THE POWER OF INNOVATION 1 Biodiesel Processing Using Supercritical Technology Employing...

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THE POWER OF INNOVATION

Biodiesel Processing Using Supercritical Technology

Employing Supercritical, Catalyst-Free,

Transesterification Technology to Produce

High Quality, Clear, Biodiesel Using Low Cost

Oils With Up To 100% Free Fatty Acid

ExecutiveSummary

November 9, 2015 v1

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3 Confidentiality Notice

How we make biodiesel

Where we take it

Tip issues we face

4 About Jatrodiesel How we make biodiesel

Where we take it

Tip issues we face

6 About Jatrodiesel How we make biodiesel Where we take it Tip issues we face

7 Why Biodiesel (7-14)

Unparalleled Technology

Biodiesel/Ethanol Plant Diagram

Table of Contents

3 Confidentiality Notice How we make biodiesel Where we take it Tip issues we face

4 About Jatrodiesel

Why Biodiesel (1-6)

Why Biodiesel (7-14)


Biodiesel/Ethanol Plant Diagram


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he information in this document, and electronically transmitted to you, is legally

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Please do not disseminate, distribute or copy this document and/or its accompanying

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Confidentiality

T

Ian M. Lawson, Director, Business Development. JatroDiesel, 845 North Main Street, Miamisburg, OH 45342 - Phone: (937) 310-5490


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1. Core Business Activities

Business Overview

• Design, engineering and construction management ¹ of biodiesel processing plants in the U.S. and worldwide

• Continued scientific development of biodiesel processing technology.

• Production operations of plants on a JV or other basis

• Biodiesel production of plants owned and operated by JatroDiesel

• Feedstock procurement through sales.

Typical isometric drawing of a biodiesel plant (generic) that

JatroDiesel provides its customers


Note (1): JatroDiesel does not typically manage actual plant construction. This is the responsibility of the customer. JatroDiesel provides engineering management (to insure plant is built to plans and specs.), and eventual start-up and training of operators

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2. A Technology Innovation Opportunity

• A “supercritical” process called Super®

• Allows processing of feedstock oils very high in free fatty acids (FFA), to 100%

• Almost every existing biodiesel plant unable to use over 15% FFA feedstock

• High FFA oils available at half cost of traditionally used oils

• Process uses no catalyst, so no contamination of glycerin or formation of soaps

• Super® is easy to use with 4 main processors vs. 10 for traditional plants

• Super® changes how biodiesel is produced!

JatroDiesel’s Super® plant in Illinois, USA at the

former Patriot Renewable Energy plant

(110mmgy). The Nameplate is 7.5 million gallons

per year. Plant is owned by CHS, Inc.

THE POWER OF INNOVATIONBusiness Overview

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3. Twelve Years in Biodiesel

• 2004 to 2012: produced biodiesel at their own 5mmgy plant in Ohio

• 2006 to present: engineered or upgraded 18 biodiesel plants

• 2012 to 2014: Developed the “supercritical” technology

• 2014: Began construction of a 7.5mmgy Super® plant co-located at a 110mmgy ethanol plant in Illinois

• November 2015: First commercial Super® plant commercialized.

Beginning in 2006, Jatrodiesel produced

biodiesel and began servicing the greater

Dayton, OH diesel fuel retail market

Note (1): RINs are Renewable Identification Numbers and a number is applied to each gallon of biodiesel as they are tradable under the EPA’s Renewable Fuels Standard

Company Background


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6. About the Company’s Pioneering Technology

• Single Reactor operates at 5800° F. and

52,200 psi

• Processes up to 100% FFA oils

• Blend oils for processing

• No catalyst used (therefore no soap to

clean up)

• No sulfuric acid used (as no esterification)

• Uses only 2,000 gals of recycled water

• Final biodiesel is distilled and clear

• 95% pure glycerin by-product.

System Operator draws sample for testing

to be sent to an 3rd party lab in order to

insure meeting ASTM 6751 biodiesel

specifications

Production Features:

• Allows use of very low cost feedstocks

• Process all types of feedstocks

• Saves cost of chemicals (uses only methanol and

Magnesol)

• Glycerin yields 3 to 4 times value vs. traditional

plants

• Final biodiesel is clear (regardless of feedstock)

• System easy to operate with minimum training

• System costs about $1/annual production

gallon.¹

Production Benefits:

Note (1): Not including land, building, rail, roads, utility hook-ups and permits

Core Technology


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4. What Drives the Market for Super

• Trap grease has a very high FFA, about 60% to 85% and is not usable by 99% of biodiesel plants. Not to be confused with grease collected from restaurants..

