zenergy bplan

7/28/2019 Zenergy Bplan

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Business Plan

for

Contact:Robert Luiten800.585.4407312.281.2901 (outside U.S.)[email protected]

This business plan presents the concept of Zenergy International, Inc. and, as such, contains

confidential, legally protected material. It may not be reproduced, circulated to others or

otherwise disclosed, in whole or in part, without express written authorization. Upon demand

this document must be returned to its source.


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EXECUTIVE SUMMARY

Zenergy International, Inc. (Zenergy) is seeking $5 million for the first round of a $205 milliontotal financing package. The funds will enable Zenergy to capitalize on the growing demand forbiofuels (i.e., fuel derived from renewable resources) by producing automotive fuel derived from

plants or their byproducts. More specifically, Zenergy is focusing its efforts on:

Ethanol produced from sugarcane Biodiesel produced from soybean oil and palm oil

1. STATEMENT OF PROBLEM/OPPORTUNITY

Both ethanol and biodiesel demand are growing. Biofuel producers have excess capacity,however, todays suppliers cant meet current demandmuch less tomorrows increasingdemand. Feedstock farmers also have excess capacity, but they dont have the experience and

know-how needed to sell their crops to biofuel producers. In addition, there are smallerbiofuelproducers with excess capacity, but they lack the experience and know-how needed to sell to thelarge distributors.

Over the last several years, the U.S. has developed new fuel standards for gasoline,recommending that up to 10% ethanol be blended with gasoline. However, current industryprocessing capacity is not able to meet the growing demand for ethanol, and is only able toproduce enough ethanol to meet a demand of 3%. The Energy Policy Act of 2005 triples thebiofuel that must be mixed with gasoline sold in the U.S. Due to health and environmentalconcerns, ethanol is replacing MTBE (methyl tertiary butyl ether) as the preferred oxygenateingredient used in gasoline. Add to this equation the growing market for flex-fuel carswhichuse E85 (85% ethanol, 15% gasoline)and youve got a growing supply problem.

The U.S. has also developed a low sulfur diesel standard. This has encouraged the blending ofdiesel and biodiesel, with biodiesel having the benefits of being non-toxic, biodegradable andsulfur-free. In addition, biodiesel provides similar fuel economy and better engine lubricationthus prolonging the life of the diesel engine. Biodiesel can be blended in any concentration,from 0 to 100% (B100), and used without diesel engine modification. However, current industrycapacity is also unable to meet the growing demand.

2. SOLUTION

Rising fossil fuel prices coupled with growing environmental concerns are making biofuel a costeffective alternative. Zenergy is preparing to build large scale processing plants and biorefineriesin locations close to feedstock farmers, enabling Zenergy to produce biofuels at prices equal to orlower than fossil fuel and biofuel competitors.

Zenergy is in business to bring biofuel to market cost effectively, and can do so because of theirproduction efficiencies and economies of scale. Specifically, Zenergy will:


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1. Manufacture Ethanol and Biodiesel. Zenergy will build its own state-of-the-art ethanoland biodiesel processing plants and biorefineries in both the U.S. and the Caribbean.

2. Sell Processed Feedstock. Zenergy will process feedstock crops of sugarcane, soybeans and

palm nuts directlyfrom farmers. Once processed, Zenergy will either produce biofuel at itsbiorefineries or sell the processed feedstock to other biofuel producers.

3. Sell Byproducts. Zenergy will sell the byproducts from its biofuel manufacturing.Although not a significant revenue source, it reduces expenses by avoiding disposal costs.

4. Trading. Zenergy has been approved on ChemConnect, which is the largest globalchemicals trading platform. This will enable Zenergy to offer its biofuels inventory toglobal members of the exchange, thereby increasing Zenergys visibility in the marketplace,as well as substantially increasing biofuel liquidity traded on the platform.

Why Sugarcane, Soybean Oil and Palm Oil?

Zenergy has determined that sugarcane is currently the only feedstock that can produce ethanolat an economically sustainable level without relying on government subsidies. Sugarcane is afeedstock with a higher energy yield, which means that it produces ethanol more efficiently thancrops such as corn and other grains.

Soybeans and palm trees offer an ideal farming tradeoff when developing biodiesel feedstockcrops. While palm trees have a very high yield per acre and soybean yields are substantiallylower, palm trees take at least 3 years to grow and mature. Soybeans, however, are a crop thatcan be harvested in the same year as plantedso soybeans are an ideal interim feedstock sourcewhile waiting for palm plantations to mature.

3. TARGET MARKETS

Biofuel demand currently outstrips supply, and demand is growing. Overproduction of biodieselfeedstock is impossibleall the farmland in the world cant produce enough biodiesel feedstockto replace all petroleum diesel. Zenergys target production locations include the Caribbean,Central America and the southern region of the U.S. Zenergys primary sales markets includethe many countries and regions that have passed legislations requiring greater use of biofuels,with the U.S., Canada, EU, Brazil and China as prime examples.

4. COMPETITION

The real competition for Zenergy and all the other biofuel producers is fossil fuel. If biofuelprices can meet or beat fossil fuel prices then there will be an unlimited market for biofuel.Although there are many companies currently building biorefineries, it is important to


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understand that all of the announced capacity still comes to less than 5% of U.S. demand. Globalbiofuel capacity in the next three years will still be less than 5% of global demand.

There is no quality differential in a commodity like biofuels since they are all manufactured tointernational standards. Customer loyalty is achieved by competitive pricing, reliable product

availability, efficient delivery systems and relationshipswith competitive pricing being thesingle most important factor.

Zenergys Competitive Advantages:

Management with Industry Expertise. Zenergy has management with experience inrunning large-scale operations, especially ones that encompass the complexities of movinglarge volumes of fuel both regionally and internationally. Specifically, Zenergys CEO,Robert Luiten, brings not only his valuable industry experience, but his relationships with allmajor U.S. gasoline and diesel suppliers and distributorsincluding Shell, Valero, BP,Exxon, Chevron and Sunocowhich will enable Zenergy to hit the ground running and

immediately begin selling its inventory. Zenergy is already working with governmentalagencies in Belize, the Dominican Republic and Guatemala in order to develop itsinfrastructure, local contacts and possible joint ventures.

Locked-In Feedstock Suppliers. As biofuel demand increases, so, too, will the demand forfeedstock. So much so, in fact, that the real competition in biofuels will be for feedstock.Zenergy has developed a groundbreaking strategy to lock-in its feedstock suppliers.

5. MANAGEMENT TEAM

CEORobert Luiten comes to Zenergy with substantial experience in the chemical commodityindustry. This experience not only includes chemical manufacturing, but also the executivemanagement side of the chemical business. Robert has the broad range of skills required tosuccessfully establish and grow Zenergy.

As the COO of an INEOS Phenol division with revenues of more than $1 billion, Robert wasinstrumental in building new manufacturing facilities, expanding existing ones as well asrefurbishing idled plants and returning them to peak operating performance. He was alsoresponsible for identifying acquisitions and bringing them on line. Robert has spent yearscultivating relationships with the major players in the refinery industry, including BP, Shell,Valero, Exxon Mobil and Citgo. These relationships will play a major role in Zenergy rapidlyestablishing itself in the industry.

Furthermore, Roberts expertise in the transportation and logistics industry, both nationally andinternationally, has been the key to his successfully building and maintaining low costmanufacturing facilities that focus on modern, efficient manufacturing techniques. His firsthandknowledge of proven solutions that work will make all the difference in establishing Zenergy asa low cost producer.


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CFOLeonard Maniscalco is a CPA who comes to Zenergy with more than 25 years experience withboth public and non-public companies. Most recently, he held a senior financial position with a

$350 million international manufacturer and marketer of luxury outdoor retail and contractfurnishings. Prior to that he headed up a joint venture between Noven Pharmaceuticals(NASDAQ: NOVN) and Novartis Pharmaceuticals, and grew the joint ventures revenue from$16 million to $120 million in four years. Leonards experience includes 20+ years experiencein senior financial management positions for companies in a range of industries, includingpharmaceuticals, medical devices, electronic security devices and precious metals manufacturing& casting. He began his career as an auditor with Arthur Young & Company.

6. FINANCIAL SUMMARY

FY 07 FY 08 FY 09Year 1 Year 2 Year 3

Revenues:

Trading $68,950,000 $109,500,000 $109,500,000

Own Production - - 704,250,000

Total Revenue 68,950,000 109,500,000 813,750,000

Costs of Revenue:

Trading 66,881,500 106,215,000 106,215,000


Total Cost of Revenue 66,881,500 106,215,000 572,550,900

Gross Profit 2,068,500 3,285,000 241,199,100

Operating Expenses 703,005 2,358,405 2,508,880

EBITDA 1,365,495 926,595 238,690,220

EBITDA Margin 2% 1% 29%

Amortization Expense 66,667 200,004 200,004

Depreciation Expense - 3,229,167 11,479,167

Earnings Before Taxes $1,298,828 $(2,502,576) $227,011,049

Once Zenergy begins generating income (estimated to be within the first six months), thosefunds will be reinvested in order to self-fund several biorefineries. However, additional outsidefunding will be sought in order to bring more plants on-line sooner than would otherwise befeasible. This, in turn, will allow Zenergy to aggressively expand its market share, as well asenjoy economies of scale more quickly.


