Converting Oil Palm Empty Fruit Bunches ( EFB ) to Organic Fertilizer Using Microbes Technology.

Project developed with both Canadian Expertise rendered under Terra Bio Plus Corporation , Canada with the commitment of Renowned Micro-biologists Dr.Eliseo Ruiz & Michael Lim

Business Concept • Using Microbes Technology developed by Renowned Bio Tech

Scientist to convert Vegetative waste effectively.• Convert existing EFB to Superior Organic Fertilizers thus adding

value to waste that is of minimal value.• Submitting claim for Credits under the Clean Development

Management program as promoted by UNFCCC• Utilizing the Sludge from the Palm Oil Mill Effluent ( POME ) to

convert to organic fertilizers thus eliminating the need to dispose of this waste effectively and comply to DOE requirement.

• Create additional income to the plantation via lower cost of disposal of EFB and POME sludge, and replacing Chemical Fertilizers with organic fertilizers at vastly reduced cost.

• Create additional economic activities and employment to the state• Concept in line with the govt. effort to clean the environment , re-

use of Waste materials to support the Agricultural Sector. With a big emphasis on the usage of Bio Technology to complement the project.

Why Organic Fertilizers ? DISADVANTAGE OF CHEMICAL FERTILZERS

Chemical fertilizers are quick acting, short term plant

boosters and are responsible for:• Creating hardpan• Destruction of beneficial soil life• Altering vitamin and protein contents of certain crops• Making crop more vulnerable to disease• Preventing plants from absorbing some needed

nutrients

Advantages of Organic Fertilizers • Replenish the soil• Keep soil friable• Promote beneficial soil life• Increase crop yield and grow larger plant• Prevent hardpan• Benefit environment by recycling waste and reduce • green house gas emission• Protect certain crops from disease• Are safe• Cheaper than Chemical Fertilizers

Market Trend – Future • Investors are keen to invest into this project as the trend of

the future generation is

“ GOING ORGANIC – BACK TO NATURE ”

• Market trends indicate that customer needs an organic product that works as well as or better than competitive chemical products.The product should be priced competitively against competing chemical or organic lines and should be easy to use, environmentally safe, and have superior performance.Terra Bio Plus can specifically target customers who are environmentally and health conscious,and also those who just want a product that works better than the rest for a competitive price.

Marketing Strategy Export to Middle East countries as this

fertilizer is produced from 100% vegetative waste and can be certified as a “ Halal” product.

• Local market – agricultural sector is the third engine of growth in Malaysia

• Contractual Sale of Organic Fertilizers to distributors

Project Success factors

The People - Technical Expertise• The team that is leading this project has the relevant

experience in implementing project of this type as they have the required technical and management expertise to do the job. Both Dr Ruiz and Michael are Micro – biologist scientists with 20 years experience

Management Expertise • The management team of Au Say Kiat & Jerry Looi

together have more than 50 years of senior management experience. They can provide both operational management and Strategic planning advise where required.

Investment Required • Infrastructure / Equipment / Machineries / building

& covers estimated to cost up to M$ 8.5 million • Funders already secured for the said project• Working Capital funding to be finalized with local

banks estimated at M$ 1.5 million • Payback expected within a period of 2.3 years.• Both Technology and know how to produce

superior organic fertilizers will be transferred from Canadian Company – Terra Bio Plus Corporation

Financial Summary & Viability • The Funding of the project already secured from Oversea funders

that are keen to invest in Environmentally friendly projects. Funding agreement already in place.

• The Rate of Return based on our Capital Outlay of M$ 10 million is less than 2.5 years.

• The project viability would require the support of the plantation owners as the Marketing of the products may take some time to realize.

• We have a Main Distributor in principle but pricing not finalized

What is required ?LONG TERM SUPPLY AGREEMENT • Long Term Supply agreement of EFB for the organic

fertilizers plant, an estimated 70,000 mt of EFB is required per year for each Plant. OR barter option of investing in Shredder in the mill to recover residue oil from the EFB which is about 0.2 % , in exchange a 10 yrs supply agreement of EFB at no cost .