Jatrodiesel’s biodiesel processing technology fulfills an important changeby providing Producers access to processing much lower cost sources of feedstock

Feedstock Max FFA %Feed-stockCost/lb

Feed-stockCost/gal²

Process/gal

TotalCost/g+ freight

EBITDA Selling³ @$2.30/g

Soy Oil 1 $0.26 $1.99 $0.45 $2.44 $0.36

Yellow Grease (YG), Corn Oil, UCO etc

15 $0.18 $1.38 $0.60 $1.98 $0.82

100% Brn. Grease w/Super®

100 $0.08 $0.61 $0.38 $1.08 $1.72

Table I. Feedstock Cost Comparison

Note (1) Sold with RINs. Producer and distributors assume $1 credit approval for 2015+ and splitting it 50/50. (2) All computations converting lbs to gals.: 7.66 lbs per gal. of feedstock

• The cost to a biodiesel Producer for trap

grease (also called brown grease) is less than

half that for typically used feedstocks such as

yellow grease, used cooking oil (UCO) and

corn oil.

Market DriverTHE POWER OF INNOVATION

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Production Forecast

20182019

20202021

2022

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$29,925,000.00$32,062,500.00

$34,200,000.00$36,337,500.00

$38,475,000.00

$199,500,000$213,750,000$228,000,000$242,250,000$256,500,000

EBITDA

TOTAL REVENUE

GLYCERIN

BIODIESEL

4. Six Super Plants of Production by Year for Biodiesel and GlycerinThe projection is based on 85% to 100% production maximum for six 15mmgy plants. Revenue is

$2.85/gallon delivered, which includes RINs and splitting $1.00 credit 50/50 with distributor. Margin target is 15%. Blend of feedstock is 70% corn and 30% trap grease.

Note (1) Based on current market conditions for November 2015.


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Cost Analysis

$2.85 B100$1.38 $0.55

$0.08$0.15

$0.69

B100

Feedstock

Processing

G&A

Freight

EBITDA 59%

29%

23%

¹

$2.85B100

$1.07 $0.38$0.08

$0.15$1.20

B100

Feedstock

Processing

G&A

Freight

EBITDA 45%

51%

16%

¹

5. Biodiesel Margin @ <15% FFA Feedstock vs. Super @ 50%/50% BlendThe advantage of handling very high FFA oils is apparent from the comparison below:

Traditional process with a <15% FFA Feedstock Super® process with 50% @ < 100% FFA and 50% <15% FFA

Note (1) Price includes RINs. Producer and Distributors splitting $1.00 credit 50/50. (Congressional approval expected by 12/31/15 for 2015-2017).


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Note (1) Price includes RINs. Producer and Distributors splitting $1.00 credit 50/50. (Congressional approval expected by 12/31/15 for 2015-2017).

6. Biodiesel Margins From Diverse Feedstock Blends – Traditional vs. Super

< 2% FFA Soy < 15% FFA YG, Corn, UCO < 50% FFA Brn Grease, 25% Corn Oil, 25% UCO & YG

< 100% FFA Brn Grease

SELLING PRICE 2.95 2.85 2.85 2.85

Feedstock 2.07 1.38 1.07 0.76

Processing 0.45 0.6 0.35 0.35

G&A 0.08 0.08 0.08 0.08

Freight 0.15 0.15 0.15 0.15

EBITDA¹ 0.7 1.24 1.8 2.11

$0.25

$0.75

$1.25

$1.75

$2.25

$2.75

Cost Analysis

Traditional Processing Super® Processing


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7. Five Year Proforma - Biodiesel Plant Sales

Business Overview


Methanol injection system for Super. No catalyst is used, so no chance of any soap

formation. Also, no contamination of the glycerin by-product and worth three times that typically

produced at traditional plants

Plants Cost Each TOTAL Margin

Systems to Ethanol Plants 4 $9,000,000 $36,000,000 $7,000,000

Stand-alone BD plants 3 9,000,000 27,000,000 5,250,000

To existing BD plants 3 6,500,000 19,500,000 5,250,000

Plants for Export 4 6,500,000 26,000,000 7,000,000

TOTAL - 5 YEARS 14 $108,500,000 $24,500,000¹

Note (1): Fixed margin as construction and 70% of parts cost procured and installed by customer

