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By Dr. Gan Lian Tiong, Musim Mas Group Head of SustainabilityBy Dr. Gan Lian Tiong, Musim Mas Group Head of Sustainability

A Musim Mas Presentation. Strictly Private and Confidential. Copyright © 2011

Implementing Methane Capture in Palm Oil Mill

- Experiences from Musim Mas

Presented at the Seminar on

Incentives for Sustainability in Agri-business: Sustainable Palm Oil,

Sultan Hotel, Jakarta 29th February 2012

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AGENDA

CONTENTS

Musim Mas and Sustainable Palm Oil

Experiences in Implementing Methane Capture

Discussion

Conclusions

Our Vision

A fully integrated Palm Oil Corporation renowned for Quality People and Products

Musim Mas Corporate Policy

Our policies on growth:

Production of Sustainable Palm Oil

Musim Mas is especially proud of being the FIRST Indonesian plantation to be certified.

1st

Smallholders Scheme in West Sumatra received RSPO Certification.

Estates PO Mills Tank Farm PME Plant

Certified on 7th March, 2011

Production of Sustainable Palm Oil

Musim Mas’ PME plant integrated with palm oil mills are ISCC certified

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• Total employment force ± 27,000.

• Musim Mas is proud to be able to provide livelihood to its employment force.

• Musim Mas is committed to the well-being of the local community and the environment in which it operates in.

MANAGING FOR SUSTAINABILITY

A Uniquely Integrated Business,Capturing margins along the whole Palm Oil value chain

MUSIM MAS INTEGRATED PALM OIL OPERATIONS

• Musim Mas shares its value with the local communities so that they can progress in tandem with Musim Mas Group.

Smallholders Oil Palm Development Programs

Riau

Scheme Smallholders 7 villages in Riau 819 families

Village Development Program 4 villages in Riau

West Sumatra

Scheme Smallholders 4 villages in West Sumatra 762 families

South Sumatra

Village Development Program 1 village in South Sumatra

Central Kalimantan

Village Development Program 3 villages in Cental Kalimantan

Riau

Village Oil Palm Development Programs

Managing for Sustainability – Sharing Value

Donation for Padang earthquake victims

Polyclinics

5 schools

Community Projects

Managing for Sustainability – CSR

Orangutan Conservation Projects

Elephant Flying Squad Project Tiger Conservation Project

Managing for Sustainability – CSR

Management of HCV Areas

Managing for Sustainability – Best Practices

Reduce GHG EmissionsSocial Responsibility

Methane capture project

A lifecycle analysis showed that palm oil mill effluent (POME)

contributes 55% of the GHG emissions in the palm oil supply chain

Source: Int J Life Cycle Asess (2011) 16:669-681

Greenhouse Gas (CO2 ) Emissions

CH4

This is because methane gas emissions from palm oil mill effluent ponds

has high global warming potential (CH4 emissions = 25x CO2)

Greenhouse Gas (CO2 ) Emissions

Therefore we zoom in to find ways to reduce the GHG emissions.

A methane capture project was initiated at Musim Mas’ Pankalang Lesung POM.

Main Objectives of Pangkalan Lesung Methane Capture Project

Methane Capture in Musim Mas

• To reduce GHG emissions in Musim Mas’ palm oil production.

• To obtain Gold Standard in the capture of methane.

• To generate electricity from the biogas captured.

• To register with the UNFCCC for the qualification of CER.

Project Location: Pangkalan Lesung POM

Project Milestones

Methane Capture in Musim Mas

Schematic Diagram of Project Boundary

Submission of Project Design Document (PDD) 11th May, 2010

Methane Capture in Musim Mas

Project Milestones

Methane Capture in Musim Mas

Launching of the Biogas Plant by the Musim Mas Group President Director in February 2011

Methane Capture in Musim Mas

Mill capacity (TPH) 45

FFB processed (t/year) 270,000

Electricity generation potential (MW) 1.5

Potential Electricity Generation from Pangkalan Lesung Methane Capture Project

Project Design Document (PDD) 11th May, 2010

Methane Capture in Musim Mas

Implementation Costs of

Pangkalan Lesung Methane Capture Project

Investment cost : ca 3 million USD

Operation cost : ca 350,000 USD per year

Project Design Document (PDD) 11th May, 2010

Methane Capture in Musim Mas

Project Design Document (PDD) 11th May, 2010

CO2 emission reductions from

Pangkalan Lesung Methane Capture Project

52,397 tones CO2 per year

Methane Capture in Musim Mas

GHG Calculation Methodology – ISCC Document 205

Methane Capture in Musim Mas

• Without CER, negative IRR

• CER price of 6.6 EUR to meet WACC

• PDD CER EUR 9.5 price gave 24.3% IRR

• Current CER price of EUR 4.8 not economical

Return on Equity

Pangkalan Lesung’s Methane Capture Project

Methane Capture in Musim Mas

Discussion

• Environmental benefits:

Palm oil with methane capture has GHG emission value of 7.25 kg CO2eq/Mj which is equivalent to emission savings of 92% as compared with fossil fuel.

• Operational considerations: High technology threshold: system not easy to operate (this is

evident from the fact that many projects even after achieving UNFCCC registration are not running). Out of the 14 companies registered on with UNFCCC only 2 has been awarded the CER.

High operation cost: US $ 350,000 per year.

• Economic consideration: High investment cost (about 30% of the cost of building a new

palm oil mill).

Return not viable due to low current CER price.

• The methane capture system can achieve substantial GHG emissions reduction.

Conclusions

• Due to the high investment/operation cost and low return, the project may not be economically viable at the moment.

• However, we recommend that large plantations with sufficient financial strength should still consider implementing the methane capture system for the long term benefits to the environment.

• Musim Mas will continue to implement methane captures in its other palm oil mills, in cognizance with other field practices, to reduce the carbon footprint in the production of palm oil.

• This is part of the Group’s corporate strategy in the production of sustainable palm oil.

A Musim Mas Presentation. Strictly Private and Confidential. Copyright © 2011