BIODIESEL INCORPORATED

1. BIODIESEL INCORPORATED Group 2 M997Z229 DamarPambudi M997Z234 Ricardo M. Dukha Jr. M997Z217 Do Nguyen Yen Nhi M997Z247 Nguyen Tan NhatDuy

2. The Project --- “The challenges & opportunities in the emerging renewable energy industry & the detrimental effect to environment with the use of non-renewable sources of energy.” • This case presented us the possibility of using biodiesel as an alternative for conventional diesel that we had been using since age. • It aims to identify the market drivers, the possible flaws, the best financing that will guarantee return, the form of business operation &, in general, viability of this kind of business

3. Biodiesel as a Product • Biodiesel is the name of a clean burning alternative fuel, produced from domestic, renewable resources. • It is made through a chemical process called transesterification, whereby the glycerin is separated from the fat or vegetable oil.

4. Historical Background • 1853 – Transesterification of a vegetable oil was first conducted by scientists E. Duffy and J. Patrick • 10 August 1893 – Rudolf Diesel’s prime model, a single 10 ft (3 m) iron cylinder with a flywheel at its base, ran on its own power for the first time in Augsburg, Germany, on running on nothing but peanut oil. In remembrance of this event, 10 August has been declared "International Biodiesel Day". • Throughout the 1990s, plants were opened in many European countries, including the Czech Republic, Germany and Sweden. France launched local production of biodiesel fuel (referred to as diester) from rapeseed oil, which is mixed into regular diesel fuel at a level of 5%, and into the diesel fuel used by some captive fleets (e.g.public transportation) at a level of 30%. Renault, Peugeot and other manufacturers have certified truck engines for use with up to that level of partial biodiesel; experiments with 50% biodiesel are underway. During the same period, nations in other parts of the world also saw local production of biodiesel. • 1998 – the Austrian Biofuels Institute had identified 21 countries with commercial biodiesel projects. 100% Biodiesel is now available at many normal service stations across Europe. • September 2005 – Minnesota became the first U.S. state to mandate that all diesel fuel sold in the state contain part biodiesel, requiring a content of at least 2% biodiesel. • 2008 – American Society of Testing Materials (ASTM) published new Biodiesel Blend Specifications Standards.

5. Therefore… • Biodiesel is a domestic, renewable fuel for diesel engines derived from natural oils like soybean oil, and which meets the specifications of ASTM D 6751. • Biodiesel can be used in any concentration with petroleum based diesel fuel in existing diesel engines with little or no modification. Biodiesel is not the same thing as raw vegetable oil. It is produced by a chemical process which removes the glycerin from the oil.

6. Strengths & Opportunities • Environmental effect of biodiesel • Lower emissions over conventional diesel compared, & the ozone-forming impact of it is nearly half of that of petroleum fuel • Lifecycle Effect • Depleting natural resources as source of petroleum diesel • Almost zero release of carbon dioxide into the atmosphere • Environmental consciousness of customers • Availability of raw materials • Feedstock & crop residue • Sustainable source of diesel for the community • Additional employment, as well as source of income, to the people of the community • Population density in the locality, which will be the consumers • Better engine performance for the biodiesel users Q.2: What are the market drivers should they research and be aware of?

7. Characteristics • Biodiesel has better lubricating properties and much higher cetane ratings than today's lower sulfur diesel fuels. Biodiesel addition reduces fuel system wear,and in low levels in high pressure systems increases the life of the fuel injection equipment that relies on the fuel for its lubrication.  • The calorific value of biodiesel is about 9% lower than regular petrodiesel. Variations in biodiesel energy density is more dependent on the feedstock used than the production process. It has been claimed biodiesel gives better lubricity and more complete combustion thus increasing the engine energy output and partially compensating for the higher energy density of petrodiesel. • Is Biodiesel the same thing as raw vegetable oil?No! Fuel-grade biodiesel must be produced to strict industry specifications in order to insure proper performance. It is the only alternative fuel to have fully completed the health effects testing requirements of the 1990 Clean Air Act Amendments. Raw vegetable oil cannot meet biodiesel fuel specifications.

8. Weaknesses & Threats • Limited floor space of the community, especially in the city • Scarcity of raw materials due to industrialization • Number of farmers & members of the community that will produce raw materials • Possibility of decentralized production • Lower market price but also lower quality • Risk of plant & facilities maintenance • Biodiesel production could be costly • Increase in the price of plants as raw materials Q.3: What are the flaws in the current business strategy?

