Latest Developments for Black Pellets: Benefits for Heat & Power Plants

in Europe and AsiaArgus European Biomass Trading 2015

London

April 15, 2015

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Zilkha Black® Pellets—A Real Option for Heat & Power Producers

Advanced wood pellet that is:• Grindable• Low-dust• Water-resistant• Can be burned in existing

steam turbine power plants • Co-fired up to 100%• Reduced capital required

Certified sustainably harvested

Carbon neutral compared to traditional fossil fuels

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Argus Biomass and Trading

How Black pellets are made

Selma: construction status, conversion scope, pellet transport & storage at port

Safety in Operations: Advantages of Black vs. white

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Zilkha Black® PelletTechnology

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What Is a Black Pellet?Zilkha Black® pellets are thermally conditioned biomass pellets100% wood with no natural or artificial additives. NONE.

The thermal conditioning process is well known. NOT TORREFACTION

The pellet itself has mechanical and physical properties which are highly desirable for use in power plants to replace coalSpecifically, Black pellets are harder than white pellets because when pelletized, the abundant free lignin melts and acts as a water resistant glueAs a result Black pellets have reduced fines and very low dust compared to conventional white pellets. Not zero. But greatly reduced.Black pellets can be shipped, received, stored, conveyed, and milled just like coal

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Zilkha Technology at a Glance

Manufacturing of Zilkha Black® Pellets is similar to the production of standard white pellets, with the addition of our patented thermal conditioning step.

IntakeSawdust, wood chips, and

first thinnings

DryingReduce moisture content

from ambient (~50%)to 6-10%

Proprietary Patented Zilkha

Thermal Conditioning

Milling & PelletizingFeedstock is resized then

passed through dies to create Zilkha Black® pellets

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Making Black PelletsWood is chipped, sealed in a pressure vessel, and pressured with steamAfter “cooking” briefly (5-15 min) the pressure is quickly released and the steam pressure “blows” the material into a receiving tankThe conditioned material moves by conveyor to a standard pellet mill

Wood is composed of cellulose, hemicellulose, and lignin (~1/3-1/3-1/3)The thermal conditioning frees the ligninLignin is a natural waterproof glue which melts at ~125+ C, a temperature which is reached inside the pellet dieResults in a tight, hard pellet bonded together with a natural, waterproof glueNo additives are used. Of any kind.

HOW:

KEY:

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Thermal Conditioning Before and After

Hammer-milled wood particles before thermal conditioning

The result AFTER thermal conditioning: the wood is more easily pelletized and is “glued” using abundant lignin

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Feedstock, Conditioned, and Pelletized

Feedstock

Conditioned Pelletized

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End Result: A Direct Replacement for Coal

How do Black pellets stack up vs. white pellets ?

Harder and more brittleFewer finesLess dustWater resistant

Just Like Coal

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Selma Plant Startup

Trucking of Finished Black Pellets to Terminal Underway

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Selma Plant Commissioned & Startup Underway

Zilkha Thermal Conditioning Island

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First Black Pellets from Selma

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Selma Rebuild = General Improvements + Black Conversion

General improvements:New chip yard (scale, truck dump, radial stacker, chip reclaim, scalper, green chip resizing, new green feed delivery conveyors)Dryer island (dryers reconditioned, new fuel system)Pelleting (reconditioned pellet machines, aspiration, pellet conveyors)Outloading (more storage, de-dusting, truck loading station)

White to Black conversion:Black pellet island (thermal conditioning and blow tank)Post conditioning (dry grinding, delivery conveyors)

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Conversion to Black—Reroute Through Conditioning

ChipyardDryers

Pelleting

Coolers

Outloading

Resizing

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Adding Black Unit Achieves Conversion from White

Chipyard

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New Thermal Conditioning Island

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Pellet Trucking from Selma to Mobile, Alabama

173 miles from

Selma to Mobile

25 Metric Tonnes per

Truck

36 Trucks per Day

216 Trucks per Week

936 Trucks per Month

11 Hours of Unloading per Day / 6 Days per

Week

End-Dump Wood Chip

Trailer

Truck Loading System

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Terminal Operations in Mobile

Pellets received using truck dump dedicated

to Black pellets

Pellets stored in hopper barges

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Barges Fleeted Prior to Mid-Streaming Onto Ships

Barge Fleeting

Area

Barge Fleeting

Area

Mid-streamShip

Loading

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Reduce White Pellet Safety Risk by using Black Pellets

Plus Operational Benefits fromUse of Coal Handling Methods

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White Pellet Risk Factors

Key areas where Black pellets have a storage and handling advantage:

Self HeatingOff-GassingDust

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Dust = very real explosion risk

Explosion mitigation takes capital beyond that required to handle coal

Off-gassing of CO, CO2, and CH4require venting during storage and transport

Pellet pile self heating can lead to fires

White Pellets Taught Safety Lessons

Source: Staffan Melin. Safety in Handling Wood Pellets. 2008.

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University of Nottingham: Self Heating Not Present

University of Nottingham2 thermally conditioned

piles and 2 wood chip piles6 month storage testConclusion:

Thermally conditioned Black pellets, both indoor and outdoor, saw no distinct increase in temperature. No evidence of self-heating.

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UBC: Dangerous Gas Emissions Greatly Reduced

Less methane:

WHITE

BLACK

Less carbon monoxide:

WHITE

BLACK

More oxygen:

BLACK

WHITE

Zilkha Black® pellets tested at UBC were far less reactive than white pellets. Black pellets were found to have significantly reduced oxygen depletion

Oxygen depletion is a significant operational issue. Extra workers and other special safety restrictions are required for workers entering white pellet storage areas

These results @ 25 C. but similar results @ 45 C.

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Minimal Dust from Conveyor DropPellets drop several feet from final conveyor discharge at Zilkha’sCrockett plantNo visible dust

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Parking Lot Drop Test Shows Minimal DustPellets stored outside in EuropeUrban location sensitive to dust Pellets were exposed to a few days of rainOperator test was looking for dust

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Black Pellets are Water-Resistant which Means …

Zilkha Black® Pellets

compared to conventional white pellets

after brief exposure to

water

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Black Pellets Load Like Coal and No Problem with Rain

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Black Pellets Can Use Established Dust Suppression Technology

Water is a very effective, widely used method of dust suppression for coal. The same methods can be used for Black pellets. Just like coal.

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Water Spray on Coal at Transfer Points & Hoppers

Transfer Points

Hoppers

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Zilkha Black Pellet Outdoor Storage Experience

Canada Sweden

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Zilkha Black Pellet Outdoor Storage Experience

Coal

Black Pellets

Denmark France

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Licensing OverviewAdding equipment to white pellet plants allows plant owners to make Black pellets in both existing and new plants

Zilkha provides the technology under a license which includes continuous improvement of the technology

Black pellets have transportation cost savings that support making Black pellets

Black pellet buyers benefit through significant capital and operating cost savings due to reduced dust and improved safety

Black pellet producers can expect to a return on their capital investment to make Black pellets at existing or new white pellet plants

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SummaryZilkha’s Selma plant constructed, commissioned, and startup underway with trucking operations beginning this weekSelma proves conversion of white pellet plants to make Black pellets is straightforwardWhite conversions to Black will accelerate Black pellet availabilityThe combination of conversions and new build Black plants provide geographic diversity as well as multiple suppliers through licensingCooperative “backup” relationships and agreements will form a robust supply systemZilkha Black pellets offer a low capital solution for power producersBlack pellets handle, store, and can be managed just like coalBlack pellets are a lower risk, cost effective option for heat and power plant owners