost of the biodiesel: $1.515. From 5% to 20% is blended with ULSD.
o However, there’s an economic element at play here, as usually the price of the biodiesel will be 20 cents or so less than ULSD to drive the market. This abnormality, is caused by the on again-off-again $1.00 biodiesel credit where the 2014 $1.00 credit ran out on 12/31/14, but Congress never came around to extending it to 2015. But they will, almost a certainty, as this has happened twice before in 2010 and 2013, and both times retroactive and why margins are thin now with the expectation of the $1.00 next year that is being equally between Buyer and Seller.
RINs, $1.00 Credit & LCFS – How They Work
Continued . . .
THE POWER OF INNOVATION
Unparalleled Technology
22
Feature Benefits Comments
1 No catalyst required • 20% lower chemical costs• No contamination of by-products No other existing biodiesel technology can match
2 Up to 100% FFA feedstocks• Use high FFA feedstocks w/o conditioning• Blend in any percentage with high or low FFA oils
High FFA feedstocks can cost 30% to 50% less than corn oil, animal fats and virgin oils
3 95%+ Glycerin Purity• Provides 4 to 5 times the price for glycerin versus catalyst-based systems• Increases margin by about 12 to 18 cents per gallon of biodiesel produced
No need for additional processing equipment as no contamination from a catalyst
4 Clear Biodiesel Produced• Biodiesel is clear from biodiesel distillation with no reddish tint from corn oil or other feedstocks used
Clear product easier to sell. 85% of biodiesel is tinted (red, yellow, dark green, gray etc.)
5 Biodiesel Distillation• Superior quality vs. other plants• Easily meet ASTM cold soak spec• Save energy by not using a chiller
Biodiesel distillation produces a far more marketable product
6 Less than 1.5% Yield loss • Regardless of FFA or feedstock type, converts 98.5% of feedstock into biodiesel
Jatrodiesel’s unique “Super” technology enables more product to be processed
7 Highly Efficient Processor • Cuts cost of processing by 1/3rd
• No soaps or contaminants generatedMinimal losses in energy. All unconverted product reused
8 4 Main Stages vs. 10 for Traditional • Easier for operators to learn the system• Less equipment means lower maintenance cost and downtime
Overall lower personnel costs
THE POWER OF INNOVATION
Why Biodiesel (Contd.)
23
7. Corn oil converts easily to biodiesel (on par w/soy)
8. Corn oil blends easily with virgin oils, animal fats,
used cooking oil (UCO) and very high FFA oils
9. Corn oil qualifies under EPA’s RFS2
10. Corn oil qualifies under the California Low Carbon
Fuel Std. with lowest carbon intensity (CI of 4)
11. Corn oil market growing with more and more
Ethanol plants putting in Corn Oil extractors
12. No blend wall issues
13. Almost any diesel engine can use 100% biodiesel
with no engine modifications
14. Most manufacturer vehicle warranties cover use up
to 20% biodiesel with 80% diesel (see slide 12)
Biodiesel is kept on spec by drawing
samples at various points throughout
the processing cycle
THE POWER OF INNOVATION
Jatrodiesel provides its customers with
detailed piping and instrumentation
drawings along with 3-D isometric
renditions of the finished plant
CleanFeedstock
PureMethanol
SUPERProcessor
Decanter Methanol Recovery from Biodiesel
Methanol Recovery from Glycerin
Post RecoveryDecanter
Washingprocess
Biodiesel Distillation
GlycerinNeutralization
GlycerinDecanter
Free Fatty Acids
Biodiesel
GlycerinDay Tank
ImpureMethanol
A
Water recycle
Feedstock
A
B
MethanolDistillation
BGlycerinStorage
Corn Oil IN (from DDGs Processing)
Other Oils IN (Optional)
System Diagram
Acid
25
THE POWER OF INNOVATION
Typical Margins
26
Profit & Loss Proforma for Biodiesel from Corn Oil
Biodiesel fuel supplied to Pilot stations
is produced from a Jatrodiesel-built
plant in the southwest
Revenue Per lb Per GalBiodiesel (w/RINs) & 50% of $1 Credit $2.85Glycerin (>95%) (per gal of biodiesel produced) 0.14TOTAL REVENUE $2.99
Cost of Goods SoldFeedstock (50% @ 12% FFA, 50% @ 85% FFA) 0.14/lb $1.07
Losses from process 1.50% 0.02
Chemicals (methanol, polishing) 0.21
Labor (varies by state) 0.07
Utilities (varies by utility co.) 0.12
Plant Maintenance 0.02
G&A, Commissions 0.08
Shipping to Customer 0.15
Total Processing & Admin Costs 0.67
TOTAL COST 1.74
EBITDA $1.11
THE POWER OF INNOVATION
Typical Operating Budget
27
Biodiesel will typically be used within a
400 mile radius of a plant
THE POWER OF INNOVATION
Biodiesel Market
28
Biodiesel blends with Diesel fuel in any percentage
1. According to DOE, the annual usage of Diesel
fuel in the U.S is 61+ Billion gallons.
It includes both On-road, Off-road and Heating Oil.
2. Biodiesel usage in percentage
1. 2% blend (B2) – 1.2 billion gals/year
2. 5% blend (B5) – 300 million gals/year
3. 10% blend (B10) – 600 million gals/year
3. Federal Mandate under RFS2 drives demand
4. Multiple individual states have mandates
1. NY – heating oil
2. PA, MN and others – All diesel fuel
3. CA – LCFS related usage
Manufacturers Support Biodiesel
29
Up to 20% Biodiesel Blends Covered Under Standard Warranties
THE POWER OF INNOVATION
Users Who Support Biodiesel
30
These Organizations USE Biodiesel
THE POWER OF INNOVATION