9. Cooperative Business • Therefore, as the incorporators, the farmers themselves will invest through capital equipment costs. Additional funding will come from lending institution, with the guarantee of paying it back • Since this is a proposal for the sustainability & development of certain community, grant is most likely the source of funding. To ensure life of the business, linkage to commercialization must be done. That includes predetermined wholesale consumers Q.4: What type of financing should they use if they choose to go forward with this?

10. Cooperative Business • A coop is owned & controlled by the members, with self-reliance & self-help being key characteristics-ideal for the implementation of the emerging & disruptive innovations • This model had been successfully used to allow small farmers to maintain a competitive edge against the larger cooperative farming organizations. It had gained its popularity across the U.S. • With the use of this form they can utilize the collective purchasing power of the coop to obtain capital-intensive equipment & to gain economies of scale • Also, they will have the chance to increase negotiating power, allowing it to • Stabilize crop pirces & biodiesel output • Gain access to higher-volume contracts Q.4: What type of financing should they use if they choose to go forward with this?

11. Distribution Channels • Farmers itself, who are producing the raw materials, will be the wholesale consumers as well • Retail distribution will be available from the gasoline station & petroleum-based infrastructure in the locality • With the largest volume of production possible, they can expand distribution to local commuters vehicle Q.5: What types of distribution channels should they go into?

12. Internal Organization/Next Step… • Put someone in-charge & organize a group that will help to facilitate doing of things. • Someone will establish the clear vision & mission of the company • People that will conduct further research & development to improve more the project & make it a investment worthy project • Attract awareness & enthusiasm of possible investors by publicizing the paper in professional manners. • Set beehive of activities like workshops with key people in the community • Join fairs related to Clean Air Act, to give highlight with the propensity of this business as environmental-friendly product • Enhance management skills of the people in the group Q.6: How can they improve their chances for success?

13. Promotion Europe • EU announces total exemption (reduction) of tax on pure & low blended bio fuels for at least 6 years w.e.f. 01.01.2004 extendable for another 6 years. • Effective Reduction in duty in Germany 587 $/MT • Adoption of Directive 2003/30/EC of The European Parliament And of The Council of 8th May 2003 promotion of the use of bio fuels for transport. United States • "Consumers and businesses need reliable supplies of energy to make our economy run so I urge you to pass legislation to moderniz our electricity system, promote conservation, and make America less dependent on foreign sources of energy."-Mr.GeorgeW.Bush • A biodiesel tax incentive was included in the Final Energy Bill. 1 cent per % point of biodiesel blended with petroleum diesel. Q.7: What is the next step?

14. Europe • EU Finance Minister adopted a political agreement to allow Governments to exempt transport bio fuels,such as biodiesel,from Excise Duties applied to Conventional Fuels. • EU target for bio fuels : At least 2% of total petrol & diesel within transport sector by 2005, to increase by 0.75% each year thereafter to reach 5.75% by 2010. • EU announces exemption of Tax on pure & low Bio fuels for at least 6 years w.e.f. 01.01.2004 • Germany • A total exemption from the Excise Duty on Mineral Oil for pure & blended Bio fuels w.e.f. January 2004 up to 31st December 2009,which is based on % of Bio fuels included in Final blend. Higher the proportion,greater the reduction. • No excise tax for biodiesel substituting standard fuels,either unblended or blended with fossil diesel in the vehicle tank. • The 2003 Budget Bill allows for a complete exemption of Excise Duties of up to 409 Euro / Kl on all fuels derived from bio mass including Biodiesel. • Tax incentive for VOME (470 Euro/M3) includes Carbon tax incentive & only applies to pure VOME.

15. France • Biodiesel to substitute 5% of Diesel fuel by 2005. • Excise Taxes on Petroleum products do not apply to Bio fuels. • Tax incentive adopted for VOME mixed with diesel within allotted quota, 320,000 MT/year for Biodiesel. • Austria • The Austrian Law on Tax Reforms 2000 exempts the use of pure Bio diesel & the blending of it . • 100 % tax exemption on pure Biodiesel • 100% tax exemption if up to 2% biodiesel is blended with diesel fuel • Currently a tax incentive of 290 Euro/M3 applies to pure VOME used in motor fuel blends up to 2%. • United Kingdom • UK Government has EU targets to replace 2% fossil fuels by renewable fuels by 2005, to reach 5% by 2010. • UK Government offered 20 pence per litre duty incentive for Biodiesel on January 1,2003. • UK is authorized to apply a differentiated rate of Excise Duty to fuels containing Biodiesel

16. Thank You!