1. The Potential Future Impact ofBiotech on the Chemical IndustryConversion of Renewable Feedstocksto Chemicals: technical andeconomical perspectives from theview of a biotechnology playerApril 22nd, 2009Thomas Schfer,Senior Director, BioBusinessTsch@novozymes.com

2. 2World leader in bio innovation and industrialNOVOZYMESbiotechnologyIN BRIEF Ca. 50 % market share in industrial enzymesState-of-the-art expertise in microbiology,biotechnology and gene technologyStrong global presenceSales of more than 700 differentproducts to more than130 countriesSales 2007: ~1.5 bn USDSales 2008: ~ 1.65 bn USD13% of turnover spent on R&DCa. 5150 employees in 30 countries 3. 3Novozymes principles for >10 years:the tripple bottomlineWe imagine a future whereour biological solutionscreate the necessary balancebetween better business,cleaner environment andbetter lives. 4. Novozymes Vision is to deliver4Bio-Innovations in the coming Biobased SocietyWe will deliver biotech solutions from renewable feedstock to consumer & industrialmarkets 5. 5Renewable Chemicals is a Strategic Growth Platformfor Novozymes:Global drivers Support the Business Case Crude oil prices have shown unexpected volatility 6. 6Conversion of Renewables is a Strategic GrowthPlatform for Novozymes:Global drivers Support the Business CaseContinued strong growth in China, India, Russia keeps demand forpetro derived products highfrom 6.7 billion people in 2008 to 9 billion people in 2042-2050new middle classes arising esp. in China, India, LatAm:additional 1 Bio consumersEnergy supply security consequenceGrowing public environmental concernsGoing Green, green mission statements andenvironmental/sustainability goals defined bymany companiesTechnology developments to enable the transition 7. 7We need a variety of sustainable solutions:Biotechnologies are expected to contribute 8. 8We need a variety of sustainable solutions:Biotechnologies are expected to contribute 9. 9928/04/2009NOVOZYMES PRESENTATIONBiotechnology enzymes can contribute- Decoupling use of resources from growthUse of naturalresourcesEnzymes are efficient biological catalysts known Business as usual from any living organism Used in production they can increase efficiency and Enzymatic solutions yield of a wide range of processes in our society With enzymes we can produce more with less and contribute to the decoupling of economic growth and use of naturalEconomic growthresources 10. 10Environmental impact of industrial enzymes andbiosolutions in partnership with customersMINUS Novozymes products contribute with a GHG emission reduction of ca. 20 Mio t CO2 equivalents3,800 KG3,400 KGCO2 REDUCTION USING 1 KG ENZYMEIN DIFFERENT INDUSTRIES :1,300 KGMINUSUP TO 600 KGBIOCATALYSISCEREAL100 KG150 KG 150 KG 200 KG 30 KG40 KGOIL & FATS PAPERTEXTILES BIOETHANOL DETERGENT FOOD CO2 COST PRODUCING 1 KGANIMAL FEED LEATHER ENZYME: PLUS 1-10 KG 11. 11Our first steps into the biobased economy:1st and 2nd generation bioethanolStarchEnzyme e.g. cornprocessFerment-Fermen-able tation sugars process Pre-WasteCelluloseEnzyme treatment biomassprocess processSteen Risgaard, CEO Novozymes: we havecommercialBI EN RG CH33 solutions for CH22 biomass OHdegradation readyby 2010 12. Biofuels reduce our dependency on oil In 2007 biofuel production replaced 1 million barrels of crude oil every day (1) Todays biofuel share of global transport fuel use is 1-2% with great regional variation: Brazil: 50% US: 5% China: 2% EU: 1% This level of biofuel production helped keep oil prices 15% lower than otherwise* Biofuels can meet at least 25% of global need for transport fuel in 2030 without significant increase in acreage used for biofuel feedstocksSource: US DoE, Merrill Lynch, International Energy Agency, UNICA, Renewable Fuel Association, EU Commission(1) ca. 85 Million bbl crude oil are produced daily 13. Novozymes is committed to 2nd generationcellulosic ethanolUnique, global effort: Large projects with a handful of leaders (USA: POET, ICM, ADM, Cargill / China: COFCO / Brazil: CTC) Implication across the entire value chain focusing on integration of key processesFocus on the main feedstock: corn stover & sugar cane bagasseMore than 100 R&D people are working on biomassWell on our way: Department of Energy Grant 2001-2004 (17.8 MUSD) Substantial focus & scale-up work since 2004 New funding allocated by the DoE (2008 2011)Novozymes will have a commercial solution in 2010 to serve thefirst commercial plants 14. Starch & biomass processes are important platform technologies: same input to other productsWe can modify the1fermentation process Starch Enzymee.g. corn processFerment- Fermen-abletation sugarsprocessPre- WasteCellulose Enzymetreatmentbiomass processprocessEthanol is more 2than fuel its a platform chemical 15. Platform technologies:Novozymes technology goes far beyond fuel ethanol- metabolic pathway engineering is key Bio energytransport, energyStarch Enzyme Bio materials e.g. corn processplastic, polymers Ferment- ablesugars Pre- Commodity/ Waste Cellulose EnzymeSpecialty treatmentbiomassprocess chemicals processNewbio