• LONG TERM LAND LEASE AGREEMENT • A long lease of 10 years ( min ) for land of 10 acres

located next to the Oil Palm mill to erect the Organic Fertilizers plant to enable operating at minimal handling cost. Option given to landowner to purchase assets of the company at the end of the lease.

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Permit & Timing • Operational permit / licenses to set up and operate the

plant. • Time being the essence of the project , the execution of

the documentation to put in place the procedure to apply to the UNFCCC is crucial for the success of the Registration of Project. Contract for Supply of EFB and Lease of Property for erection of Factory needs to be executed without delay in order to secure the approval of both the M’sian Govt. and Canadian Govt. and Project Funder’s due diligence.

Technology & Track Record• The team has already built a number of “Built, operate and

transfer” organic fertilizer plant for many reputable companies in Malaysia, China,Vietnam, Philippines and the other Asean region.

• To date, Terra Bio Plus Corporation associated firms of ELR Trading Company and Bio-Organic Systems have built 12 organic fertilizer plants with 500 to 1000 tons per month capacity in China, 4 plants in Philippines with 7500 tons per month capacity, 2 plants in Malaysia with 1500 to 3000 tons per month capacity using vegetative and/or animal waste sources. Currently two additional plants are being constructed in China with 30,000 and 60,000 tons per month capacity and one additional plant being considered in Vietnam.

Benefit to Mill Owners / Plantation owners• Effective clearing of EFB which is a waste that cost money to

dispose. EFB are sold and taken away at no cost to the mill. Thus savings from disposal cost and no fire hazard as a result of rotting EFB piles.

• Effective clearing of some of the POME sludge which is disposed off by spraying on the Organic fertilizers – thus reducing the Dept of Environment fines. There will be savings for the mill , from the necessity to create more ponds for POME treatment.

• Additional Income from disposal of EFB and Recovery of Residue Palm Oil from EFB shredding.

• Cheap effective Organic fertilizers to replace the more expensive chemical fertilizers

Est. Financial Benefits to Nam Bee

• The expected financial Benefits are estimated to be : M$ 000’ / year

1) Recovery of Residue Oil from EFB 945

( Based on 35 K/ mth of FFB @ 0.15% @ $1500 )

2) Saving on Transportation of EFB for 840

disposal at neighboring area ( $ 70K / mth )

3) Additional Income from Lease of Land 60

4) Saving on treatment of POME for Mill 40

( assuming lesser POME pond maintenance )

Total 1,885

Next Step• Evaluate Location of the existing mill and it’s

production Capacity and amount of EFB available. • MOU to be signed for the supply of EFB with option

of Investing in Shredder for the Oil Mill to recover Residue Oil and Lease of Land for duration of project with Option to buy assets at the end of lease

• Fixed timing for the signing of Official Agreement. This is a matter of extreme urgency as we have to close this deal within 3 weeks. Failing which, the project may miss the timing needed.

OPTIONS – NO. 1

• Do not invest in the project – only supply of EFB at a fixed price via a long term supply contract with option to purchase the plant. Make available land – 10 acres for long term lease at token rate( i.e. $500 per acres per month ) OR we will invest in a shredder to be installed in the mill and any oil recovered will be go towards improving the Oil yield of the Mill , the EFB will be given free ( token sum $ 1.00 ) for composting as a trade off . The shredder will maintain by us ( the investment is expected at $ 500K)

• Terra Bio Plus Corporation , Canada & Co will set up a JV company to invest in the plant and claim the CDM Program to support the project. ( an estimated amount of USD 2.43 Million will be injected into the project )

Continue option 1 Share Participation • We invite Nam Bee Management to take a stake in

the equity of the JV Company. They are required to contribute for the registration fees and other expenses amounting to US$ 200K for a 20% share in the JV Company. This amount will be classified as a loan to the JV company and will be repaid over a short term period.

