Bioenergy Advancing grain-based ethanol Advancing grain-based ethanol Peter Halling, Head of...
Transcript of Bioenergy Advancing grain-based ethanol Advancing grain-based ethanol Peter Halling, Head of...
Bioenergy Advancing grain-based ethanol Peter Halling, Head of Bioenergy marketing, Novozymes Claus Crone Fuglsang, Vice President R&D, Novozymes
Martin Parrish, Vice President, Alternative Fuels, Valero
This presentation and its related comments contain forward-looking statements, including statements about future events,
future financial performance, plans, strategies and expectations. Forward-looking statements are associated with words
such as, but not limited to, "believe," "anticipate," "expect," "estimate," "intend," "plan," "project," "could," "may," "might"
and other words of similar meaning.
Forward-looking statements are by their very nature associated with risks and uncertainties that may cause actual results
to differ materially from expectations, both positively and negatively. The risks and uncertainties may, among other things,
include unexpected developments in i) the ability to develop and market new products; ii) the demand for Novozymes’
products, market-driven price decreases, industry consolidation, and launches of competing products or disruptive
technologies in Novozymes’ core areas; iii) the ability to protect and enforce the company’s intellectual property rights; iv)
significant litigation or breaches of contract; v) the materialization of the company’s growth platforms, notably the
opportunity for marketing biomass conversion technologies or the development of microbial solutions for broad-acre crops;
vi) the political conditions, such as acceptance of enzymes produced by genetically modified organisms; vii) the global
economic and capital market conditions, including, but not limited to, currency exchange rates (USD/DKK and EUR/DKK in
particular, but not exclusively), interest rates and inflation; viii) significant price decreases on input and materials that
compete with Novozymes’ biological solutions. The company undertakes no obligation to update any forward-looking
statements as a result of future developments or new information.
Forward-Looking Statements
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Session outline
• State of the U.S. ethanol market
• Innovation; key for performance
• Valero: Views from 3rd largest U.S. ethanol producer
• Innovation priorities
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0
20
40
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2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039
Ind
ex
Gasoline volumes are stable today. 2040 outlook is for lower volumes driven by mileage standards
Ethanol production and outlook in the U.S. – Production has stabilized at 10% of U.S. gasoline consumption + exports
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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Billio
n G
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U.S. ethanol production volumes have stabilized
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600
800
1,000
1,200
1,400
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Millio
n G
allo
ns
U.S. ethanol exports have increased since 2009
0%
2%
4%
6%
8%
10%
12%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
U.S. Ethanol blend:
~10% of gasoline consumption
Strategy – Sustainability – Innovation – Household Care – Bioenergy – Food & Beverages
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CAGR +0.3%
Sources: US Energy Information Agency; annual energy outlook, April 2015, US Department of Agriculture, F.O Licht, Renewable Fuel Association and Houston Biofuel Consultants LLC
Grain-based ethanol market in the U.S. – Novozymes serves a fragmented industry with overcapacity
Enzyme market players and share
Novozymes innovation drives
efficiency & growth
Industry capacity split by technology (15bn gallons/ 213 facilities)
Industry capacity split by producer
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Dry-grind
POET
Wet milling
POET
ADM
Valero
Green Plains
Flint Hills
Cargill
Abengoa
Others2.70
gal/bu
2.85
gal/bu
3.00
gal/bu
Avantec®,
Spirizyme
Achieve®
& Olexa®
New Innovation
2012-2014 2015-2017 Eth
an
ol yie
ld
per
bu
sh
el o
f co
rn
Source: RFA ethanol and Novozymes estaimates
DuPont
+ Others
Innovation can grow the enzyme market, even in a flat production volume market
Strategy – Sustainability – Innovation – Household Care – Bioenergy – Food & Beverages
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-20%
-10%
0%
10%
20%
30%
40%
Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
U.S. quarterly ethanol volume growth rates and Novozymes organic growth (quarter over last year quarter)
NZ org. Bioenergy growth Eth.vol. growth
Avantec® launched
Spirizyme Achieve® and
Olexa® launched
Source: EIA and Novozymes
From bioethanol plant to biorefinery
• Every process step has been improved and optimized over last decade
• From just ethanol and wet distiller’s grains, to also producing corn oil and higher-value feeds
• Achieving higher ethanol yields, while using less corn and energy
• More innovation is coming to improve sustainbility of earnings and footprint
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Strategy – Sustainability – Innovation – Household Care – Bioenergy – Food & Beverages
EVAPORATORS
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Who We Are
World’s Largest Independent Refiner
• 15 refineries, 2.9 million barrels per day (BPD) of high-complexity throughput capacity • Greater than 70% of refining capacity located in U.S. Gulf Coast and Mid-Continent • Approximately 10,000 employees
Large Logistics Infrastructure with Focus on Growth
• General partner and majority owner of Valero Energy Partners LP (NYSE: VLP), a growth-oriented, fee-based master limited partnership (MLP)
• Significant inventory of logistics assets within Valero
Wholesale Fuels Marketer