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TABLE OF CONTENTS

Page

EXECUTIVE SUMMARY ................................................................................................ i

I. THE BUSINESSA. Description of Business ....................................................................................... 1B. Products/Services Offered ................................................................................... 3C. Market Analysis ................................................................................................... 5D. Location of Business.......................................................................................... 11E. Competition........................................................................................................ 12F. Management Team............................................................................................. 20G. Personnel............................................................................................................ 21

H. Application and Expected Effect of Investment ................................................ 22I. Risks Related to the Business ............................................................................ 23

II. FINANCIAL DATAA. Sources and Uses of Funding............................................................................. 29B. Annual Balance Sheet Projections ..................................................................... 30C. Annual Statement of Operations Projections..................................................... 31D. Annual Statement of Cash Flow Projections ..................................................... 32E. Monthly Projected Statement of Operations: FY1............................................ 33

F. Monthly Projected Statement of Operations: FY2............................................ 34G. Monthly Projected Statement of Operations: FY3............................................ 35H. Monthly Cash Flow Projections: FY1 .............................................................. 36I. Monthly Cash Flow Projections: FY2 .............................................................. 37J. Monthly Cash Flow Projections: FY3 .............................................................. 38

III. APPENDICESA. Ethanol Manufacturing Process ......................................................................... 39B. Biodiesel Manufacturing Process ...................................................................... 40C. Management Team Resumes ............................................................................. 41

D. Timeline for Plant Personnel Hiring (detailed).................................................. 45


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I. THE BUSINESS

A. DESCRIPTION OF BUSINESS

Zenergy International, Inc. (Zenergy) is capitalizing on the growing demand for biofuels (i.e.,fuel derived from renewable resources) by producing automotive fuel derived from plants ortheir byproducts. More specifically, Zenergy is focusing its efforts on:

1. Ethanol produced from sugarcane2. Biodiesel produced from soybean oil and palm oil

Initially, Zenergy will buy ethanol and biodiesel from smaller producers who lack the volume,industry contacts and know-how to sell their fuel at competitive prices, and sell it to the worldslarge distributors, such as BP, Chevron, Citgo, Exxon, Shell and Sunoco. In other words,Zenergy will connect small biofuel producers to the large distributors.

Once the necessary funds are secured, Zenergy will build the infrastructure needed to produce itsown biofuel:

Processing plants: for oil extraction and/or sugarcane processing Storage facilities: primarily for soybean oil and palm oil Biorefineries: for ethanol and biodiesel productionZenergy is also developing a reliable feedstock supply to meet its production needs (feedstock isthe raw material used to manufacture biofuel). Zenergys groundbreaking strategies includeoffering select local farmers multi-year purchase contracts with minimum guaranteed pricing(i.e., floor pricing)thus providing farmers with a guaranteed market for their harvest andZenergy with the reliable feedstock supply it needs. Additional strategies include assisting localfarmers with: (i) growing desirable feedstock crops, (ii) improving their farming methods inorder to increase yield and (iii) developing transportation efficiencieswhen farmers are locatedfar from processing plants, costs increase.

The Problem

Both ethanol and biodiesel demand are growing. Biofuel producers have excess capacity andCaribbean farmers have excess capacity, both of whom want to maximize their revenues.

1. Todays suppliers cant even meet current demand, much less tomorrows increasingdemand.

2. Feedstock farmers have excess capacity, but they dont have the experience and know-howneeded to sell their crops to biofuel producers.

3. Many smaller biofuel producers have excess capacity, not the experience or know-howneeded to sell to the large distributors.


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U.S. consumers are frustrated. Petroleum-based fuel prices are rising to the point that disposableincome is being squeezed, with less income available for discretionary spending. Consumershate their dependence on foreign oil, but dont see any real alternative. Simultaneously, thepublics concern for the environment is increasing the demand for fuel derived from renewable

energy sources.

Over the last several years, the U.S. has developed new fuel standards for gasoline,recommending that up to 10% ethanol be blended with gasoline (otherwise known as E10, whichis 10% ethanol and 90% gasoline). E10 requires no adjustments to todays car engines.However, current industry processing capacity is not able to meet the growing demand forethanol, and is only able to produce enough ethanol to meet a demand of 3%. Add to thisequation the growing market for flex-fuel carswhich uses E85 (85% ethanol, 15% gasoline)and youve got a growing supply problem.

The U.S. has also developed a low sulfur diesel standard. This has encouraged the blending of

diesel and biodiesel, with biodiesel having the benefits of being non-toxic, biodegradable andsulfur-free. In addition, biodiesel provides similar fuel economy and better engine lubricationthan petroleum dieselthus prolonging the life of the diesel engine. Biodiesel can be blended inany concentration, from 0 to 100% (B100), and used without diesel engine modification.However, current industry capacity is also unable to meet the growing demand.

The Solution

Rising fossil fuel prices coupled with growing environmental concerns are making biofuel a costeffective alternative. The time is right for biofuel to enter the marketplace as a real alternative tousing fossil fuels. Zenergys industry experience combined with its refinery and gasolineblending expertise is opening new sales channels for small, emerging feedstock producersspecifically sugarcane, soybean and palm growers.

What does all this mean? Todays ethanol and biodiesel manufacturers will have access to alarger, more reliable supply of feedstockleading to an increasing supply of biofuelsleadingto lower biofuel prices in a world where fossil fuel prices are still rising. Meanwhile, Zenergy ispreparing to build large scale processing plants and biorefineries located close to feedstockfarmers or transportation hubs convenient to processing plants. By optimally locating itsinfrastructure, Zenergy will reduce transportation costs and create economies of scale. Thus,Zenergy will be able to sell competitively priced ethanol and biodiesel directly to refiners,distributors and, in some regions, directly to consumers.

Background: How Biofuel Gets From the Soil to the Pump

To understand Zenergys vision it helps to understand how biofuel gets from the farm to theservice station.


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1. The farmer grows the crops (i.e., feedstock) used to produce the biofuel, and sells thefeedstock to the biofuel producer.

2. The biofuel producer processes* the feedstock or buys processed feedstock on the openmarket. By processing we mean that soybean oil is extracted from soybeans, palm oil from

palm nuts and sugarcane juice from sugarcane. Note: In sugarcane processing a step can beadded: removing some of the water from the sugarcane juice in order to turn it intomolasses, which requires less storage space.

3. The molasses, soybean oil or palm oil is then used to manufacture raw biofuel.

4. The producer then sells the raw biofuel to a large distributor, although the raw biofuel isactually transported to a blender (the distributor chooses the blender).

5. The blender formulates the end-product biofuel according to the distributors specifications,and then transports it to the service station.

* Feedstock processing plants must be located close to the farmssugarcane is too voluminous totransport and palms nuts are too perishable.

B. PRODUCTS/SERVICES OFFERED

Zenergy is in business to bring biofuel to market cost effectively, and can do so because of theirproduction efficiencies and economies of scale. Specifically, Zenergy will:

1. Manufacture Ethanol and Biodiesel. Zenergy will build its own state-of-the-art ethanoland biodiesel processing plants and biorefineries in both the U.S. and the Caribbean, eachwith a capacity of 150-250 million gallons of ethanol and 50 million gallons of biodiesel. Allplants will be built so that both soybean oil and palm oil, as well as other plant oils andanimal fats, can be used as feedstock. In addition, all Zenergy infrastructure will be optimallylocated so as to reduce transportation costs and create economies of scale.

Some of Zenergys infrastructure target locations are especially advantageous because theyoffer excellent opportunities to grow feedstock crops nearby. In the case of sugarcane, thefibers left after processing can be burned to produce steam energy, which can power the finalproduction of ethanol. Since molasses has more volume than ethanol, its much cheaper totransport ethanol rather than transporting molasses to a biorefinery. As a result, it is much

more cost effective to process sugarcane and manufacture the ethanol directly on or near thesugarcane farm itself. Incidentally, manufacturing locally has the added advantage ofmeeting local and regional biofuel needs.

However, this is notthe case for soybean and palm oils, in which case Zenergy has the optionof either manufacturing biodiesel at the same location as where it processes the vegetableoils, or transporting the oils to biorefineries located further away. As such, Zenergy will


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have other infrastructure locations that are ideal from a regional perspective in order toprocess the feedstock (e.g., palm oil), and then transport and/or exported it to biorefineries.

2. Sell Processed Feedstock. Zenergy will process feedstock crops of sugarcane, soybeans and

palm nuts directlyfrom farmers. Once processed, Zenergy will either produce biofuel at itsbiorefineries or sell the processed feedstock to other biofuel producers.

