Through the confluence of market and technical factors, the world is witnessing the rapid evolution of greenfield opportunity in biofuels. The current and expected growth of the biofuel market will enable the creation of new, vertically integrated businesses that offer excellent prospects for high return on investment, significant job creation, and long term regional economic development. Lessons are being learned from the recent development of new biofuels projects around the world, and many business models are being employed. Our analysis, based in part on Brazilian, Asian and European biofuel experience, indicates that the most profitable, low-cost and reliable projects will fully integrate agricultural production into a well-designed and managed processing facility with price linkage between inputs and outputs (from farming-to-fuel). It is our conclusion that the location for the most profitable and economically stable biofuels production will be in the tropical and sub-tropical regions because the tropical production of sugar cane, palm and jatropha are the lowest cost sources of the primary feedstocks for the production of bio-fuels.

The scale and complexity of creating global biofuel projects has led Agland Investment Services, Inc. to establish joint ventures with leading experts in bio-fuels to capitalize on the latest research, technology and experience. The leadership in biofuels development is truly international, with Brazil the cost leader in ethanol and Europe and South Asia leading in biodiesel, requiring the coordination of experienced people from these leading areas in the evaluation of projects in selected regions. For example, an Agland led team has completed two comprehensive feasibility studies for the production of ethanol and sugar in Nigeria with a diverse team comprised of production and processing experts from Brazil and the United States and is currently evaluating investment opportunities in Mexico, Central America, South America and Africa.

Project Characteristics

• We focus on the low cost feedstocks and state-of-the-art processing to insure that the integrated system is a low cost producer at each step in the process and overall. This means a project starts at the farm and ends with the fuel.
  • Tropical climates produce the lowest cost feedstock for biofuels:
    • Sugar cane for sugar and ethanol
    • Palm oil or Jathropa oil for biodiesel
  • Concessionary financing and subsidies are often available in developing economies.
  • The tropical cost differences are structural and profound, meaning that in the long term tropical countries will likely become the lowest cost producers of biofuels and the drivers of the biofuels markets.
• We are able to link agricultural production to the value of processing plant output by producing a diverse plant output, thereby insuring stable agricultural and plant income through competing commodity price cycles.
• We focus on projects which enjoy strong political support, either through direct involvement of politically experienced national partners and/or the presence of supporting policies for biofuels development

The impetus for promoting biofuels comes from four key market drivers:

• Petroleum market. The rise in the market price of petroleum products is not viewed as a brief price spike. The 10 Year Forward market price of crude oil remains near $70/barrel, or FOB $1.66 per unrefined gallon. This translates into a refined product cost at $1.75 to $2.00 at wholesale, without considering any subsidies or incentives that may be available. The high cost of petroleum provides a new economic target for alternative fuels. Our goal is to develop only projects that can retain profitability at prices much closer to petroleum's historic average.

• Technology. Important strides have been made in both the improvement of cultivars and yields of key crops such as sugar cane and palm and Jatropha oil coupled with new biofuel processing technologies. This provides the basis for abundant and low cost raw material for conversion to biofuel.

• Government Policies. Governments are becoming more aggressive in promoting alternative fuels, driven by policy objectives such as price stabilization of transportation fuels, reduced reliance on imported oil, the need to promote agricultural production (i.e., for job creation and rural development), and reducing pollution through cleaner fuels. These policy goals create an environment favorable to the development of alternative energies.

• Capital Markets. Alternative fuels have been accepted as a long-term investment opportunity based on prior experience and long-term sales contracts. This favorable investment climate results in domestic and international business opportunities for companies working within the alternative fuel sector.

Economics:

Biofuels derived from the tropical crops such as sugar cane and palm oil are far more cost-effective than biofuels from other feedstocks, including the target prices for cellulosic ethanol. Brazil is the lowest-cost ethanol producer in the world, at 90 cents per gallon, or less for vertically integrated projects. Profitability can be enhanced at the plant level by incorporating complementary products such as electricity cogeneration, yeast, and CO2. By comparison, U.S. corn-based ethanol costs from stand-alone ethanol plants is currently between $1.70 and $2.00 depending on the underlying cost of corn, which has recently exceeded $3.00 per bushel, or $1.10/gallon of ethanol.

Similarly, the fully amortized cost per gallon to produce biodiesel from vertically integrated Palm and Jathropa oil production and processing projects is estimated to be $1.25 per gallon. This is in contrast to the raw cost of the primary US biodiesel feedstock, soybean oil, which is currently in the range of $2/gallon.

By focusing on farm-to-fuel projects that reflect the key three elements of location, price linking and processing diversification we are building a portfolio of candidate projects that offer both short and long term profitability, even if petroleum prices fall to closer to their historic averages. To insure our ability to accurately and efficiently pursue and develop these projects the Agland Investment Services team has built and utilizes proprietary financial and engineering models to evaluate the economic and technical feasibility of proposed new biofuel projects.

The Team:

Agland Investment Services has joined forces with leading experts in the industry to develop integrated agricultural production and biofuels processing/marketing facilities. The team recently completed two farm-to-fuel feasibility studies for the government of Nigeria, and is currently evaluating new projects in Mexico, Central America and Africa.

Agland Investment Services has over 30 years of experience in the successful transfer of agriculture and food processing technology and the creation of new agribusiness ventures, particularly in developing economies. Agland has successfully completed more than 150 agricultural development, alternative energy, natural resource, food-processing, training, and agribusiness investment projects both in California and in over 35 countries. Clients include development institutions such as the World Bank, Asian Development Bank, U.S. Agency for International Development, U.S. Trade and Development Agency, as well as private investors, land owners, and corporations such as Wells Fargo Bank, Labatt Brewing, and the Nigerian National Petroleum company. .

Agland has successfully identified and created agribusiness projects in several developing economies. In Colombia Agland principals developed Floramerica, the first cut-flower export company in the country. Today, the success of Floramerica has led to the creation of a $700 million cut-flower export industry employing over 200,000 persons. In Peru, Agland's efforts created a $40 million sweet onion export industry. Agland Energy, an affiliated company, became a pioneer and the largest supplier of alternative, non-utility supplies of natural gas within the California market in the l980's.

Agland's partners in the tropical biofuels joint venture have extensive experience designing and implementing agribusiness production and processing facilities worldwide. Specific to biofuels, our team has a long history with the sugar industry focusing on the development of engineering and operating plans for sugar processing, ethanol, and cogeneration facilities, both in the U.S. (Hawaii) and in over 26 countries. Projects range from short-term studies to long-term management, advisory and training assignments coupled with engineering design and implementation.

Our team relies on the experience of Brazilian staff and consultants. The Brazilian sugar and ethanol industry has 35 years of experience in developing the most efficient, low-cost sugarcane plantations and ethanol production facilities in the world.

Projects:

Agland currently collaborates with Accenture in the preparation of a comprehensive feasibility study and plans for two integrated sugar cane plantations and sugar/ethanol production plants in Nigeria, with expected investment of over $300 million for each project. As part of this project, Agland has developed a detailed cost model for farm and plant level biofuel production. The client is the Nigerian National Petroleum Corporation. Our team has also recently completed an assessment of ethanol projects in Belize. Other projects are currently being evaluated in Mexico, Peru and Ghana.

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