A Focused Trip towards a Reduced Carbon Footprint Economy

Guido Ghisolfi

25 November 2014

The Apparently Impossible Starting Point

Primary Fuels Energy Content CO2 Emissions Transportation Bulk Densityt TEP* tCO2 / TOE tdm / m3

Oil 1 3.02 0.90Methane [1000 m3] 0.82 2.33 0.74Coal 0.72 4 0.80Wood 0.45 0.02 0.30Straw 0.45 0.02 0.15

Secondary Gasoline 1.20 2.90 0.79LPG 1.01 2.64 0.52Diesel 1.08 3.10 0.90Fuel Oil 0.98 3.20 0.90Ethanol 0.64 0.02 0.79Lignite 0.25 4.20 0.40

*1 TEP = 42 GJ = 11,666 kwh = 10 GCal

The Apparently Impossible Starting Point

Comparing 2.2 to 2.7 times the energy at 3 to 6 times the density, i.e. a ratio 6.6 to 16, has discouraged serious thoughts on handling wood and biomass.Large availability of fossil sources at low procurement costs have prevented LARGE and LONG TERM development investments strategically focused on Sustainable Bioenergy solutions in particular by those countries and companies that counted to leverage on the spread between cost and relatively high market prices of oil and gas.What could lead to second thought is how the exploration, prospection and extraction cost has evolved.There is in fact little doubt that oil and gas are and will be available. How much of the incremental will be below 80 $/b procurement cost remains to be seen.

The Issues to solve to seriously consider Biomass

1. A very low “delivered” energy content;

2. Doubts on industrially proven technologies to free up most on the already low energy content at profitable market conditions;

3. Difficult to envisage a "REAL" Supply Chain between two worlds, Energy & Oil and Agriculture, which never dealt nor trusted each other;

4. An inherent uneasiness of the industrial and “non speculative” community to depend on Government strategic decisions such as step changes on consolidated policies on energy.

Lack of Strategic Investors

Although, globally, a certain amount of money has been invested in the world, the 10-15 B$ that can be accounted for, have been highly fragmented and rarely focused on a specific target with a clear strategy in mind.

Many and large flops did not help confidence building:D1 OilsChorenLS9RangeCoskata

None reached industrial level and the few who did, as KiOR and Ineos, are not replicated yet.

Why not the Large Agriculture?

The sector is very commingled: large land owners accustomed to defend their position and highly fragmented farmers accustomed to high subsidies.

The subsidies have quashed their productivity and their strategic thinking, if they had ever had one.

All operator left their futures in the hands of Fertilizers and Biotech Producers.

Farmers expect support and money. They do not even think to invest money!

Why not the Life Science?

Only in the year 2000 fast sequencing a DNA was a 100 MMUS$ and 6 month job, while now is a 3000 $ and 6 hour effort.

When ICI, Hoechst Bayer, DuPont made the strategic decision to make of “Life Science” their core business, their thought was not Biomass and Energy but Health and Quality of Life. The big investments went to Drugs Developments that promised high margin returns and, if any, to Agribusiness that already had a developed market for Food and Feed.

Spending big dollars for an undefined market to be created in Green Energy was considered too risky and of doubtful return.

Why not the Forestry and Pulp & Paper Industry?

In an age when Digital has reduced printed paper to a luxury and Waste Management is recovering most of the paper, the Commodity Pulp & Paper Industry had no money for high risk investments and the Specialty one had no appetite for low teens returns.

Besides, as Biochemtex could experience on its own skin, the Pulp & Paper environment is one of the least innovative because the very large investments discourage Innovation that, if unsuccessful, could erode sure and stable returns on huge investments.

Why not the Oil and Energy Sector?

In all honesty, most of the “real money” that has been invested in the sector came from the Oil Industry, often for political reasons to soothe local governments and sometimes to diversify and hedge the risk of energy sources. Sometimes the hedging part went at the expenses of the focus on one specific technology.

One of the worst global crisis in History has reduced the appetite for long term strategic alternative thinking.

In any case in the last decade the Oil Companies had not invested large sums on Biotech per se, but selected the most promising Developers, funding their programs often when still at “Venture” level.

Why Biochemtex has arrived so far?

A large amount of money, 450 MM€, concentrated and focused on an organic plan to develop Technology, Supply Chain and Operations to extract Energy from Biomass.A consolidated R&D and Engineering Group, Twice Technology World Leader.Under a Single Investor and focused Management Group, substantial results were achieved but, when required, important corrections and radical changes of direction have been made.Biochemtex developed at industrial scale all parts of the SC.Every investment has been made and tested at Industrial Level with engineering developed to the detail and installed on the Field.Some equipment is already at the Third Evolution.