3. Sell Byproducts. Zenergy will sell the byproducts from its biofuel manufacturing.Although this is not a significant revenue source, it effectively reduces expenses by avoidingdisposal costs. Below are several examples:

Glycerin is a byproduct of biodiesel manufacturing, and isused as protein-richagricultural feed or in cosmetic industry products, such as soap. The current price ofglycerin is high; however, that is likely to change in the next few years due to increased

biodiesel production (and thus an increase of available glycerin). An alternative is forZenergy to purchase a glycerin-to-methanol converter. Since methanol is one of theingredients needed to manufacture biodiesel, producing its own will allow Zenergy toavoid the expense of purchasing (and transporting) methanol from outside sourcesandthe cost of the converter would be offset by the cost savings. Although the technology isonly one step beyond experimental, it does present a promising alternative.

Soy wheat is a byproduct of soybean oil manufacturing, and is used as a protein-richagricultural feed in the cattle and fish-farm industries.

After sugarcane is crushed and the molasses extracted, the remaining fiber can be burned.The resulting steam can be used in the ethanol manufacturing process while the excesssteam can be converted into electricityand sold to the local utility company.

4. Trading. Zenergy has been approved on ChemConnect, which is the largest globalchemicals trading platform. As such, Zenergy will be using ChemConnect's platform to offerits biofuels inventory to global members of the exchange, thus bringing biofuels to themarket most cost effectively. This will not only increase Zenergy's visibility in themarketplace, but also substantially increase biofuel liquidity traded on the platform.

Why Sugarcane?

Zenergy has determined that sugarcane is currently the only feedstock that can produce ethanolat an economically sustainable level without relying on government subsidies. Sugarcane is afeedstock with a higher energy yield, which means that it produces ethanol more efficiently thancrops such as corn and other grains. Moreover, ethanol produced from sugarcane has a positivenet energy balancei.e., it is energy positive, producing more energy than is used inmanufacturing it. Ethanol produced from corn, however, is energy negative, producing lessenergy than is used manufacture it.


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Ethanols net energy is based on five variables:

1. Energy contained in the final ethanol product2. Energy value of byproducts generated during the production process

3. Energy directly consumed to make the ethanol (e.g., diesel used in tractors, energy used tomake fertilizer, heat energy used in the distillation process)4. Energy indirectly consumed to make the ethanol (e.g., processing plant, etc).5. Quality of the ethanol as compared to the quality of refined gasoline

Some say that it takes as much or more fossil fuel energy to create an equivalent amount ofenergy from ethanol. In other words, the energy needed to run the tractors and process theethanol may be more than the energy derived from burning ethanolbut this ignores energyquality. Poor energy quality results in air and soil pollution and their economic and societalcosts (e.g., medical costs, cleanup costs, etc.). So when environmental factors are also includedin the net energy calculation, ethanol comes out far ahead of fossil fuel.

Why Soybean and Palm Oils?

Soybeans and palm trees offer an ideal farming tradeoff when developing biodiesel feedstockcrops. While palm trees have a very high yield per acre and soybean yields are substantiallylower, palm trees take at least 3 years to grow and mature. Soybeans, however, are a crop thatcan be harvested in the same year as plantedso soybeans are an ideal interim feedstock sourcewhile waiting for palm plantations to mature.

Zenergy is also considering jatropha as a biodiesel feedstock. Jatropha is a hardy tree native tothe Caribbean that grows quickly, establishing itself easily even on arid land. Its droughttolerance means that it requires only 300mm of annual rainfall. It grows especially well in Southand West Africa, and South East Asia. Although a jatropha plantation will produce lessfeedstock than a palm oil plantation, land that is not being used for food production can be madeproductive.

On a related note, although animal fat is an option, it is not an ideal feedstock. It is a lower costfeedstock, but animal fat has limited availability. In addition, biodiesel produced from animal fatfreezes at temperatures too high to be used in colder climates. With that in mind, though,Zenergy may use animal fats as a feedstock for biodiesel sold to warm climate customers.

C. MARKET ANALYSIS

Industry Overview

Demand for biofuel currently outstrips supply, and demand is growing. Meanwhile, Caribbeanfarmers and biofuel producers have excess capacity, all of whom want to maximize their


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revenues. Overproduction of biodiesel feedstock is impossibleall the farmland in the worldcant produce enough biodiesel feedstock to replace all petroleum diesel.

Yet the opportunity to grow feedstock crops is there for the taking. In Guatemala, for example,large tracts of land are available for palm plantations. The Caribbean countries are looking to

convert land use to crop production in order to replace their expensive fossil fuel imports.

Meanwhile, the WTOs 2005 rulings no longer give favorable trade conditions to Caribbeancountries exporting to the EU. As a result, the sugar industries in Belize, the DominicanRepublic and Guatemala are contracting due to the sugar export limitations. It is also importantto note that the demand for refined sugar is declining.

U.S. Biofuel Supply & Demand

U.S. consumers are frustrated. Petroleum-based fuel prices are rising to the point that disposable

income is being squeezed, with less income available for discretionary spending. Consumershate their dependence on foreign oil, but dont see any real alternative. Simultaneously, thepublics concern for the environment is increasing the demand for fuel derived from renewableenergy sources. Once biofuel prices are the same or lower than fossil fuel prices, biofueldemand will see an explosive growth.

Flex-fuel cars are a growing presence in the car industry. Today there are 12 hybrid carmodels available and, according to The Wall Street Journal, more than 20 models will beavailable by 2008. The E85 fuel standard, which is used in flex-fuel cars, brings ethanoldemand to a whole new level.

New fuel standards are being developed that will lead to greater biofuel demand. The EnergyPolicy Act of 2005 (EPAct) increases the amount of biofuel that must be mixed withgasoline sold in the U.S. to triple the current requirement: 7.5 billion gallons by 2012.

MTBE (methyl tertiary butyl ether) is being replaced as the preferred oxygenate ingredientused in gasoline. Due to health and environmental concernsleaking underground fueltanks contaminate groundwater25 states (representing more than 50% of the MTBEconsumed in the U.S.) have banned or significantly limited the use of MTBE. As MTBE isreplaced, ethanol is the most likely substitute because of its favorable production economics,relatively high octane rating and clean burning characteristics.

Ethanol. Todays demand for ethanol not only exceeds supply but exceeds current productioncapacity, which is only able to produce enough ethanol to meet a demand of 3% (E3). To makematters worse, currently U.S. ethanol demand is being met primarily by corn-based ethanol.This is not only energy negative, but it is expensive. Corns yield per acre is low relative tosugarcane, and more fertilizers and pesticides are used. So prices are higheven higher thanfossil fuel prices. So the high price of ethanol is raising the price of gasoline at the pump!


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When comparing ethanol and gasoline prices, it is important to understand that ethanol reducesfuel efficiency. As such, E85 will only be an acceptable fuel alternative if the price of ethanol issignificantly lower than the price of gasoline.

The U.S. Department of Energy estimates todays gasoline sales at 9 million barrels/day. If all

this gasoline were sold as E10, there would be a market of 0.9 million barrels/day for ethanol,which equals 36 million gallons of ethanol per day or 13 billion gallons of ethanol per year.According to the Renewable Fuels Association, a Washington-based trade association for theU.S. ethanol industry, the U.S. has an installed annual capacity of 4.8 billion gallons of ethanol,and an additional 2.8 billions gallons in capacity is under construction. This is still only a littlemore than half of what is needed to convert all of today's gasoline to E10, not considering largescale use of E85.

Biodiesel. The U.S. low sulfur diesel standard, referred to as Ultra Low Sulfur Diesel (ULSD)or S15, has encouraged the blending of diesel and biodiesel. Biodiesel is non-toxic,

biodegradable and sulfur-free, and provides similar fuel economy and better engine lubricationthan petroleum diesel. In fact, the higher the concentration of biodiesel, the greater the benefits.Biodiesel in any concentration can be used without modifying the diesel car engine. However,current industry capacity is unable to meet even the demand for B10 (10% biodiesel, 90%petroleum diesel). Although the lack of production capacity is a problem, even more significantis the lack of biodiesel feedstockmore feedstock plantations are needed.

The DOE estimates todays diesel market at 2.5 million barrels/day or 100 million gallons perday or 36 billion gallons per year. The U.S. government mandates the use of ULSD, whichreduces diesels allowable sulfur content from 500 ppm (S500) to 15 ppm (S15). This newstandard went into effect in June 2006. Beginning October 15, 2006, all diesel sold at the retaillevel must be S15. Because S15 has less lubrication, which could cause excessive wear to adiesel engine, a lubricant must be added. Biodiesels excellent lubrication features alleviate theissue, even by adding as little as 5% (B5).

If all diesel sold today were B10, this would equate to a demand of 3.6 billion gallons per year.Since biodiesel can be mixed with diesel in any ratio without having to alter diesel engines inany way, today's biodiesel market could equate to 36 billion gallons per year. However, today'sinstalled biodiesel capacity is 395 million gallons. This is projected to grow to 713 milliongallons per year in the next 18 months if all announced projects are built. (Source: NationalBiodiesel Board).

International Biofuel Supply & Demand

In 2005 the Kyoto Protocol took effect. Currently there are 164 countries committed to eitherreducing their emissions of carbon dioxide and five other greenhouse gases or engaging inemissions trading if they maintain or increase their emissions. This agreement covers more than60% of global greenhouse gas emissions. As a result of the Kyoto Protocol, the EU is mandating


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the use of biofuels. Biodiesel, for example, meets the lower sulfur limitations that are mandatedfor diesel fuel, while ethanol releases no greenhouse gases.