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8. Five-Year Production Projections (6 plants)

Business Overview

Notes (1): Includes RINs and $1.00 credit at 50% split with distributor (2): Based on market index at time of development of this this document


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REVENUE¹Annual Gallons Per Gal 15,000,000Biodiesel $2.85 42,750,000Glycerin 0.14 2,100,000TOTAL 44,850,000

COST OF GOODS SOLD FFA % % of Total Per lb

Feedstock 12 70% 0.18 0.9651680 30% 0.09 0.20682

Processing (chems, labor, energy, maint., test.) 0.38Freight 0.15G&A 0.06CAPEX 0.15TOTAL/gal 1.91198EBITDA/gal $0.94²ANNUAL $16,170,300# of Plants 6 $97,021,800

Years 5 $485,109,000Since the major oil companies will not allow stand-

alone pumps for biodiesel (or ethanol) while still serving the station fuel, a number of companies

such as Propel have struck out on their own offering all blends of biodiesel and ethanol

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2009 2010 2011 2012 2013 2014 2015 2016$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$2.47

$2.99

$3.85 $3.97 $3.92

2.93

2.42 $2.77

$2.74

$3.27

$4.08 $4.12 $4.00

$3.85

$2.73$2.73

2010 2011 2012 2013 2014 2015 2016

$80 $87 $102 $104 $88 $48 $44

9. Price of Biodiesel and ULSD vs. Crude Oil

Core Technology


Note: Includes RINs and on $1 credit a 50/50 split with distributor

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$104.00 $75.00 $65.00 $45.00$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$4.05

$3.25

$2.95

$1.75

$3.80

$3.20$2.90

$0.98

$2.98

$2.29

$1.68$1.15

$1.95

$1.14

$0.00$0.00

$0.95

$0.75 $0.40

Diesel FuelBiodieselFeedstockRINsEBITDALCFS

2013 2014 2015

Crude Oil

8. Effects of Removing Subsidies From Biodiesel

Core Technology


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9. Business Development Activities

• Developing a joint venture partnership for a

15mmgy biodiesel plant with a major ethanol

company with 400mmgy of ethanol production

at two plants

• Moving forward with a joint venture to operate a

15mmgy biodiesel plant in Carlisle, OH. The

project has been approved for a loan guarantee

by the USDA under Section 906 Rules

• Signed exclusive marketing arrangement with a

Chinese machinery manufacturing company in

Jining, Shandong Province, China. (Jatrodiesel

will be showing at a biofuels trade show in

Shanghai, China, December 10-16, 2015)

• Marketing Super® to 212 ethanol plants in the

U.S. and Canada. Also as a potential upgrade to

194 biodiesel plants in the U.S. and Canada

• Establishing exclusive distributors in Europe,

Africa, S.E. Asian, Japan and India.

Ethanol plants such as the one above see the value in increasing

margins by adding biodiesel processing. The feedstock is corn oil

taken from distiller dried grain (DDGs), the by-product from making

ethanol. A number of existing plant assets can be leveraged in the

biodiesel plant such as process steam and power. . .

The following are on-going events:

Current Initiatives


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EPA Actual and Projected Volumes Through 2017

Table III. The EPA’s actual and required %age of biodiesel blended with ULSD by refiners:2014 2015 2016 2017

1.42% 1.41% TBD TBD

The renewable fuel standard will run through 2022. Each year the EPA will designate the renewable fuel volumes for the following year. Due to political issues, 2015 and 2016 will be announced in November 2015.

EPA Fuel Volumes

2012 2013 2014 2015 2016 20170

200

400

600

800

1000

1200

1400

1600

1800

2000

Actual

Table II. The EPA’s actual and projected renewable fuel volumes (to be announced 11/15)

Proposed


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The majority of biodiesel is purchased by large trading companies

who typically sell to refiners to meet their RFS obligation for

blending renewables. Not so common, but slowly emerging, are

retail renewable fuel outlets that sell an 100% unblended, or a

variety of biodiesel blends with #2 diesel fuel (ULSD)

Offtake AgreementsSpot Buys, Forward Strips and Long Term Contracts

Buyers of biodiesel purchase material three ways:

• SPOT BUYS: Where anything from truck, rail

or barge loads are purchased on a cash (or up

to 10 days net terms) based on a negotiated

one time price

• STRIPS: A price is negotiated against heating

oil and remains constant over a three month

period, typically. For instance, heating oil plus

10 cents would be the price Buyer pays whether

heating oil goes up or down over the period.

