Brasil EcodieselFueling Brazil with Biodiesel

Biofuel Supply Chain Summit 2009Biofuel Supply Chain Summit 2009

Ghent – 09/15/09

Brazilian Experience on Renewable Fuels

Brazilian Experience on Renewable Fuels

Energy Matrix

87,1%

80%

90%

100%

45,4%

54,6%

0%

50%

60%

70%

12,9%

10%

20%

30%

40%

0%

10%

World (2007) Brazil (2008)

RENEWABLE AND CLEAN ENERGY IS ALREADY A REALITY IN BRAZIL

Renewable Non renewables

Source: Resenha Energética Brasileira – Ministério de Minas e Energia

RENEWABLE AND CLEAN ENERGY IS ALREADY A REALITY IN BRAZIL

The Brazilian Biodiesel Program

Introduced in 2005, it was based on:,

• Energy matrix diversification with an eco‐friendly, fsustainable and renewable fuel.

• Reduction of mineral oil and diesel imports• Reduction of mineral oil and diesel imports.

• Social development and job creation whileincentivating family farming, mainly in theNortheast of the country.y

• Better use of available lands.

Biodiesel: Brazilian MarketDi l k t t ti l k t i f bi di lDiesel market: potential market size for biodiesel.

Diesel is the main Brazilian fuel, 42% of all oil derivative fuels and more than 50% of transport sector fuels.

Brazilian Mineral Diesel Market (‘000 m3)

39 663 39 361 37 971 40 947 40 768 42,206

44,188  46,478  47,000 * 

45.000

50.000

2007‐ 20088.3% 

36,581 

39,663  39,361  37,971  40,947   40,768  42,206 

35.000

40.000

20.000

25.000

30.000

10.000

15.000

Imports      ('000 m3)

Domestic market extremely significant allowing for the development and consolidation of the

‐

5.000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

InternalProduction('000 m3)

5 Source:  National Agency for Petroleum, Natural Gas and Biofuels – ANP.(*) 2009 Forecast

Domestic market extremely significant, allowing for the development and consolidation of the sector.

Transportation fuels mix

Gasoline CG li + A h d Eth l

Gasoline: 21,80%

Gasoline + Anhydrous Ethanol21,8 + 7,7 = 29,5%

A h d Eth l 7 70%Diesel:49,20%

Anhydrous Ethanol: 7,70%

Hydrated Ethanol: 17 20%Hydrated Ethanol: 17,20%

Ethanol (total)7,7%+17,2%=24,9%

Natural Gas: 2,80%B100: 1,30%

Diesel (total)49,2% + 1,30% = 50,5%

Source: MME ‐ Resenha Energética Brasileira – Resultados Preliminares de 2008 (Maio/2009)

National Biodiesel Program – where do we stand

Biodiesel Law: Mandatory use to leverage production. 

2005 2007 Fi t h lf 2008 2010 onJuly 2008 – July 2009 –2005 ‐ 2007 First half 2008

Mandatory 5% Minimum Blend

Authorized Blend of up to 2%

Mandatory 2% Minimum Blend

2010 onyJune 2009

Mandatory 3% Minimum Blend

y2010

Mandatory 4% Minimum Blend

Brazilian Biodiesel Production (‘000 m3)

Expected anticipation of 5% blend, as happened with 3% and 4%... 

2 500

Production Increases show  the success of the program

2,000

2,500

1,645

2,500

p g

Current blend percentages are only the 1,000

1,500

402

1,168

p g yinitial stimulus: higher blends and pure B100 already feasible in 

engines. ‐

500 

2005 2006 2007 2008 2009 2010

0.7 69

7Source:  National Agency for Petroleum, Natural Gas and Biofuels – ANP.(1) Forecast considers B4 in 2S09 and B5 in 2010.

2005 2006 2007 2008 2009 2010

Production Production Forecast

The Ethanol Parallel 

Government policy and support

Technological Evolution:

Agricultural: the productivity of sugar cane increased from 55t/ha in 1975 to 85t/ha in 2008

Industrial: in the Ethanol production and in the automotive industry

World Trend

Potential for Brazil to become a leader

Domestic alternative with impact in the Trade Balance

Brazilian Biodiesel can achieve, in less time, the same stage ethanol took 40 years! 

ill h i h i di i d !

Domestic alternative with impact in the Trade Balance

8

It will happen with immediate investments and resources!

The Brazilian Biodiesel Sector 

• The biodiesel program was introduced in 2005 and Brazil has 

become, already,  the world’s 5th largest producer.

• In 2010, B5 will be introduced, representing a 25% increase in the 

demand.

• Extensive available areas climate strong and increasing domesticExtensive available areas, climate, strong and increasing domestic 

market favor the growth of the industry.

d h d l f d k ( b fl d• Besides the traditional feedstock (Soybean, Sunflower, Cotton and  

animal fats/grease), there are many viable options of non‐edible 

vegetable oil – Castor, Jatropha, Palm, Macaúba, Babaçu, etc.

• As the industry matures, Brazil will become more competitive in 

the internacional market.

The Brazilian Biodiesel Sector (cont.)

• The industry has been working with, aproximately, 50% of its 

capacity.

Th i d t i t lik l t f lid ti i th• The industry is most likely to face a consolidation process in the 

near future.

• Verticalization or some sort of control of the feedstock will be 

essential for survivalessential for survival.

