January 27, 2003

NADB RGVSG Project ReviewNADB RGVSG Project Review

Summary Presentation

San Antonio, Texas

January 27, 2003

January 27, 2003

Introducing Pollutech’s TeamIntroducing Pollutech’s Team

Richard Laughton– Project Director– NADB Compliance– BECC Step 2– Compliance Issues– Risk Assessment– Reporting

Greg Brown– Project Manager– Technical Analysis– Financial Review– Regulatory Permits– Project Feasibility– Reporting

January 27, 2003

Project Project DescriptionDescription

The project is a clean energy and air quality improvement project as defined under the BECC/NADB mandate expansion.

The project sponsor is the sugar cooperative identified as the “Rio Grande Valley Sugar Growers, Inc.” (RGVSG).

FOR MORE INFO...

http://www.pollutechinternational.com/jobs/nadb/

January 27, 2003

RGVSG FacilityRGVSG Facility

The project is located 2½ miles west of Santa Rosa, Texas (Hidalgo County) in the Lower Rio Grande Valley on Highway 107.

January 27, 2003

Project GoalsProject Goals

Review proposed system improvements in terms of capacity and operative compatibility with existing facility and expected performance, primarily focussing on equipment related to the co-generation from bagasse, air quality improvements, water and energy savings, and potential waste reduction.

Review and validate proposed technical, financial, operational, and environmental claims, costs associated with system improvements, and electricity sales.

January 27, 2003

Technical ViabilityTechnical Viability

basic systems processes and technologies; O&M experience and requirements; technical specifications and design; energy production and sales estimates; proposed environmental efficiencies; cost savings, emissions credits, and environmental improvement-related credits

January 27, 2003

Project Project TechnologyTechnology

Upgrades to bagasse handling system;

New higher efficiency boiler; and

New (rebuilt) turbine generator.

January 27, 2003

Project Project ResourcesResources

NADB Project Manager RGVSG Management Team TCEQ Industry and Approvals Staff Schaffer & Associates, LLP Turner Collie & Braden Inc. Pollutech International Limited

January 27, 2003

Review Review ProceduresProcedures

Background document review;Site inspection and interviews;Consultants reports and inquires;Regulatory analysis; andTechnical and financial analysis.

FOR MORE INFO...

1) Pollutech Technical Review Report

2) Executive Summary Report

January 27, 2003

Project TimelineProject Timeline

Pollutech Report January 23, 2003 TCB BECC Step 2 February 3, 2003 BECC Approval March 20, 2003 NADB Approval June 2003 Bagasse upgrade September 2004 Boiler and GenSet April 2005

0102030405060708090

100

2003Q1

2003Q2

2003Q3

2003Q4

2004 2005

January 27, 2003

Key ConcernsKey Concerns

Reduction in air emissionsChange to net power exporterCompliance with BECC Step IITechnically viable and sustainableFits in with RGVSG long term plans

January 27, 2003

The Detailed AnalysisThe Detailed Analysis

Review Existing Process Analyze Proposed Upgrade Projected Power Capacities Project Air Emissions The Financial Analysis

January 27, 2003

Key FactorsKey Factors

Sugar Policy (WTO and Farm Bill) Weather Conditions Supply of Irrigation Water Environmental Limits (air

permits) Grower co-operation and

education Plant Production Capabilities

January 27, 2003

Process FlowsheetProcess Flowsheet

January 27, 2003

Proposed Plant UpgradesProposed Plant Upgrades

Schaffer Stage 1– Production plant upgrades– Plant increase to 20,000 tcd

Schaffer Stage 2– Bagasse handling upgrades– Power plant upgrade (boiler & turbine)

January 27, 2003

Proposed Plant UpgradesProposed Plant Upgrades

As a result of other restrictions on the plant capacity increase (i.e. production quotas, growers capabilities, financing capabilities) there is no immediate plan to increase the production capabilities through the Phase 1 expansion.

However, the positive economic and environmental benefits of the proposed Phase 2 expansion do warrant those tasks being undertaken at this time.