Brazil. Brazils government aims to become the worlds largest renewable fuel producer. Assuch, they have mandated the use of B2 (2% biodiesel, 98% petroleum diesel) for all diesel sold

in the country beginning in 2008. The mandatory blend will increase to B5 beginning in 2013.It is important to note, however, that current Brazilian biodiesel capacity cannot meet the 2008mandate.

Canada. In 2005 the Canadian government passed legislation requiring 5% renewable contentin Canadian gasoline and diesel fuel.

China. In 2005 China passed its Renewable Energy Law. Their national renewable energyrequirement is expected to increase the use of renewable energy up to 10% by 2020. Effective in2006, the law requires power grid operators to purchase resources from registered renewableenergy producers, and offers financial incentives to do so.

EU. The EU has always had a large demand for diesel fuel. In 2005 the EU began mandatingthe use of E3 and B3, and aims to increase the mandate to E10 and B10 by 2015 or 2020. It isimportant to note, though, that a 10% biofuel mandate exceeds the current production capacity ofproducers worldwide. The EU has set a 2010 target of having 5.75% of its transportation fuelbeing biofuel.

Caribbean. Fossil fuel prices in the Caribbean are 50% to 100% higher than U.S. prices.Despite ample land and locally grown feedstock crops, only a limited supply of biofuel is beingproducedtherefore, demand is greater than productioncapacity. As such, producing biofuellocally is an attractive, viable alternative. Although the Caribbean markets are relatively small,especially when compared to the U.S., they are attractive nonetheless due to higher margins (i.e.,cost of sales is significantly lower there since there is little or no transportation involved). Dueto these higher returns, Zenergy plans to supply local/regional markets before supplying the U.S.In addition, the Caribbeans high cost of electricity adds another appealing dimension to thebiofuel picture. As discussed earlier, excess electricity is a byproduct of the ethanolmanufacturing process and can be sold to local utilities.

Target Markets: Production

Zenergy considers several factors when choosing its production plant locations. These include:

1. Deep Water Access. This allows for large quantity shipments to regions as far-ranging as theU.S., the EU and the Far East. Zenergys customer base can easily shift, depending ondemand and pricing.


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2. Tariffs. Production plants located outside the U.S. benefit from lower wages and the use offoreign flag vessels for transportation. Transportation costs are minimized by avoiding theuse of expensive Jones Act vessels*.

* The Jones Act is a federal statute requiring that all U.S. flag vessels are:a. Built in the U.S.b. Owned by U.S. citizensc. Documented under U.S. law (i.e., registered, enrolled or licensed under U.S. law)d. Staffed so that all officers and 75% of the crew are U.S. citizens

3. Transportation & Logistics. Ethanol cannot be pumped through existing gasoline pipelinesfor two reasons: its flammability and because it attracts water (which leads to corrosion inpiping). As a result, ethanol must be transported to blenders exclusively on its own barges,trucks or rail cars. However, U.S. interstate shipping methods are stretched thin because theyare currently operating at maximum capacity. As a result, it is more efficient and costeffective to locate production plants outside the U.S.thus avoiding the need for expensive

shipping methods since the raw biofuel can be shipped directly to the blenders using largerand more readily available ocean vessels. Note: Biodiesel can be blended at the refinery.

4. Proximity to Feedstock Suppliers. Regions that are attractive feedstock farming locationshave the following characteristics:

Long growing seasons Cheap, abundant land available Markets for selling biofuel byproducts such as protein-rich agricultural feed

Zenergy has identified several regions that are ideally suited for building processing plants andbiorefineries:

Caribbean. The Caribbean is one of the worlds primary sugarcane suppliers. This regionoffers unique opportunities to build 150-250 million gallon ethanol production facilities and 30-60 million gallon vegetable oil processing plants conveniently located near farms offering almostexclusive access to large quantities of sugarcane. Moreover, the sugar industry in both Belizeand the Dominican Republic has left both countries with idle processing plants that can be easilyconverted for ethanol production. Due to ready availability of cheap land, the Caribbean offersgreat opportunities for building ethanol and biodiesel combination unitsmeaning ethanol and

biodiesel plants located at the same site. Combination units will enable Zenergy to enjoysignificant economies of scale.

Several Caribbean governments are actively pursuing the conversion of crops to biofuelfeedstock crops. These crops are in growing demand while the crops that are traditionally grownhave been facing stiffer competition on the international markets. This is meant to reduce theoutflow of their currency and increase the income of their farmers.


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The Caribbean is also attractive because of its tariff exemptions and reductions. The CaribbeanBasin Initiative (CBI) provides for tariff exemptions or reductions for most products from 24participating countries in Central America and the Caribbean region (the program becameeffective in 1984). Products are eligible for CBI duty-free treatment if the following conditionsare met:

The merchandise is imported directly from any beneficiary country into the customs territoryof the U.S.

The merchandise has been produced in a beneficiary country, specifically (i) the goods arewholly the growth, product or manufacture of a beneficiary country, or (ii) the goods havebeen substantially transformed into a new and different article in a beneficiary country.

At least 35% of the appraised value of the merchandise consists of the cost or value ofmaterials produced in one or more beneficiary countries and/or the direct costs of processingoperations performed in one or more beneficiary countries (Note: Puerto Rico and the U.S.

Virgin Islands are defined as beneficiary countries for purposes of this requirement).

Articles which are the growth, product or manufacture of Puerto Rico and whichsubsequently are processed in a beneficiary country may also receive duty-free treatment ifthe following conditions are met: (i) they are imported directly from a beneficiary countryinto the customs territory of the U.S., (ii) they are advanced in value or improved incondition by any means in a beneficiary country, and (iii) any materials added to the articlein a beneficiary country is a product of a beneficiary country or the U.S.

Finally, the Caribbean is an attractive market for selling biofuels directly to service stations.Traditionally, Caribbean countries have imported petroleum gasoline and diesel from the U.S.and Venezuela at prices that, in some cases. are close to double the price paid in the U.S. TheCaribbean countries are eager for cash infusions into their economies and are always on thelookout for ways to improve the income of local farmers. Thus, selling a portion of the locallyproduced biofuel in local markets is very appealing.Target countries: Belize; Dominican Republic

Central America. Central American is appealing for many of the same reasons as theCaribbean. Guatemala, Costa Rica and El Salvador all have free trade agreements with the U.S.in combination with cheap, underutilized land, cheap labor and a long growing season. Inaddition, several of the target countries have shorelines on the Pacific, making shipping toCalifornia very attractive.Target countries: Costa Rica, El Salvador, Guatemala

U.S. (Southern Region). East Texas currently produces sugarcane, although it is transported allthe way to Louisiana for processing. Zenergy can remedy this by building an ethanol plant in theregion. In fact, Zenergy plans to build an ethanol plant with the additional capacity to convert


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imported palm oil and animal fat to biodiesel. In addition, the rice fields in the area can beconverted to more lucrative sugarcane fields.

Target states: Texas, Louisiana (specifically the border area between the two states; e.g.,Louisianas Lake Charles and Arcadia regions, as well as Beaumont and Houston in Texas).

Seasonal Considerations

It is undeniable that biofuel production has a seasonal component. Feedstock supplies depend onthe crop, farm location, length of growing season and harvest time. And then, of course, there isthe weather. Biofuels are made from crops that are subject to weather conditions. Drought,flooding or other weather-related hazards have an impact on feedstock prices, consequentlyaffecting the cost of biofuel. There can be an abundance or a shortage of feedstock. In times ofabundance, Zenergy will use its storage tanks. In times of shortage, Zenergy will either usestockpiled feedstock or import what it needs. Clearly, production costs are lowest during the

harvest season since no storage or importing necessary. Regardless, the key is planning.

Biofuel demand is also somewhat seasonal. For example, the U.S. demand for automotive fuel ishighest from July 4

ththrough Labor Day, with another jump occurring around Thanksgiving.

Zenergy is aware of these fluctuations and has factored them into its calculations.

D. LOCATION OF BUSINESS

Zenergy will have support staff located at each biorefinery, however Zenergys headquarters willbe located in Houston since many of the industrys bio- and fossil fuel refiners are located there.Rent is budgeted at $20,000 per month.

Overhead will be low since only a small group will be running the business. Mostresponsibilities will handled at Zenergys production sites, whereas Zenergys headquarters willbe responsible for sales and operational planning.

Manufacturing Locations Under Consideration

Biodiesel Dominican Republic Guatemala Gulf Coast: primarily areas near Texas/Louisiana borderEthanol Costa Rica Dominican Republic Guatemala


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Gulf Coast: primarily areas near Texas/Louisiana borderAll locations are in industrial areas located at harbors and will allow for future expansion.Operational permits will be required.

E. COMPETITION

Overview

The real competition for Zenergy and all the other biofuel producers is fossil fuel. If biofuelprices can meet or beat fossil fuel prices then there will be an unlimited market for biofuel.Although there are many companies currently building biorefineries, it is important tounderstand that all of the announced capacity still comes to less than 5% of U.S. demand. Globalbiofuel capacity in the next three years will still be less than 5% of global demand.