Biochemtex Path: 2003-2005 Analysis

What was available? Several access routes to bioenergy were thought viable:

• Gasification;• Pyrogasification;• Pyrolysis;• Enzymatic fermentation.

Few proved to be affordable.

Biochemtex Vision: The Analysis

The more commingled is the Biomass available, the easiest the Procurement, the most difficult and energy intensive the Process.

Biomass ready availability

Cost

of fi

nal p

rodu

ct

per t

on o

f bio

mas

sGasification

Pyrogasification

Pyrolysis

Fermentation

SSFH

Biochemtex Path 2005: The Choice

Enzymatic Hydrolysis

A relative low cost choice

Simultaneous Fermentation and Hydrolysis

A lower Capex cost

Neutral Simultaneous Fermentation and Hydrolysis

A much lower Capex AND an easier way to Biorefinery

The choice of Novozymes.

The Lignin Energy Content: How to extract it2013-2014: Crescentino OperationA large effort in Energy Generation Engineering, coupled with the unique development of data on the only industrial quantity of Lignin Cake available worldwide, led to a major energy recovery and a VERY LARGE competitive advantage based on how to handle and how to burn a 60% wet lignin.

Work has been done on Construction materials (Astelloy, Duplex, 316, 304, Carbon Steel), Boiler types (Moving Grids, Boiling FB CFBs), Lignin Cake separation techniques (Filters, Centrifuges, Polyelectrolytes) and Handling to minimize Energy Consumption and improve Operating Conditions.

CRESCENTINO IS NOW IN FULL OPERATION and has proven throughput and yields.

PROESA® Step 3: The Lignin Energy Content Extraction2013-2014: Crescentino Operation

Italian Bio Product S.p.A.(Italy)

Italian Bio Product S.p.A.(Italy)

IBP Energia S.r.l.(Italy)

IBP Energia S.r.l.(Italy)

Biochemtex S.p.A.(Italy)

Biochemtex S.p.A.(Italy)

Beta Renewables S.p.A.(Italy)

Beta Renewables S.p.A.(Italy)

100% 100%100%

Patent Filing;Technology Marketing;

License Sale.

Process Modification;Design of New Equipment;

Strong Effort in Bioenergy Generation, Steam and Energy Bloc Design.

Hardware Modification;Plant Testing.

Industrial Testing on Lignin Combustion.

67.5% Biochemtex22.5% TPG10% Novozymes

PROESA® Step 3: The Lignin Energy Content Extraction2013-2014: Crescentino Operation

Balance for 1 ton of EtOH5 t of dry biomass + 350 $/t cash cost 1 t of EtOH + 3.5 Mwhe

Cost of Ethanol: 5 tb + 350 + CAPEX/10 - 3.5 MWhe

Energy balance per ton of biomass5 t of biomass [2.25 TEP] + 350 US$

Energy balance per ton of EtOH2.25 TEP + 350 $ 0.64 TEP + 0.85 TEP [(0.281 – 0.11) x 5]

2.25 TEP + 350 $ 1.49 TEP

Energy Yield 66%

0.35 Waste0.9 CO2

1 EtOH [0.128 TEP] = 5.37 GJ2.7 t lignin cake [1.40 TEP] = 59 GJutilities [0.11 TEP] 24 GJ

35 GJ = [0.85 TEP] excess energy per ton of biomass

Utilities1 MWhe = 9 GJ6 tsteam = 15 GJ

24 GJ [0.55 TEP]

PROESA® Step 3: The Lignin Energy Content Extraction2013-2014: Crescentino Operation

Balance for 1 ton of Biomass1 t of dry biomass + 70 $/t cash cost 0.2 t of EtOH + 0.70

MWhe

Balance per ton of biomass1 t of biomass [0.45 TEP] + 70 US$

Energy balance per ton of biomass0.45 TEP + 70 $ 0.128 TEP + 0.17 TEP [(0.281 – 0.11) x 5]