January 27, 2003

Proposed Stage 2 Plant UpgradesProposed Stage 2 Plant Upgrades

Bagasse Handling Upgrades– conversion of all bagasse conveyors to fully

automated (PLC controlled) belt conveyors (for an increased capacity to handle 20,000 tcd)

– expansion and upgrade of the bagasse storage building

– conversion of the boiler building (height and length) to handle the modified bagasse conveyor system and to allow for the new boiler #5

January 27, 2003

Proposed Stage 2 Plant UpgradesProposed Stage 2 Plant Upgrades

Power Plant Upgrade (Boiler & Turbine)– installation of a new high efficiency boiler (#5)

with corresponding reduction in the use of the existing boilers (#’s 1,2,3,4)

– new condensate storage tank;– rebuilt 6,000 KW turbine generator to replace

one of existing 2,500 KW turbine generators

January 27, 2003

Power ProductionPower Production

January 27, 2003

Proposed OperationProposed Operation

Plant Operation Old Boilers

(% capacity)

New Boilers

(% capacity)

10,000 tcd 34 90

13,500 tcd 67 90

15,000 tcd 85 90

January 27, 2003

Proposed Power CapacitiesProposed Power Capacities

Power Analysis

MW Produced

MW Purchased

MW

Sold

MW

Used

Current 4.3 1.7 0.0 6.0

10,000 tcd 9.6 0.0 5.0 4.6

13,500 tcd 11.8 0.0 4.2 7.6

15,000 tcd 14.0 0.0 9.0 5.0

January 27, 2003

Air EmissionsAir Emissions

January 27, 2003

Projected Air EmissionsProjected Air Emissions

Emission Analysis

CO tons/year

NOx tons/year

PM

tons/year

VOC tons/year

Current 2,458 482 385 157

10,000 tcd 1,320 439 198 79

13,000 tcd 2,191 609 335 134

15,000 tcd 2,564 682 393 158

January 27, 2003

Allowable v. Actual EmissionsAllowable v. Actual Emissions

0

500

1000

1500

2000

2500

3000

3500

4000

Allowable Emissions Actual 2001 - 2002Emissions

Air

Em

issi

on

s (T

on

s p

er

Ye

ar)

CO

SO2

TSP

NOx

VOC

January 27, 2003

Projected Air EmissionsProjected Air Emissions

0

500

1000

1500

2000

2500

3000

3500

4000

Actual 2001 -2002

Emissions

ProjectedEmissions at

10,000 tcd

ProjectedEmissions at

13,500 tcd

ProjectedEmissions at

15,000 tcd

Air

Em

iss

ion

s (

To

ns

pe

r Y

ea

r)

CO

SO2

TSP

NOx

VOC

January 27, 2003

Financial Analysis - Project CostsFinancial Analysis - Project Costs

Financial

Analysis

Bagasse Handling

Boiler Turbine Generator

TOTAL PROJECT

Project Cost (10% contingency)

$6,422,532 $13,986,117 $3,986,117 $23,826,937

January 27, 2003

Financial Analysis - Cost Financial Analysis - Cost SavingsSavings

Component Bagasse Handling Boiler & Turbine

Conveyor Operation $112,478

Bagasse Storage $135,000

Boiler Maintenance $841,000

Electricity $312,120

Natural Gas $250,000

Excess Power ________ $450,000

TOTAL $247,478 $1,853,120

January 27, 2003

Financial Analysis - Payback PeriodFinancial Analysis - Payback Period

Cost Component

Bagasse Handling

Boiler & Turbine

Total Project

Total

Cost

$6,422,532 $17,384,405 $23,826,937

Annual Cost Savings

$247,478 $1,853,120 $2,100,598

Payback Period

26.0 Years 9.4 Years 11.3 Years

January 27, 2003

Plant Environmental ProgramsPlant Environmental Programs

TCEQ Site Assistance Visit (P2SAV)Emerald Consultants Compliance AuditEPA Pilot EMS ProgramRoutine Regulatory Compliance

January 27, 2003

Air Quality ImprovementsAir Quality Improvements

- 42% at 10,000 tcd - 0.6% at 13,500 tcd + 9.0% at 15,000 tcd

January 27, 2003

Water Quality IssuesWater Quality Issues

100% RecycleHigh EvaporationStormwater PlanOn-Site WWTP

January 27, 2003

Other Environmental IssuesOther Environmental Issues

Solid WasteChemical WasteTRI (no reports)EMS (in process)

January 27, 2003

Emission Reduction CreditsEmission Reduction Credits

ERCDERCsPPA Options

January 27, 2003

General Project ValidationGeneral Project Validation

Is the plant proposing to use production and power generation technology that would be used by a prudent owner of a similar facility?

Is the pollution abatement equipment that is proposed BACT-EA?

January 27, 2003

General Project ValidationGeneral Project Validation

Will the upgraded facility be able to produce more power?

Will the total air emissions from the upgraded facility be significantly less than the existing?

January 27, 2003

General Project ValidationGeneral Project Validation

Will the project result in a reduction in the environmental impacts related to water supply and discharge?

Has it been demonstrated that there are no adverse environmental impacts on the neighbouring community?