There is no quality differential in a commodity like biofuels since they are all manufactured tointernational standards. Customer loyalty is achieved by competitive pricing, reliable productavailability, efficient delivery systems and relationshipswith competitive pricing being thesingle most important factor.

Competitive pricing is determined by:

1. Efficient Production. Several production choices can add up to a significant impact on thebottom line.(a) Biorefineries that can produce not only ethanol, but also biodiesel from a variety of

feedstocks (vegetable oils, animal fats).(b) Combining feedstock processing and biofuel manufacturing at one location.(c) In the case of ethanol, burning crushed sugarcane fibers to generate electricity.

2. Location. Proximity to feedstock farms and transportation hubs is key to keeping costs lowand maximizing production efficiencies.

3. Economies of Scale. Transportation, feedstock storage and production are all sensitive toeconomies of scale. For example, on the production side, a larger plant increases efficiency.

4. Relationships. Keeping in mind that price trumps all, strong relationships in this tight-knitindustry are key.

Competitive Advantages

1. Management with Industry Expertise. Zenergy has management with experience inrunning large-scale operations, especially ones that encompass the complexities of movinglarge volumes of fuel both regionally and internationally. Specifically, Zenergys CEO,


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Robert Luiten, brings not only his valuable industry experience, but his relationships with allmajor U.S. gasoline and diesel suppliers and distributorsincluding Shell, Valero, BP,Exxon, Chevron and Sunocowhich will enable Zenergy to hit the ground running andimmediately begin selling its inventory.

Zenergy is already working with governmental agencies in Belize, the Dominican Republicand Guatemala in order to develop its infrastructure, local contacts and possible jointventures.

2. Locked-In Feedstock Suppliers. As biofuel demand increases, so, too, will the demand forfeedstock. So much so, in fact, that the real competition in biofuels will be for feedstock. Inorder to lock-in reliable feedstock suppliers, Zenergy will offer select local farmers 10-15year purchase contracts with minimum guaranteed pricing (i.e., floor pricing), thus providingfarmers with a guaranteed market for their harvests. Zenergy will negotiate the floor priceannually, factoring in the current and expected future price of the biofuel.


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Archer Daniels Midland

Who They Are:Archer Daniels Midland Company (A.D.M.) is one of the worlds largest agriculturalprocessors of soybeans, corn, wheat and cocoa. They work with farmers worldwide to turn thesecrops into soymeal and oil, corn sweeteners, flour, cocoa and chocolate, ethanol and biodiesel, aswell as a wide variety of other food ingredients, animal nutrition and industrial products. Theirglobal transportation network and worldwide facilities, in their words allow them to grow thingswhere they grow best, and sell things where theyre needed most.

More than 20 years ago A.D.M. began making corn-based ethanolthey currently have threelarge plants. A.D.M. recently opened several soybean biodiesel plants and in September 2006they announced a large investment in Brazil in order to start producing soybean-based biodieselthere. A.D.M. is a market leader with 2005 revenues of $36.6 billion and profits of $1.3 billion.Website: www.ADMworld.com

Strengths: Already own biorefineries for ethanol and biodiesel Name recognition and well-respected in the industry Market leader in many agriculture-related industries Very well capitalized Beginning to venture into Central and South America (e.g., Argentina, Brazil) Their biofuel business is increasing due to:

- More states are phasing out the use of MTBE as an oxygenate- Europe has developed mandatory fuel standards requiring that biodiesel be added to diesel

Weaknesses:

Their biofuel profit margins are dependent on U.S. government subsidies, which will notcontinue indefinitely.

What was Learned from Watching Their Operation: Biofuels can be more cheaply manufactured outside the U.S. Selling biofuel outside the U.S. helps the bottom line. A.D.M.s newer production plants are larger than the industry average (thus, improved

economies of scale).


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Ineos Enterprises

Who They Are:INEOS Enterprises is a leading global manufacturer of chemicals and refined products. Based inBaleycourt, France, they has more than 10 years experience in the biodiesel sector. INEOSconsists of multiple decentralized businesses, including recently acquired Innovene (BP), whichgenerates more than $33 billion in revenuemaking INEOS the worlds third largestindependent chemicals company, the UKs largest, and the UK's largest private company.

In October 2006, INEOS announced their strategy to grow its biodiesel business across Europe,the first step of which is to reach at least 600 million gallons of biodiesel output by 2012. Assuch, they plan to make major plant investments in the UK and across Europe.

According to INEOS Enterprises CEO, INEOS Enterprises is aiming to become the first trulypan European supplier of biodiesel to meet the significant growth in demand predicted forEurope. We will build world scale plants using the latest technology to produce high qualityproducts that will be highly competitive in all market conditions. Unlike other regionalproducers, our strategy will see new production facilities located at the very heart of key demandcenters. The existing INEOS operations within these centers would provide us with cost effectiveinfrastructure, a ready-made and fully integrated customer base in addition to access to some ofEuropes very best transport networks. Our intention is to...capture significant market shareacross Europe. We are already in discussions with a number of oil majors and supermarket giantsto secure this additional demand.

The Chairman of INEOS Enterprises states, INEOS is well skilled in commissioning andoperating low cost, high yield commodity plants and has the size and scale that is essential forsuccess in this business. By building on the ready made synergies with our existing Europeanrefining operations, coupled with our existing client base and market contacts, we firmly believethat we have the competitive edge and can develop into Europes premier biodiesel company.Website: www.ineosenterprises.com

Strengths: Already own biorefineries for biodiesel Name recognition and well-respected in the industry Very well capitalized INEOS Refining is the largest independent refiner in the EU. The INEOS biorefinery in Baleycourt, France is operated by INEOS Enterprises and has

been producing biodiesel for more than 10 years. The site is in the heart of Frances secondlargest vegetable oil producing region, and the new investment currently underway at the sitewill allow around 100 million gallons of locally produced rapeseed to be transformed into oiland then biodiesel for supply to the French, Belgian and German fuels markets.


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Weaknesses:

Not interested in any markets outside the EU

What was Learned from Watching Their Operation:

Zenergy is using the same business model as INEOS: Focus on the highest value-addedcomponent in the product chain, and sell directly to distributors/blenders with large scale unitsand low overhead.


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VeraSun

Who They Are:Based in Brookings, South Dakota, VeraSun Energy Corporation (VeraSun) is the secondlargest ethanol producer in the U.S. based on production capacity. They focus exclusively on theproduction and sale of ethanol and its co-products (also known as byproducts). The companyrecently brought its second corn-based ethanol unit online, giving VeraSun a combined ethanolproduction capacity of 230 million gallons/yearthis represents 5% of total U.S. capacity.

Revenue in 2005 was $236 million, with net income of $10 million. VeraSun invested in largerrefineries for corn-based ethanol.

Website: www.verasun.com

Strengths: Large size production plants They already have sizeable production capacity on line.

Weaknesses:

Only active in the ethanol market Ethanol production focuses exclusively on one feedstock: corn

What was Learned from Watching Their Operation:

Larger production plants help lower the manufacturing cost.


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Earth Biofuels

Who They Are:Founded in 2004, Earth Biofuels, Inc. (EBI) is a producer, distributor and marketer of ethanoland biodiesel fuel. Based in Dallas, Texas, EBI uses a vertical model and engages in theconstruction and operation of production facilities, the coordination and management of blendingand transportation services, the marketing and implementation of a national distribution program,and the building of a branded retail presence. In addition, EBI tries to facilitate the passage oflegislative policies that integrate biofuels into the U.S. fuel supply and that provide a sustainablebusiness environment for the American biofuels industry. Earth Biofuels is a publicly traded

company on the OTC Bulletin Board exchange. As a majority-owned subsidiary of ApolloResources International, Inc., EBIs mission is to reduce Americas dependence on foreignenergy and improve environmental conditions through renewable domestic alternatives.

EBI attracted support from actor Morgan Freeman and country musics Willie Nelson, both ofwhom are members of the board of directors. Earth Biofuels has three small biodiesel plants,and announced in September 2006 that they are buying an ethanol plant in Louisiana. Revenuesin the first quarter of 2006 was $1.9 million and $3 million in the second quarter.Website: www.earthbiofuels.com

Strengths: High visibility due to its entertainment industry board members. High visibility due to their branding effortse.g., their own service stations, NASCAR

sponsorships, etc.

Weaknesses:

Not yet profitable, and may never be because their production facilities are too small SGA expenses are too high because they are using their own service stations

What was Learned from Watching Their Operation:By developing their own distribution channels they took on significant fixed costs, which isweakening their bottom line.


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U.S. BioEnergy Corporation

Who They Are:BioEnergy Resources (BioEnergy) is a recent start-up company that is acquiring one andconstructing three corn-based ethanol production plants. They are due to come online in 2007and their combined production will be 300 million gallons. BioEnergy also has five plants in thedevelopment stage, pushing total capacity to 450 million gallons once completed.Website www.bioenergy.net

Strengths: They are building up production capacity in an expanding market.