• Approximately 7,400 marketing sites in U.S., Canada, United Kingdom, and Ireland • Brands include Valero, Ultramar, Texaco, Shamrock, Diamond Shamrock, and Beacon
One of North America’s Largest Renewable Fuels Producers
• 11 corn ethanol plants, 1.3 billion gallons per year (85,000 BPD) production capacity • Operator and 50% owner of Diamond Green Diesel joint venture – 10,500 BPD renewable diesel production capacity
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Financial Snapshot
Ticker “VLO” on New York Stock Exchange
Market Cap. $29.7 billion ($57.77/share on Mar 10, 2015)
Revenues $131 billion (Full Year 2014)
EBITDA $7.6 billion (Full year 2014)
Earnings $3.6 billion (Full year 2014)
Total Assets $46 billion (as of Dec 31, 2014)
Cash $3.7 billion (as of Dec 31, 2014)
Total Debt $5.8 billion (as of Dec 31, 2014)
Total Equity $21 billion (as of Dec 31, 2014)
Credit Rating Investment grade: S&P BBB, Moody’s Baa2, Fitch BBB
Valero ranked No. 10 on the 2014 Fortune 500 list
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Assets Concentrated in Advantaged Locations
Refinery Capacities (MBPD) Nelson
Index Throughput Crude Oil
Corpus Christi 325 205 19.9
Houston 175 90 15.4
Meraux 135 125 9.7
Port Arthur 375 335 12.4
St. Charles 290 215 16.0
Texas City 260 225 11.1
Three Rivers 100 89 13.2
Gulf Coast 1,660 1,284 14.0
Ardmore 90 86 12.1
McKee 180 168 9.5
Memphis 195 180 7.9
Mid-Con 465 434 9.3
Pembroke 270 210 10.1
Quebec City 235 230 7.7
North Atlantic 505 440 8.9
Benicia 170 145 16.1
Wilmington 135 85 15.9
West Coast 305 230 16.0
Total or Avg. 2,935 2,388 12.4
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Valero’s Business Segments
Refining 88%
Ethanol 2%
Corp. 10%
Assets as of 12/31/2014
Oil Refining and Marketing
• As an independent, we don’t produce or own reserves of oil
Ethanol Production
Refining 88%
Ethanol 12%
Operating Income Full Year 12/31/2014
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Ethanol Investments Have Performed Well
Note: See Appendix for reconciliation of EBITDA to GAAP results.
$2,229
$161
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millions
Cumulative Capex and EBITDA
EBITDA CapexOutstanding
Cash Generation
Excellent Acquisitions
Competitive Advantages
• 11 plants acquired between 2Q09 and 1Q14 for $794MM, less than 35% of replacement value
• 1.3 billion gallons total annual production
• Scale and location in corn belt
• Operational best practices transferred from refining
• Low capital investment
• $2.2 billion cumulative EBITDA generated since acquisitions
• $161 million cumulative capex excluding acquisition costs
Importance of Technology in Biofuels
General • Biofuels is a relatively new industry and the technology is changing rapidly • We constantly evaluate the economics of new technologies to stay competitive
Rate • New enzymes allow thicker and faster fermentations • Allows for increased plant capacity without adding equipment
Yield • New enzymes increase ethanol yield by unlocking “bound up” starches • Also increase corn oil yield by unlocking “bound up” oil
Cost • The enzymes must by attractively priced relative to alternate technologies (whether capital or expense)
– Fine grind technology – Additional fermentation capacity, etc.
Trials • Trials are manpower intensive and burdensome • Must be mindful of unwanted side effects (fouling, etc.)
In the end, new enzymes typically “win”
Product Performance
Continuous Improvement
Technical Support
Total Cost of Ownership
Passionate about the success of
both the Customer and
Supplier
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What is Important in a Supplier?
What’s in a corn kernel? – Refining for multiple revenue streams and lowest cost position
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1 bushel
56 lbs
Starch 34.7 lbs
Sugars 1.0 lbs
Protein 4.8 lbs
Oil 1.8 lbs
Cellulose 1.6 lbs
Hemicellulose 3.2 lbs
Water 8.5 lbs
Germ
(high in oils)
Endosperm
(starch)
Pericarp
(gluten, high
in protein)
Bound oil Oleosin protein
Hull
(fiber)
Further innovation targeted, along different paths – Novozymes to launch new innovation in 2015
2.70
2.80
2.90
3.00
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3.20
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3.50
2012-2014 2015-2017 2018-? 2020+
Eth
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bu
sh
el o
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al/b
u
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Sta
rch
&
Sugar
Fib
er
New processes
and biological
solutions convert
corn fiber into
ethanol
New enzyme and
yeast-based
innovation
Avantec®, Olexa®
& Spirizyme
Achieve®
Remaining fiber
pool potentially
converted into
ethanol
Innovation direction
Starch
Fiber
Increasing ethanol yield Increasing throughput Reducing other costs
Converting fiber into ethanol
Our ambition
Learn in partnership and through a strong presence at plants:
• Higher ethanol yield and throughput
• Low residual starch and ability to access beyond starch
• Co-product yield increase (corn oil)
• Co-product value increase (high-protein DDGS)
• Process low-value corn components to high value outputs (e.g. corn fiber cellulose to ethanol
• Reduction of low value by-products (e.g. glycerol, lactic acid, etc.)
Strategy – Sustainability – Innovation – Household Care – Bioenergy – Food & Beverages
Creating Unique Innovation for the
Biofuel Industry Using a Broad
Biotechnology Toolbox
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protease cellulase
gluco-amylase
alpha-amylase
yeast phytases ?
Conclusion
• U.S. ethanol industry constantly becoming more efficient and cost-effective
• U.S. ethanol production tracks gasoline consumption and exports today. Uncertainties remain around future volume growth
• Biological solutions are a CAPEX-light means of improving plant profitability and sustainability
• Continuing innovation opportunities exist to add more value over the coming years
Strategy – Sustainability – Innovation – Household Care – Bioenergy – Food & Beverages
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