0.45 + 70 $ 0.298 TEP

0.07 Waste0.19 CO2

0.20 EtOH [0.128 TEP] = 5.37 GJ0.54 t lignin cake [0.281 TEP] = 11.8 GJutilities [0.11 TEP] - 4.8 GJ

7 GJ = [0.17 TEP] excess energy per ton of biomass

Utilities0.2 MWhe = 1.8 GJ1.2 tsteam = 3 GJ

4.8 GJ [0.11 TEP]

The Apparently Impossible Starting PointNOW LIGNIN IS ON THE MAP

Primary Fuels Energy Content CO2 Emissions Transportation Bulk Densityt TEP* tCO2 / TOE tdm / m3

Oil 1 3.02 0.90Methane [1000 m3] 0.82 2.33 0.74Coal 0.72 4 0.80Wood 0.45 0.02 0.30Straw 0.45 0.02 0.15

Secondary Gasoline 1.20 2.90 0.79LPG 1.01 2.64 0.52Diesel 1.08 3.10 0.90Fuel Oil 0.98 3.20 0.90Ethanol 0.64 0.02 0.79Lignin Cake 0.52 0.02 0.40Lignite 0.25 4.20 0.40

*1 TEP = 42 GJ = 11,666 kwh = 10 GCal

Cost of Ethanol (all prices in US$)

5 tb + 350 + CAPEX/10 - 3.5 MWhe Price

Country Biomass MWh Price CAPEXEthanol Full Cost

Brazil 30 150 3000 275 China 40 125 1500 262 USA (NC) 50 50 3500 775 (2.3 $/gal) USA (CA) 90 100 4500 900 (2.7 $/gal) Italy 100 200 4500 600 France 60 150 4500

525 Eastern Europe 40 120 3000

430

2014-2018: The Second Generation Biorefinery

For a period of 5 maybe 10 years, Green Electricity (baseload vs. unsteady photovoltaic or aeolic) will support the system in most countries (Europe, South America, China).By then, the 0.85 TEP of Lignin Cake Excess Energy Content, which can and must be increased, will be industrially converted into more remunerative products.

MOGHI will be one of the solutionswith 700 US$ of Phenol Oil.

GREG will be an addition to the “Green Barrel”with 1000 US$ of Glycols.

BUTANOL, BDO, FARNASENE AND…OTHER CHEMICALS are the future.

The future is in Biorefineries and Ethanol is just one of the products.

Cost of Cellulosic Sugars(1 ton of EtOH = 2.32 tons of Sugars)

C5-C6 Sugars Plant

Energy Bloc

3 t Steam

1.17 t Dry lignin1.7 t Water

1.7 t Water vented0.43 MWhe

1 ton of Sugars @ 141 $/t Cash Cost0.33 t CO2

2.17 t Biomass

@100 $/t = 217 $

Enzyme Yeast = 152 $

Others

1.5 MWhe

2.28 $@ 150 $/MWh

Cost of Sugars (all prices in US$)

2.17 tb + 150 + CAPEX/10 - 1.5 MWhe Price

Country Biomass MWh PriceCAPEX Sugar Cost

Brazil 30 150 2000 190

China 40 125 1000 150

USA (NC) 50 50 2000 383

USA (CA) 90 100 2500 445

Italy 100 200 2000 267

France 60 150 2000 255

Eastern Europe 40 120 1500 207

What's Next? Biochemtex Group 2015-2018

All efforts are towards reducing cost of Sugars for when Green Electricity does not support anymore;Improve the quality of the biomass introduced into the plants;Increase the density to the Biomass for Long Distance Supply Chains;Further Increase of the Energy Extraction: Work on Energy Bloc;Develop and build large scale and/or Stategically Positioned Projects to be converted to Biorefineries: Brazil, NC, Italy, Sarawak;Work on In-House (MOGHI & GREG) and Third Parties Technologies to produce Biochemicals (Bio-Naphtha, Glycols, Farnasene, BDO, Butadiene, Lipid, Rubbers).

Biochemtex Developments

Several Biotech Companies have worked with Biochemtex to develop biochemicals using their Methabolic Paths and Technologies and PROESA® Sugars.

Some of these companies have funded pilot plants investments and Biochemtex Engineering works to develop Second Generation Technology to produce their proprietary products.

Successful Tests have been carried on on Fatty Alcohols, Lipids and C4s based products.

Biochemtex Group on December 31, 2014

Biochemtex S.p.A.(Italy)

Biochemtex Agro S.r.l.(Italy)

C5-6 S.r.l.(Italy)

Beta Renewables S.p.A.*(Italy)

Italian Bio Product S.p.A.(Italy)

*Beta Renewables: 67,5% Biochemtex – 22,5% TPG – 10% Novozymes