Weaknesses:

Although they are building a lot of production plants, those plants are not especially large. In the current market, its questionable if BioEnergy paid too much for the production plants.


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F. MANAGEMENT TEAM

CEORobert Luiten comes to Zenergy with substantial experience in the chemical commodityindustry. This experience not only includes chemical manufacturing, but also the executive

management side of the chemical business. Robert has the broad range of skills required tosuccessfully establish and grow Zenergy.

As the COO of an INEOS Phenol division with revenues of more than $1 billion, Robert wasinstrumental in building new manufacturing facilities, expanding existing ones as well asrefurbishing idled plants and returning them to peak operating performance. He was alsoresponsible for identifying acquisitions and bringing them on line. Robert has spent yearscultivating relationships with the major players in the refinery industry, including BP, Shell,Valero, Exxon Mobil and Citgo. These relationships will play a major role in Zenergy rapidlyestablishing itself in the industry.

Furthermore, Roberts expertise in the transportation and logistics industry, both nationally andinternationally, has been the key to his successfully building and maintaining low costmanufacturing facilities that focus on modern, efficient manufacturing techniques. His firsthandknowledge of proven solutions that work will make all the difference in establishing Zenergy asa low cost producer.

CFOLeonard Maniscalco is a CPA who comes to Zenergy with more than 25 years experience withboth public and non-public companies. Most recently, he held a senior financial position with a$350 million international manufacturer and marketer of luxury outdoor retail and contractfurnishings. Prior to that he headed up a joint venture between Noven Pharmaceuticals(NASDAQ: NOVN) and Novartis Pharmaceuticals, and grew the joint ventures revenue from$16 million to $120 million in four years. Leonards experience includes 20+ years experiencein senior financial management positions for companies in a range of industries, includingpharmaceuticals, medical devices, electronic security devices and precious metals manufacturing& casting. He began his career as an auditor with Arthur Young & Company.

Duties & Responsibilities

Each region will be operating as its own division, with each local Operations Manager reportingto the U.S. Operations VP.


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G. PERSONNEL

Robert Luiten will use a decentralized, team-empowered approach to run Zenergyan approachhe has used in the field with great success. Production plants will be brought on line over aperiod of years, and Roberts industry contacts will allow him to fill open positions from a groupof highly qualified people. The following tables outline Zenergys staffing plan.

Table 1. Management

Title Q4-2006 Q1-2007 Q2-2007 Q3-2007 Q4-2007

CEO 175K

Sales & Marketing/Trading VP 120-150K

CFO 120-150K

VP Technical Services 100-120K

Accountant (4) 40-50K

Project Engineer 80-100K

Controller 80-120K

Purchasing Director 90-110K

Feedstock Specialist 60-80K

QC/EHS Manager* 70-90K

Human Resources Manager 70-90K

Logistics Manager 60-90K

*Quality Control/Environmental Health & Safety Manager

Sales & Mktg.VP

CFO Tech Svcs. HRManager

PurchasingDirector

Operations VP& HoustonOps. Mgr.

CEO

Controller

Sales

QC/EHSManager

GuatemalaO s. M r.

CaribbeanOps. Mgr.

BelizeO s. M r.

D.R.O s. M r.

LogisticsMgr.

Accountants

ProjectEngineer

IToutsourced

FeedstockSpecialist


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Table 2. Personnel Timeline & Pay Structure*

2007 2008 2009 2010 2011Title

Qty Pay Qty Pay Qty Pay Qty Pay Qty Pay

Operations Manager12

100-15060-80

2 60-80 1 60-80 1 100-150

Production Foreman1

1

70-90

15-202 15-20 1 15-20 1 70-90

Production Operators1010

40-606-15

26 6-15 10 6-15 16 40-60

Plant Engineer11

70-9015-20

2 15-20 1 15-20 1 70-90

Purchasing Agent12

60-8010-15

2 10-15 1 10-15 1 60-80

Plant Controller12

50-7010-15

2 10-15 1 10-15 1 50-70

Administrative Support12

20-305

2 5 1 5 1 20-30

Maintenance Supervisor12

60-8010-20

2 10-20 1 10-20 1 60-80

Logistical Coordinator 12

40-605-15

2 5-15 1 5-15 1 40-60

QC/EHS Coordinator12

40-605-15

2 5-15 1 5-15 1 40-60

*in thousands

Table 3. Plant Timeline

Plant Location 2008 2009 2010 2011

Houston, Texas 1 1

Dominican Republic 1

Belize 1

Guatemala 1Caribbean 1 1

TOTAL 3 2 1 1

H. APPLICATION AND EXPECTED EFFECT OF INVESTMENT

Zenergy is seeking a first round of $5 million, which will be used as follows:

$ 1,425,000 Capital to fund trading

1,100,000 Operating Expenses plus Taxes1,000,000 Pre-Construction Engineering Studies

475,000 Personnel

1,000,000 Capital Reserve for contingencies

$ 5,000,000 Round 1 Investment


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Once Zenergy begins generating income (estimated to be after the first six months), those fundswill be reinvested in order to self-fund several biorefineries. However, additional outsidefunding will be sought in order to bring more plants on-line sooner than would otherwise befeasible. This, in turn, will allow Zenergy to aggressively expand its market share, as well asenjoy economies of scale more quickly.

$ 30,000,000 Biodiesel Plant #1

30,000,000 Biodiesel Plant #2

40,000,000 Ethanol Plant #1

$ 100,000,000 Round 2 Investment

$ 30,000,000 Biodiesel Plant #3

30,000,000 Biodiesel Plant #4

40,000,000 Ethanol Plant #2$ 100,000,000 Round 3 Investment

Table 4. Biorefinery Timeline

Year Fuel TypeNumber of

BiorefineriesCapacity per Biorefinery

(million gallons)Location

2008 ethanol 1 250 Caribbean

biodiesel 2 50 Guatemala; Houston

2009 ethanol 1 250 Caribbean

biodiesel 1 50 Dominican Republic

2010 ethanol 1 250 Texas

biodiesel 1 50 Belize

2011 biodiesel 1 50 Houston

I. RISKS RELATED TO THE BUSINESS

Zenergy International, Inc. (Zenergy or the Company) has had no operating history as a

producer of ethanol or biodiesel.

Zenergy has no operating history as the Company was formed in July 2006. The Company hasnot earned any revenues in our contemplated ethanol and biodiesel business. Accordingly, itmay be difficult for investors to evaluate its business prospects.

The Companys business is dependent upon the implementation of our business plan, includingour ability to make agreements with suppliers, customers and with respect to future investments.


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There can be no assurance that the Companys efforts will ultimately be successful or result inrevenues or profits.

Moreover, the Companys prospects must be considered in light of the risks and uncertaintiesencountered by an early-stage company and in rapidly evolving markets, such as the ethanol

market, where supply and demand may change significantly in a short amount of time.

Some of these risks relate to the Companys potential inability to:

effectively manage our contemplated business operations; recruit and retain key personnel; successfully create and maintain relationships with ethanol producers and develop reliable

feedstock supplies; and

develop new products that complement our contemplated business.

If the Company cannot successfully address these risks, our contemplated business and theresults of our contemplated operations and financial position would suffer.

The Company is largely dependent upon its officer, Robert Luiten,for management and

direction, and the loss of Mr. Luiten could adversely affect the Companys contemplatedoperations and results.

The Company is largely dependent upon our officer, our President and Chief Executive Officer,Robert Luiten, for implementation of our proposed expansion strategy and execution of ourcontemplated business. The Company does not maintain key person life insurance for Mr.Luiten. The loss of Mr. Luiten could delay or prevent the company from achieving any of itsbusiness plans.

The Companys ability to execute our business plan depends on conditions, the satisfaction ofwhich are not under our control.

The Companys ability to successfully execute our business plan depends on the satisfaction ofseveral conditions. The Companys ability to satisfy these conditions may be, in part or inwhole, beyond our control. The principal conditions to be satisfied include:

reaching definitive agreements for production of ethanol and reliable feedstock supplies forbiodiesel; and the development, construction and operation of company owned productionfacilities;

entering into satisfactory agreements for the sale of ethanol and biodiesel;


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entering into satisfactory agreements for the expansion of existing ethanol facilities that wemay be able to acquire;

Since the Company has yet to begin full operation as a business, there is no certainty that we willbe able to achieve satisfaction of any or all of the above conditions. Furthermore, to achieve

satisfaction, it is likely that the Company will be required to raise substantial additional amountsof capital, including equity capital. The terms on which such equity capital may be raised, ifavailable at all, may be dilutive and otherwise disadvantageous to existing Companystockholders.

The results of operations, financial position and business outlook of the Companys planned

business are highly dependent on commodity prices, which are subject to significant volatility

and uncertainty, and the availability of supplies. Accordingly, any results of our contemplatedbusiness could fluctuate substantially.

Anticipated results may be substantially dependent on commodity prices, especially prices forsugarcane, natural gas, ethanol, diesel and unleaded gasoline.