The Buyer would hedge this with an “options”

facilitator such as F.C. Stone

• CONTRACTS: Much the same as strips, but the

price agreed to might not follow heating oil, but

rather the cost of feedstock that maintains a

pre-agreed upon margin for the Producer

• Producers and Buyers universally agree to a

price and terms that can not be changed if the

market turns one way or the other

unexpectedly.


Incentives & Subsidies

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Typically it takes two operators to run

a 5 to 20 mmgy plant with one to two

utility personnel

A brief explanation of how theses incentives and subsidies work in the biodiesel industry and specifically for Jatrodiesel:

• RINs:

o These are Renewable Identification Numbers and a single number (38 digits) is assigned to each gallon of biodiesel produced

o The program is managed by the EPA

o Called the Renewable Fuels Standard and by law sunsets on Dec. 31, ‘22

o The program is designed to drive the use of renewable fuels

o When Jatrodiesel sells a gallon, the value of the RIN is part of the sale

o The Buyer then sells the RIN to a broker or directly (if quantity is very large) to a refiner (called by the EPA, “an obligated party”)

o When the Buyer, if a refiner, purchases RINs it relieves them from blending a like amount of renewable fuel into their diesel inventory

o If the RINs are sold to a broker, they can resell to others, but eventually the RIN must be purchased by a refiner

o In order for RINs to be valid at sale, the original Buyer of the fuel MUST blend with a like quantity of diesel fuel

o Biodiesel RINs are worth 1.5 times the market value of RINs

RINs, $1.00 Credit & LCFS – How They Work

Continued . . .



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utility personnel


• RINs: (continued)

o In practice the Producer doesn’t actually get monetized

directly by the RIN value; rather, when the RIN is sold by

the Distributor, it reduces the Buyer’s cost to have parity

with #2 ultra-low sulfur diesel fuel (ULSD) for its

marketability. This keeps Jatrodiesel’s sales flowing.

For example (11/5/15 market numbers for Houston):

1. Biodiesel sold to Buyer for $2.35 delivered

2. RIN value: $0.56/gal x 1.5 = $0.84/gal

3. ULSD rack price: $1.55

4. RIN adjusted cost of the biodiesel: $1.51

5. From 5% to 20% is blended with ULSD.


Continued . . .

• $1.00 Blenders’ Credit:

o I

o n practice the Producer doesn’t get monetized directly by

the RIN value; rather, when the RIN is sold by the

Distributor, it reduces the Buyer’s cost to have parity with

#2 ultra-low sulfur diesel fuel (ULSD) for its marketability.

For example (11/5/15 market numbers for Houston):



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utility personnel


• RINs: (continued)

o In practice the Producer doesn’t get monetized directly by the RIN value; rather, when the RIN is sold by the Distrbutor, it reduces the Buyer’s cost to have parity with #2 ultra-low sulfur diesel fuel (ULSD) for its marketability. For example (11/5/15 market numbers for Houston):1. Biodiesel sold to Buyer for $2.35 delivered2. RIN value: $0.56/gal x 1.5 = $0.84/gal3. ULSD rack price: $1.554. RIN adjusted cost of the biodiesel: $1.515. From 5% to 20% is blended with ULSD.

o However, there’s an economic element at play here, as usually the price of the biodiesel will be 20 cents or so less than ULSD to drive the market. This abnormality, is caused by the on again-off-again $1.00 biodiesel credit where the 2014 $1.00 credit ran out on 12/31/14, but Congress never came around to extending it to 2015. But they will, almost a certainty, as this has happened twice before in 2010 and 2013, and both times retroactive and why margins are thin now with the expectation of the $1.00 next year that is being equally between Buyer and Seller.


Continued . . .



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Feature Benefits Comments

1 No catalyst required • 20% lower chemical costs• No contamination of by-products No other existing biodiesel technology can match

2 Up to 100% FFA feedstocks• Use high FFA feedstocks w/o conditioning• Blend in any percentage with high or low FFA oils

High FFA feedstocks can cost 30% to 50% less than corn oil, animal fats and virgin oils

3 95%+ Glycerin Purity• Provides 4 to 5 times the price for glycerin versus catalyst-based systems• Increases margin by about 12 to 18 cents per gallon of biodiesel produced

No need for additional processing equipment as no contamination from a catalyst

4 Clear Biodiesel Produced• Biodiesel is clear from biodiesel distillation with no reddish tint from corn oil or other feedstocks used

Clear product easier to sell. 85% of biodiesel is tinted (red, yellow, dark green, gray etc.)