materials 16. Novozymes and Cargill have joined forces todevelop commercial solutions for Bio-Acrylic AcidCurrent petro-route for production of Acrylic Acid: Propylene Acrylic Acid Propylene 2000: 430 USD/metric ton Propylene 2008: 1450 USD/metric tonNew fermentation enabled route to Acrylic AcidStarch, 3-Hydroxy- Bio-AcrylicBiomass Glucose Acid propionic acid NZChemical NZ technology:Enzymatic downstreamOptimised pathways Processprocess 17. Acrylic acid is used in a variety of existingmarkets and applications: the existingmarket size is 11 Bio USDillustrative 3.1 Million tons production in 2005 Serving high end industries such as diapers,hygiene products, flocculants, coatings,dispersions and adhesives A myriad of applications Growth 4 % Mainly in SEASuperabsorbersFibers 3-HPAAcrylic Acid Coatings,AdhesivesPolymers 18. The Bio-route for Acrylic acid is competitive withcurrent propylene-based production processesRegional Bio-Acrylic Acid Cost Competitiveness,160 000 tonnes per year140012001000$US per tonne 800 600 400 200 0 US LED GlacialUS Bio-Glacial BZ Bio-Glacial CH Bio-Glacial Net Raw Materials Utilities Direct Fixed Costs Allocated Fixed Costs DepreciationSource: Nexant LED = Leader Technology, propylene based. Costing year: 2006, Crude oil price: 65 USD/bbl(1)Glucose price assumptions: US (14c/lb); BZ (sucrose 7 c/lb); China (11c/lb)Source: Nexant 19. The capital investment in bio AA should not be prohibitiveas it is competitive with its petrochemical equivalent Petrochemical and Bio-Acrylic Acid Investment, 160 000 tonnes per year 400 350 300$US millions 250 200 150 10050 0US LED Crude US LED Glacial US Bio-3HP US Bio-GlacialSource: Nexant Inside Battery Limits Outside Battery LimitsOther Project Costs 20. The bio-process acrylic looks competitive in a mediumcrude oil scenario and even more competitive ifBrazilian sucrose prices appliedBio-Acrylic Acid Indifference Curve, 160 000 tons per year capacity 20 Technology Leader 18 16 Glucose, cts per lb 14 Equals a US net corn price of $4/bu 12 10 8 Potential sucrose prices in Brazil 6 Brazil 4 2 02025 30 3540 45 50 556065 70Crude Oil, $ per bbl 21. 3-HP is a platform chemical on its own andwill potentially enter existing and newmarketshttp://www1.eere.energy.gov/biomass/pdfs/35523.pdf 22. Selected other projects:untraditional partnershipsDuPont/BP: ButanolDanisco/Goodyear: IsopreneAmyris Biotechnologies: Isoprene, alternative fuelLS-9: alternative fuelsRoquette/DSM: Bio-SuccinicMetabolics Explorer: L-Methionine, 1,2-Propanediol,1,3-Propanediol, N-Butanol, Glycolic acidGenomatica: 1,4-Butanediol 23. 23The general challenges are high Todays chemicals are a product of many years of optimisation Costs are generally low Performance is generally top 24. 24Classical Chemistry is highly optimisedillustrative Petroleum based chemistryLevel of optimisationOptimisation: challenge Scale (Ethylene plant SA: 1.5 mio t) Energy efficiency Fixed cost reduction Improved maintenance Sourcing /supply chains Value engineering Plant reliability On-stream time Foundation DevelopmentExpansion Diversification Maturity (1) time(1) Modified from Value Creation, Budde et al. 2006 25. 25Classical Chemistry is highly optimised illustrativePetroleum based chemistryLevel of optimisationchallenge 1865: BASF1920: first (www. BASF.com)ethyleneplant by UnionCarbide1856: Perkin purple dye 1892: Viscose 1933: PEfrom aniline 1933: PVC 1939: Nylon 1941: Polyester 1954: Polypropylene 1958: Polycarbonatetime 26. 26Renewables/Biotech based chemistry is in itsinfancy but has to compete on price &performance illustrative Petroleum based chemistry What isLevel of optimisation the price of yourproduct?challengechallenge Renewables/Biotech based chemistryFoundationDevelopmenttime 27. 27The general challenges are highTodays chemicals are a product of many years of optimisationCosts are generally lowPerformance is generally topYield & productivity for biotech routes must be on top: R&D We can not afford to loose carbon in the future Capex must be affordable Novel downstream processes are neededMost Biorefineries still need to be built: infrastructure and they have to compete with existing economy-of-scale of large petroleum refineries Entry time for new chemicals is traditionally long: strategy As shown for PLA, PHB, PHA Green alone does not sell though consumer awareness increases The industry is focused on price/performanceNew value chain needs to be assembled 28. 28The potentials are significant . Total Value of Chemical products sold in 2003: USD 1.24 trillion - Excluding pharmaceutical and consumer products Here: Output by regionCommodity Chemical Market SizeJapan (2005): ca. 360 Billion USDRoW Virtually all bulk chemicals areproduced from oil and gas today Asia Technological advances andWestern sustained high oil prices suggestEuropethat it is possible to substitutemany bulk chemicals at a lower andUSA less volatile cost using a biologicalroute Japan AsiaUSA Western Europe RoWSource: modified from Value Creation, chapter 1Ed.Budde, Felcht, Frankemlle, 2006, 29. 