January 27, 2003

Air Emission SummaryAir Emission Summary

Immediate and significant 42% decrease in component and total air emissions at 10,000 tcd.

Reduced air emissions from outside power producers.

January 27, 2003

Power Production SummaryPower Production Summary

Currently a net importer of power at approximately 1.7 MW

Will become a net exporter of power at 5 MW (plus 1.7 MW benefit)

January 27, 2003

Compliance with BECC Step 2Compliance with BECC Step 2

general; human health and environment; technical feasibility; financial feasibility; project management; community participation; and sustainable development.

January 27, 2003

BECC Guiding PrinciplesBECC Guiding Principles

• Principle 1. The project is centered on energy conservation and the economic needs of the region.

• Principle 2. The rights of the cooperative members and surrounding communities to adequately raise their standard of living and develop their properties are recognized and underlie the reasons for undertaking the project.

January 27, 2003

BECC Guiding PrinciplesBECC Guiding Principles

• Principle 3. Environmental protection is integral to the project with the promotion of renewable energy sources and the significant reduction in air pollutant loadings during operation.

• Principle 4. Stakeholders have been involved and have had the opportunity to participate in the decision-making process. This not only includes the cooperative members and surrounding residents, but also local, regional, state and federal agencies with statutory interest and standing in the issues at hand.

January 27, 2003

BECC II – Community ImpactBECC II – Community Impact

Air emissions from the RGVSG will be reduced while allowing the mill to continue to compete in an aggressive international market, while at the same time allowing for increased energy production (electricity) from the waste biomass (bagasse).

January 27, 2003

BECC II – Project AlternativesBECC II – Project Alternatives

The “do nothing” alternative means no improvement in air quality and a less competitive industrial operation.

More advanced alternatives might provide additional environmental improvement (i.e. better emissions control technology, more efficient energy production methods) but are deemed not to be economically viable at this time.

January 27, 2003

BECC II – Financial FeasibilityBECC II – Financial Feasibility

The annual cost savings associated with reduced operating costs, reduced natural gas costs, and excess power sales are calculated to be approximately $2,100,000 per year. These cost savings account for 8.8% of the total project costs.

January 27, 2003

Risk AnalysisRisk Analysis

Can this project achieve what is projected in terms of current and future plant operation, or are there some undermining limitations that may increase the risk?

If the plant can go ahead with the upgrade to the operation with a manageable level of risk in operations, are we sure that the project they are proposing is technically sound?

January 27, 2003

Risk AnalysisRisk Analysis

Can we confirm that all the local, state and federal environmental regulations will be met? What are the risks and impacts of occasional infractions?

Does the plant have the capability to operate and maintain the upgraded facility, so as to minimize or eliminate any risk of plant upsets that could affect either plant profitability or environmental emissions?

January 27, 2003

Risk AnalysisRisk Analysis

Does the project result in long term sustainability for the local area, giving due consideration to all of the issues required in the BECC Step II evaluation?

RISK = [Likelihood x Impact]

Likelihood = could it happen?Impact = what if it happens?

January 27, 2003

Cane ProductionCane Production

43,000 acres in production Yields of 45 tons cane per acre Peak generation of 2,000,000 tons cane

per year Weather and irrigation are critical

MODERATE RISK

January 27, 2003

Sugar PoliciesSugar Policies

Current quota of 144,000 tons sugar Storage of shortfalls Current pricing in the $0.21 range Farm Bill expires in 2007-2008 Mexican and Canadian Issues

MODERATE RISK

January 27, 2003

Production ExpansionProduction Expansion

Satisfactory for the next 5 years Anticipate 10,000 tcd over 150 days Immediate cost savings in operation Future growth in Stage 2 upgrades

LOW RISK

January 27, 2003

Plant ProfitabilityPlant Profitability

Reduction in power costs Reduction in labour & equipment costs Payback period of 11.3 years

EXTEMELY POSITIVE

January 27, 2003

Technology EvaluationTechnology Evaluation

Experience of Schaffer & Associates Relying on “proven technologies” Manufacturer guarantees Proven operation and maintenance

LIMITED RISK

January 27, 2003

Regulatory IssuesRegulatory Issues

Immediate reduction in air emissions Ongoing program for cane burning No concerns with water discharge Moving to EMS in 2003

LIMITED RISK

January 27, 2003

Environmental SustainabilityEnvironmental Sustainability

Direct benefit to the local communityPlant can remain competitiveTruly a “win win” situation

January 27, 2003

For Further InformationFor Further Information

Pollutech International Limited

768 Westgate Road

Oakville, Ontario CANADA

Tel: 1-905-847-0065

E-mail: laughton@pollutech.com

Web: http://www.pollutech.com