• Efficiency in the industrial process and productivity in the 

agriculture side will be extremely important when the free market 

takes place.p

The competitive advantages of Brazil

Technology or Raw Material: Key Success Factor?

10%

60%

80%

100%

80%

10%10%

Other Inputs and General Expenses

Methanol/ Ethanol

0%

20%

40%

Bi di l C t St t

%

Vegetable Oil

Technology Well‐Known!

Not an entry barrier.

Main Input is Vegetable Oil, in volume and cost.

Biodiesel Cost Structure

Achieve uniform quality in large scale production and with different vegetable 

oils is the challenge!

Second main input is methanol.

So, it's a variable cost industry.oils is the challenge!

Known Technology + Variable Cost Industry = 

12

Access to raw material is the key success factor.

Bi di l P d i b R M i l B ilBiodiesel Producion by Raw Material ‐ Brazil

jan/09 feb/09 mar/09 apr/09 may/09 jun/09jan/09 feb/09 mar/09 apr/09 may/09 jun/09

Soya 71.16% 73.68% 85.37% 76.37% 81.33% 81.10%

Animal Fat 24.54% 19.25% 10.94% 19.36% 16.11% 14.03%

Cottom 3.25% 4.96% 1.59% 2.04% 0.00% 2.97%

Others 1.05% 2.11% 2.1% 2.36% 2.56% 1.90%

Total 100% 100% 100% 100% 100% 100%

Optimized Mix of Oils in the Long Term…

SOYA COTTON SUNFLOWER CASTOR JATROPHA PALM% of oil 

in the seeds18 ‐ 2215 ‐ 20  40 ‐ 45 45 ‐ 50 30 ‐ 3918 ‐ 20 

in the seedskg of oil

per hectareTechnologicallyDeveloped

400 350 700 700 1,500 3,000

Developed

Perennial

Edible

Avoid competition for food lands; Diversify Risks!

Higher content of oil per hectare;

Take advantage of regional potential of crops;

Optimize land usage!

Occupy idle areas, with poor soil correction!

Brazil: Land, Climate, Regular Rainfall, SunAMAZON REGION: No plantationexpansion, avoiding degradation

NORTHEAST: 

Available land, mostly inadequate for food production;

Excellent for alternative crops, such p ,as Castor and Jatropha;

Contribution to social development.

BRAZIL Area Million haBRAZIL - Area Million haTotal 851Suitable for Agriculture 340

Cultivated 72Pastures 172Available 96

Source: FGVAgro – 2º Brazil –EU Business Summit, Dec 22,2008. Keynote Speaker Roberto Rodrigues.

CENTER WEST SOUTH andCENTER‐WEST, SOUTH and SOUTHEAST: Current main 

production areas

Fuel Distribution Bases and Diesel consumption

Northeast ‐ 15%North ‐ 9%

Mid‐west– 11%

Southeast ‐ 45%

South ‐ 20%

Brasil Ecodiesel SA

Highlights

Brasil Ecodiesel on the map

Major biodiesel producer in Brazil and the only one with nationwide presence

Biodiesel Plants – 580 ths m3 p.y.6 operational multi–feedstock

Biodiesel Plants  580 ths m p.y. 

Crushing Units2 operational Multi‐seed– 1,600 tpd

3 Certification Laboratories (CE TO e RS)3 Certification Laboratories (CE, TO e RS)

Farms: 41,500 hectares of own land + 17,000 leased

Investments in agriculture

• Initial investment in Castor based on family t a est e t Casto based o a yfarming ‐ disappointing results 

• Investment in experiments with Jatropha p pplantation – 5,000 hectares

• Most likely the company will have Jatropha as the main alternative feedstock

Company’s Financial RestructuringCompany s Financial Restructuring

Debt (in ths R$) 1T09 2T09 After 2nd Capital RaiseDebt (in ths R$) 1T09 2T09 After 2nd Capital RaiseShort Term 120,106 92,543 12,877(+) Long Term 177,991 136,912 80,499( ) g , , ,(=) Total Debt 298,097 229,455 93,376(-) Cash 7,416 2,321 151,66(=) Net Debt 290,681 227,134 -58,284

Issues to be tackled by 

the Biodiesel Industry

Issues to be tackled by the industry

• Worlwide involvement of society in the global warming issue and in the biofuels discussion.

• The need to lower the cost of biodiesel production. 

• Definition of the most suitable feedstock for each region.Definition of the most suitable feedstock for each region.

• Genetically modified seeds will play a decisive role in productivity of the non‐edible feedstock.p y

• The water footprint and NxO emissions will become recurrent issues in biofuels discussions.

• Artificial comercial/specification barriers, such as the land use restrictions and the different national certifications so as to protect local industries, hindering world supply of biodiesel.

“Biodiesel is an industry in its infancy”od ese s a dust y ts a cy

“The production of oil seed biodiesel occurs in j ti ith th d ti f t i ”conjunction with the production of proteins”

“Mineral oil should be directed to the chemistry yindustry, which is a higher value aggregator”

“How much does it cost not to produce biodiesel?”How much does it cost not to produce biodiesel?

“Biodiesel: no war required”

Thank you!

Contacts:Investor Relations

Phone: 55 21 2546-5031ri@brasilecodiesel.com.br@

www.brasilecodiesel.com.br