29 dedicated pioneers have shown it can be done even with new molecules 1,3-propanediolPLA (Polylactic acid) Branched Poly- hydroxy-alkanoatesPoly-hydroxy-butyrate (PHB) 30. 30but also existing chemicals like PE can be made(Braskem, Dow): Ethanol as platform chemical 31. 31Bio-PE has positive impact on GHG emissions 32. 32 The Board of Directors made an important decision to approve the investment of R$488 million (ca. 200 Mio USD) to build a unit producing ethylene made from 100% renewable raw materials. Capacity of 200 kton/year. The green polyethylene unit already has its building licenses and will be installed at the Triunfo Complex. Braskem should become the first company in the world to produce green polyethylene on an industrial scale, with the plant expected to come online in the first quarter of 2011. 33. 33 09/08/2007 1H 2007 Financial resultsThe biobased economy will further drivetriple bottomline Business:Environment EnvironmentBusiness: Futureless emission less emissionFutureEnergy and (e.g.CO2),(e.g.CO2), Energy andMaterials replacement replacement Materialsmarket of brute forceof brute force marketThe biobased economy Trillion USD chemistrychemistryTrillion USDmarkets sustainable sustainable marketswill create significant today today agricultureagriculturebusiness, will bebeneficial for theJobs: Jobs:e.g. in e.g. inenvironment and will developingdevelopingcreate new jobscountriescountries where the newwhere the new feedstocks arefeedstocks areNew value New value chainschains 34. 34Besides technical risks there are generaluncertainties Decreasing crude oil and propylene prices might make a bioroute less cost competitive Pricing for renewable feedstocks might increase raw material costs structure Decreased demand for Bio-Acrylic acid might influence the growth scenarios for the project Infrastructure development might delay the project 35. 35Besides technical risks there are 2009: Jan generaluncertainties15.000 jobs lost in the chemical industry Decreasing crude oil and propylene prices might make a bioroute less cost competitive Pricing for renewable feedstocks might increase raw material costs structure Decreased demand for Bio-Acrylic acid might influence the growth scenarios for the project Infrastructure development might delay the project 36. 36 and potential advantages are many Independence of volatility of crude oil and itsderivatives (energy still needed) Cost competitiveness (depends on crude oilprices and processes) Capex reduction Improved carbon footprints throughproduction and post-consumer value chainincl. reduced GHG emissions and recyclingpotentials Exploit waste biomass Branding of green products into the valuechain Novel molecules unattainable frompetrochemical sources 37. 37ConclusionsWe are witnessing a gradual change in our feedstock The Biobased Economy is coming There is basically no alternative It is challenging - but it is doable and the timing is right Offers exciting opportunities for grain processors, technology suppliers and chemical companies and for developing countries: they own the feedstock of the future major innovations are expected 38. 38 The way forward into the biobased economy will be in overlapping phasesPhase 4 (concept phase): it does not happen 4deploy new tech, build overnightmore infrastructure,invest in new technology,build markets and innovation will go on from then for many years 3Phase 3 (R&D phase):deploy new tech, buildmore infrastructure,invest in new technology,build marketsPhase 2 (initiated):2 deploy new tech, buildmore infrastructure, newvalue chains, invest inPlusnew technology, buildmarkets 1 Phase 1 (today): employ existing technology, build infrastructure and new value chains, invest in new technology, build marketsFoundationDevelopment ExpansionDiversification Maturity (1) 39. 39 The way forward there are several alternatives to create4New Bio- energy (wind, solar, materials biogas, nuclear): keep bio-carbon for materials Bio-refineries 2nd generation:multiple feedstocks to multipleproducts3 Gradual replacement of existing materials by bio- materialsGradual replacement of 2existing materials by bio-materials Bio-refineries 1st generation: specific2nd generation feedstocks to productsfuel ethanol1 1st generation fuel ethanole.g. dry milling, wet milling 40. 40 The way forward Drivers and enablers: Crude oil prices above 504 USD and volatile Technology is matured Policies, subsidies, CO2 credits Stakeholders Communication 3 Labour creation in rural areas (close to feedstock, limited transport of feedstock) 2 Challenges and hurdles: New value chain has to be assembled New infrastructure needed Crude oil below 30 USD/bll Bio-feedstock prices (sugar) above 20 ct/lb 1 No demand No money for investments Economic crisis will cause delays 41. 41Bio-Innovations pave our way towards regainedsustainabilitySustainability index (relative)Sustainable agriculture Future Industrial revolutionFeedstock based Feedstock based PLUS sustainable industrial processesIndustrial revolutioncrude oil based timeHigh emmission load 42. 42Thank YouTsch@novozymes.com