As a result of the volatility of the prices for commodities, anticipated results may fluctuatesubstantially, and the Company may experience periods of declining prices for our products andincreasing costs for our raw materials, which could result in operating losses.

The Companys contemplated business is likely to be highly sensitive to sugarcane prices, and

generally we will be unable to pass on increases in sugarcane prices to our customers.

The principal raw material we expect to use to produce ethanol and co-products is sugarcane. Asa result, changes in the price of sugarcane can significantly affect our contemplated business. Ingeneral, rising sugarcane prices produce lower profit margins. Because ethanol competes withfossil-based fuels, the Company is not likely to be able to pass along increased sugarcane costs tocustomers. At certain levels, sugarcane prices may make ethanol uneconomical to use in fuelmarkets.

Weather conditions and other factors affecting crop yields, farmer planting decisions and generaleconomic, market and regulatory factors all influence the price of feedstock. Governmentpolicies and subsidies with respect to agriculture and international trade, and global and localdemand and supply also impact the price. The significance and relative effects of these factorson the price of sugarcane and other feedstock are difficult to predict. Any event that tends tonegatively affect the supply of sugarcane, such as adverse weather or crop disease, couldincrease feedstock prices and potentially harm our business.

Fluctuations in the selling price and production cost of gasoline may reduce the Companysanticipated profit margins, if profits are achieved.


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Historically, the price of a gallon of gasoline has been lower than the cost to produce a gallon ofethanol. Ethanol prices are influenced by the supply and demand for gasoline, and ouranticipated results of operations and financial position may be materially adversely affected ifgasoline demand or price decreases.

The Company may be substantially dependent on its suppliers, which may only have one or

two facilities; any operational disruption could result in a reduction of sales volumes andcould cause the Company to incur substantial losses.

Most of the Companys anticipated initial revenues are, and a substantial amount will continue tobe, derived from the sale of ethanol and the related co-products that we plan to produce or resellfrom other producers. Once commenced, our anticipated operations may be subject tosignificant interruption if any of our producers facilities experience a major accident or aredamaged by severe weather or other natural disasters. In addition, our producers may be subjectto labor disruptions and unscheduled downtime, or other operational hazards inherent in the

ethanol industry, such as equipment failures, fires, explosions, abnormal pressures, blowouts,pipeline ruptures, transportation accidents and natural disasters. Any interruption in supply fromour producers will have a material adverse effect on our business.

The Companys anticipated business will be subject to seasonal fluctuations.

The Companys anticipated operating results are likely to be influenced by seasonal fluctuationsin the price of our primary operating input, sugarcane, and the price of our primary product,ethanol. Ethanol prices are substantially correlated with the price of unleaded gasoline,especially in connection with our indexed, gas-plus sales contracts. The price of unleadedgasoline tends to rise during each summer and winter. Given our lack of operating history, theCompany does not know yet how these seasonal fluctuations will affect our results over time.

Growth in the sale and distribution of ethanol is dependent on the changes to and expansion

of related infrastructure which may not occur on a timely basis, if at all, and the Companys

contemplated operations could be adversely affected by infrastructure disruptions.

Substantial development of infrastructure will be required by persons and entities outside theCompanys control for our contemplated operations, and the renewable fuel industry generally,to grow. Areas requiring expansion include, but are not limited to:

additional storage facilities for ethanol and biodiesel; expansion of refining and blending facilities to handle ethanol; and growth in service stations equipped to handle ethanol and biodiesel fuels.


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Substantial investments required for these infrastructure changes and expansions may not bemade or they may not be made on a timely basis. Any delay or failure in making the changes toor expansion of infrastructure could hurt the demand or prices for the Companys contemplatedproducts, impede our delivery of those products, impose additional costs on us, or otherwisehave a material adverse effect on our results of contemplated operations or financial position.

The Companys contemplated business will be dependent on the continuing availability ofinfrastructure, and any infrastructure disruptions could have a material adverse effect on ourbusiness.

The Company may not be able to compete effectively in the U.S. and foreign ethanol andbiodiesel industries.

In the U.S., the Companys contemplated business would compete with other corn processors,ethanol producers and refiners. As of March 2006, the top 12 producers accounted for at least50% of the ethanol production capacity in the U.S. according to the Renewable Fuels

Association.

A number of competitors are divisions of substantially larger enterprises and have substantiallygreater financial resources than the Company plans to have. Smaller competitors also pose athreat. Farmer-owned cooperatives and independent firms consisting of groups of individualfarmers and investors have been able to compete successfully in the ethanol industry. Thesesmaller competitors operate smaller facilities which do not affect the local price of corn grown inthe proximity to the facility as much as larger facilities. In addition, many of these smallercompetitors are farmer-owned and often require their farmer-owners to commit to selling them acertain amount of corn as a requirement of ownership. A significant portion of productioncapacity in the ethanol industry consists of smaller-sized facilities. Most new ethanol plantsunder development across the country are individually owned. In addition, institutional investorsand high net worth individuals could heavily invest in ethanol production facilities andoversupply the demand for ethanol, resulting in lower ethanol price levels that might adverselyaffect the results of the Companys contemplated operations and financial position.

Any increase in domestic competition could result in reduced ethanol prices. As a result, theCompany could be forced to take other steps to compete effectively, which could adverselyaffect the results of our contemplated operations and financial position.

The U.S. renewable fuel industry is highly dependent upon federal and state legislation and

regulation and any changes in legislation or regulation could materially and adversely affect

the results of the Companys contemplated operations and financial position.

The cost of producing ethanol and biodiesel is made significantly more competitive with regulargasoline by federal tax incentives. The elimination or significant reduction in such federal taxincentives or other programs benefiting ethanol and/or biodiesel may have a material adverseeffect on the results of the Companys contemplated operations and financial position.


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The Company may be adversely affected by environmental, health and safety laws, regulations

and liabilities.

As we pursue our business plan, we will become subject to various federal, state and local

environmental laws and regulations, including those relating to the discharge of materials intothe air, water and ground, the generation, storage, handling, use, transportation and disposal ofhazardous materials, and the health and safety of our employees. In addition, some of these lawsand regulations require our suppliers and our contemplated distribution facilities to operate underpermits that are subject to renewal or modification. These laws, regulations and permits canoften require expensive pollution control equipment or operational changes to limit actual orpotential impacts to the environment. A violation of these laws and regulations or permitconditions can have a material adverse effect on our business.


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II. FINANCIAL DATA

This business plan includes information that may be deemed forward-looking within the meaning

of the safe harbor provisions of the U.S. Federal Securities Laws. These include, among otherthings, statements about expectations of future transactions or events, projected financialinformation including revenues, sales of products and performance. Forward-looking statementsare subject to risks and uncertainties that may cause the Company's results to differ materiallyfrom expectations. These risks include the Company's ability to execute its business plans,having the necessary financing, developing appropriate strategic relationships with suppliers andcustomers, raising working capital, acceptance of the Company's products and services, buildinga functional infrastructure, and other such risks as the Company may identify (herein andotherwise) and discuss from time to time. Accordingly, there is no certainty that the Company'splans will be achieved.


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Sources:

Principal's Equity 57,997$

Investment: Phase I 5,000,000

Total Sources 5,057,997$

Uses:

Pre-Startup Expenses 50,000$

Operating Expenses plus Taxes 1,100,000

Pre-Engineering & Due Dilligence 1,000,000

Personnel 475,000

Capital to fund trading 1,482,997

Cash Reserve for contingencies 1,000,000

Total Uses 5,057,997$

Zenergy International, Inc.

July 1, 2006 - June 30, 2007 (FY1)

Sources and Uses of Funding

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Base Case

FY '07 FY '08 FY '09

ear 1 ear 2 ear 3

Assets

Cash 5,207,770$ 16,048,311$ 64,956,302$

Accounts Receivable 1,520,833 1,520,833 15,555,556

Inventory - - 31,422,292

Prepaid Expenses 12,969 40,701 127,738

Total Current Assets 6,741,572 17,609,845 112,061,889

Long Term Assets

Gross Property, Plant & Equipment - 190,000,000 305,000,000

Less: Accumulated Depreciation - (3,229,167) (14,708,334)Net Property Plant & Equip - 186,770,833 290,291,666

Pre-Engineering & Due Diligence Costs 1,000,000 1,000,000 1,000,000

Less: Accumulated Amortization (66,667) (266,671) (466,675)

Net Intangible assets 933,333 733,329 533,325

Transaction closing costs - - -

Total Long Term Assets 933,333 187,504,162 290,824,991

Total Assets 7,674,905$ 205,114,007$ 402,886,880$

Liabilities

Accounts Payable 1,475,208$ 1,475,208$ 11,949,306$

Accrued Expenses 42,872 134,550 422,276

Total Current Liabilities 1,518,080 1,609,758 12,371,582

Long -Term Liabilities

Deferred Tax Liability 189,648 (711,124) 27,392,190

- - -

Total Long-Term Liabilities 189,648 (711,124) 27,392,190

Total Liabilities 1,707,728 898,634 39,763,772

Shareholder Equity

Common Stock & APIC 5,057,997 205,057,997 205,057,997Retained Earnings 909,180 (842,624) 158,065,111

Total Shareholder Equity 5,967,177 204,215,373 363,123,108

Total Liabilities & Shareholders Equity 7,674,905$ 205,114,007$ 402,886,880$

ZENERGY INTERNATIONAL, INC.