5 Biodiesel Distillation• Superior quality vs. other plants• Easily meet ASTM cold soak spec• Save energy by not using a chiller

Biodiesel distillation produces a far more marketable product

6 Less than 1.5% Yield loss • Regardless of FFA or feedstock type, converts 98.5% of feedstock into biodiesel

Jatrodiesel’s unique “Super” technology enables more product to be processed

7 Highly Efficient Processor • Cuts cost of processing by 1/3rd

• No soaps or contaminants generatedMinimal losses in energy. All unconverted product reused

8 4 Main Stages vs. 10 for Traditional • Easier for operators to learn the system• Less equipment means lower maintenance cost and downtime

Overall lower personnel costs


Why Biodiesel (Contd.)

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7. Corn oil converts easily to biodiesel (on par w/soy)

8. Corn oil blends easily with virgin oils, animal fats,

used cooking oil (UCO) and very high FFA oils

9. Corn oil qualifies under EPA’s RFS2

10. Corn oil qualifies under the California Low Carbon

Fuel Std. with lowest carbon intensity (CI of 4)

11. Corn oil market growing with more and more

Ethanol plants putting in Corn Oil extractors

12. No blend wall issues

13. Almost any diesel engine can use 100% biodiesel

with no engine modifications

14. Most manufacturer vehicle warranties cover use up

to 20% biodiesel with 80% diesel (see slide 12)

Biodiesel is kept on spec by drawing

samples at various points throughout

the processing cycle


Jatrodiesel provides its customers with

detailed piping and instrumentation

drawings along with 3-D isometric

renditions of the finished plant

CleanFeedstock

PureMethanol

SUPERProcessor

Decanter Methanol Recovery from Biodiesel

Methanol Recovery from Glycerin

Post RecoveryDecanter

Washingprocess

Biodiesel Distillation

GlycerinNeutralization

GlycerinDecanter

Free Fatty Acids

Biodiesel

GlycerinDay Tank

ImpureMethanol

A

Water recycle

Feedstock

A

B

MethanolDistillation

BGlycerinStorage

Corn Oil IN (from DDGs Processing)

Other Oils IN (Optional)

System Diagram

Acid

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Typical Margins

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Profit & Loss Proforma for Biodiesel from Corn Oil

Biodiesel fuel supplied to Pilot stations

is produced from a Jatrodiesel-built

plant in the southwest

Revenue Per lb Per GalBiodiesel (w/RINs) & 50% of $1 Credit $2.85Glycerin (>95%) (per gal of biodiesel produced) 0.14TOTAL REVENUE $2.99

Cost of Goods SoldFeedstock (50% @ 12% FFA, 50% @ 85% FFA) 0.14/lb $1.07

Losses from process 1.50% 0.02

Chemicals (methanol, polishing) 0.21

Labor (varies by state) 0.07

Utilities (varies by utility co.) 0.12

Plant Maintenance 0.02

G&A, Commissions 0.08

Shipping to Customer 0.15

Total Processing & Admin Costs 0.67

TOTAL COST 1.74

EBITDA $1.11


Typical Operating Budget

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Biodiesel will typically be used within a

400 mile radius of a plant


Biodiesel Market

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Biodiesel blends with Diesel fuel in any percentage

1. According to DOE, the annual usage of Diesel

fuel in the U.S is 61+ Billion gallons.

It includes both On-road, Off-road and Heating Oil.

2. Biodiesel usage in percentage

1. 2% blend (B2) – 1.2 billion gals/year

2. 5% blend (B5) – 300 million gals/year

3. 10% blend (B10) – 600 million gals/year

3. Federal Mandate under RFS2 drives demand

4. Multiple individual states have mandates

1. NY – heating oil

2. PA, MN and others – All diesel fuel

3. CA – LCFS related usage

Manufacturers Support Biodiesel

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Up to 20% Biodiesel Blends Covered Under Standard Warranties


Users Who Support Biodiesel

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These Organizations USE Biodiesel


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