Annual Balance Sheets Projections for the Years Ending


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Base Case

FY '07 FY '08 FY '09

Year 1 Year 2 Year 3

Revenues:

Trading 68,950,000$ 109,500,000$ 109,500,000$Own Production - - 704,250,000

Total Revenue 68,950,000 109,500,000 813,750,000

Costs of Revenue:

Trading 66,881,500 106,215,000 106,215,000


Total Cost of Revenue 66,881,500 106,215,000 572,550,900

Gross Profit 2,068,500 3,285,000 241,199,100

Gross Profit Margin (%) 3% 3% 30%

Operating Expenses:

Advertising 10,365 12,000 12,000Computer 6,000 12,000 12,000

Contract Labor 83,500 - -

HR Administration 2,000 4,000 4,000

Insurance - 150,000 150,000

Legal and Accounting 45,015 60,000 60,000

Licenses 80 400 400

Maintenance & Cleaning - 10,000 10,000

Office Supplies 1,200 4,000 4,000

Payroll 362,550 1,265,850 1,329,600

Payroll Taxes & Benefits 108,765 379,755 398,880

Postage/Shipping 1,200 2,400 4,000

Rent - 200,000 200,000

Telephone 5,900 18,000 24,000

Travel & Entertainment 68,000 180,000 240,000

Utilities - 20,000 20,000

Miscellaneous 8,430 40,000 40,000

Total Operating Expenses 703,005 2,358,405 2,508,880

EBITDA 1,365,495 926,595 238,690,220

EBITDA Margin 2% 1% 29%

Amortization Expense 66,667 200,004 200,004

Depreciation Expense - 3,229,167 11,479,167

Earnings Before Taxes 1,298,828 (2,502,576) 227,011,049Tax Rate 30% 30% 30%

Taxes 389,648 (750,773) 68,103,315

Net Income (Loss) 909,180$ (1,751,803)$ 158,907,734$

Assumptions

Long term price for ethanol is $2.05

Long term price for biodiesel is $2.00

Trading has a gross margin of 3%

Ethanol production cost is $1.50/ gallon and includes all fixed and variable cost, including feedstock

Biodiesel production cost is $0.30 and includes all fixed and variable cost, excluding feedstock

Biodiesel feedstock from our own plantations is $1.10, but cannot cover all our demand (25%)Logistical cost is $0.02/gallon in average


Annual Statement of Operations Projections

Biodiesel feedstock cost is $1.40/gallon biodiesel, and excludes any benefits from selling leftover

material as cattle feed and glycerine

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Base Case

FY '07 FY '08 FY '09

ear 1 ear 2 ear 3

Net income (Loss) 909,180$ (1,751,803)$ 158,907,734$

ash flow from operating activities:

Depreciation and amortization 66,667 3,429,171 11,679,171

Plus decrease/(less increase) in:

Accounts Receivable (1,520,833) - (14,034,723)

Inventory - - (31,422,292)

(12,969) (27,733) (87,037)

lus increase / (less decrease) in:

Accounts Payable 1,475,208 - 10,474,098

Accrued Expenses 42,872 91,678 287,726

Net cash provided (used) by operations 960,125 1,741,313 135,804,677

Cash flow from investing activities:

Capital expenditures - (190,000,000) (115,000,000)

Pre-Engineering & Due Diligence Costs (1,000,000) - -

Transaction closing costs - - -

Net cash provided (used) by investing (1,000,000) (190,000,000) (115,000,000)

Cash flow from financing activities:Financing - - -

Other Financing Activities 189,648 (900,773) 28,103,315

Common Stock & APIC 5,057,997 200,000,000 -

Net cash provided (used) by financing 5,247,645 199,099,227 28,103,315

Net increase / (decrease) in cash 5,207,770 10,840,541 48,907,992

Cash at beginning of period - 5,207,770 16,048,311Cash at end of period 5,207,770$ 16,048,311$ 64,956,302$


Annual Statements of Cash Flow Projections

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III. APPENDICES

A. Ethanol Manufacturing Process

B. Biodiesel Manufacturing Process

C. Management Team Resumes

D. Timeline for Plant Personnel Hiring (detailed)


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APPENDIX A. Ethanol Manufacturing Process

The sugarcane is pressed or crushed close to the harvest location and the resulting liquidis referred to as syrup. The water in the syrup is then evaporated with the help of steam.The resulting molasses is fermented, distilled, dehydrated and denatured (optional).

Carbon dioxide, a potentially harmful greenhouse gas, is emitted during fermentation.However, the net effect is more than offset by the uptake of carbon gases by the plantsgrown to produce ethanol. The net result of using ethanol as a fuel is to reduce greenhouse gases. Ethanol produced by fermentation results in a solution of ethanol in water.During ethanol fermentation, glucose is evolved into ethanol and carbon dioxide.

For the ethanol to be usable as a fuel, water must be removed. The oldest method isdistillation, but the purity is limited to 95-96 % due to the formation of a low-boilingwater-ethanol azeotrope. The 96% ethanol, 4% water mixture may be used as a fuel, andit's called hydrated ethyl alcohol fuel.

It is not possible to obtain ethanol of purity > 96 % by distilling any more dilute solution.For blending with gasoline, purities of 99.5 to 99.9% are required, depending ontemperature, to avoid separation. Currently, the most widely used purification method is aphysical adsorption process using molecular sieves.

A molecular sieve is a material containing tiny pores of a precise and uniform size that isused as an adsorbent for gases and liquids. Molecules small enough to pass through areadsorbed while larger molecules are not. It is different from a common filter in that itoperates on a molecular level. For instance, a water molecule may be small enough topass through while larger molecules are not. Because of this, they often function as adesiccant. Molecular sieve can absorb water up to 22% of its own weight.

Often they consist of aluminosilicate minerals or synthetic compounds that have openstructures through which small molecules can diffuse, such as clays, porous glasses,micro porous charcoals, active carbons etc.


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APPENDIX B. Biodiesel Manufacturing Process

Pre-Processing

The soybeans or palm fruit are crushed, and a solvent is used to extract the vegetable oil.

The oil and solvent are then skimmed from the remaining pulp (which can be sold asanimal feed) and filtered to remove any plant parts. The oil and solvent are then heatedin order to extract and recycle the solvent. At this point any remaining water is thenremoved. This yields the crude vegetable oil that is used to produce biodiesel. Thebiodiesel can then be produced on-site, or the crude vegetable oil can be transported toanother location for production.

Biodiesel Production

The crude oil is mixed with methanol and either a heterogeneous catalyst or lye. A

chemical reaction occurs and a two-phase mixture forms: (1) the top layer is biodiesel,ready for use, after a final rinse with water to remove all traces of lye and (2) the bottomlayer is crude glycerin, which is water and glycerin. The glycerin can be purified by usingheat to extract the water, and the glycerin can then be sold.


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APPENDIX C. Management Team Resumes

Robert [email protected]

EXPERIENCE

INEOS Phenol, A Division of INEOS Americas LLC

COOand Vice President 2003-presentResponsible for daily operations as well as defining and achieving strategic mid-termobjectives of $800MM division with a global reach. Recently spear-headed acquisition of a

$400MM raw materials plant. Instrumental in promoting growth and exploringopportunities & synergies among the various INEOS U.S. divisions. Played major role in

expanding the business by more than 30% while reducing fixed costs by 20% withoutdownsizingthis resulted in bottom line returns outpacing industry peers, turning the

business into a cash-generator.

Director of Production1998-2003

Member of the site selection and implementation team of a grassroot phenol factory inMobile, AL. Primary responsibility was to ensure knowledge transfer and to establish themanufacturing organization. Responsible for all manufacturing aspects of the company,with emphasis on building a lean organization with manufacturing excellence and budgetcontrol.

President2003-present

Board member and President for the INEOS U.S. Investment Holding Company (soleshareholder of all assets of INEOS Americas).

Board Member and Vice President2003- present

Board member of INEOS Partners, INEOS U.S. Intermediate Holding Company, and INEOSU.S. Holding Company II, all of which are holding companies used to control the financesof the INEOS enterprises in the U.S. Since December 2005, board member and Vice

President of Innovene LLC and its subsidiaries Innovene Holding Company LLC, InnoveneUSA LLC, Innovene Polymers Inc., Innovene Polyethylene Holding Company LLC, Innovene

Polyethylene LLC, Innovene Olefins LP, and Innovene Polypropylene LLC , as part of thetransition management from the recently acquired former BP Chemicals into the INEOSorganization.

Phenolchemie GmbHAssistant Plant Manager 1995 - 1997

Responsible for the daily operation of a phenol manufacturing unit in Antwerp, Belgium.

Phenolchemie GmbHLab Manager 1993 - 1995

Responsible for setting up the lab organization for a phenol manufacturing facility inAntwerp Belg ium. Establ ished and implemented an Environmenta

zenergy bplan

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