• The funds will be only collected after securing the approval of the UNFCCC Executive Board. There will be a trade off between the EFB Supply & Lease of land .

• An Option will be granted to the Company to purchase the assets later.

Options – NO 2 • Invest in the project – Estimated investment of capital – M$ 10

million – Project owner to take care of the sale of the fertilizers

• We will provide CDM consultancy to secure the Carbon Credit for the project – to date we have successfully applied for 5 projects. –

Revenue sharing ratio shall be based on tiered basis : CERs - < 100,000 mt 70% ( owners ) : 30 % CERs - < 200,000 mt 65 % : 35 %CERS - < 300,000 mt 60 % : 40 % CERs - < 400,000 mt 55 % : 45 %CERs - > 400,000 mt 50 % : 50 %All cost relating to the preparation of the application for the CDM program with the UNFCCC until approval shall be for account of the Consultant. The project owner only pays for the registration fees upon approval by UNFCCC – thus all risk with the application borned by the consultant. The entire process will cost USD 100 K.

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• Consultants will provide the technology and know- how on a Built , Operate and Transfer Concept. Guidance will be given for all aspect of complying to the CDM parameters and data collection.

• The Management of the plant shall be the responsibility of the Terra Bio Plus in order to ensure that the process of production of Fertilizers and parameters of the CDM program are adhered to strictly. The cost of managing the plant shall be agreed upon at a cost plus basis for manpower ( 1.8 X ) and actual purchase for Capital and maintenance of equipment. This arrangement shall be for a perod of 6 years to 2012.

• The consultants consist of Terra Bio Plus Corp, Canada and Management team of Au Say Kiat and Jerry Looi

Estimates of Cost – Organic Fertilizers

• Capex –

Land / Machineries / Land preparation / civil works / Cost of Installation & logistics , etc - M$ 8.5 M ( does not include Working Capital )

It is expected to take 6 to 8 months for the completion of the plant.

Cost of Production :

The cost of production of Fertilisers is estimated at M$ 250 to $280 per mt. This include the cost of Microbes , Overheads , Repair and maintenance , depreciation, etc.

Financials Summary of Results Year 06 07 08 09 00 01 02

M$’Million

PAT (0.26) 4.61 5.36 6.17 6.72 7.057.40

IRR 48 %

Payback based on investment of M$ 8.5 million - 2.3 years

Savings from Operations for Mill $ 1.88 million

Assumptions : Sale of CERs at USD 6 per mt to USD 8 per mt Sale of Fertiliser at M$ 320 per mt ( no margin to penetrate market )

Financial Projections – based on full financing by TERRA

Project : EFB Waste to Organic Fertliser Year 2006/7 2007 2008 2009 2010 2011 2012 Contract Year 0 1 2 3 4 5 6M$000Capacity 30,000 100% 100% 100% 100% 100% 100%Annual Hours 8720

CDM Program Expenses (100) (200) (200) (200) (200) (200) (200)CER Sales 250K mt @ US$6 0 5,400 5,580 6,100 6,100 6,100 6,100Sales of Fertiliser M$320/mt 800 9,600 10,080 10,584 11,113 11,669 12,252Total Revenue 700 14,800 15,460 16,484 17,013 17,569 18,152

Operating Expenses 4.0%EFB Biomass ( $5 /mt ) 31 255 255 255 255 255 255Microbes ( $22,000 / mt ) 275 3,300 3,300 3,300 3,300 3,300 3,300Mechanical Shovel 15 120 125 130 135 140 146Bagging 150 1,800 1,872 1,947 1,800 1,872 1,947Electricity 24 180 180 180 180 180 180Additive for enhancing fertiliser 0 0 0 0 0 0 0Travelling 75 360 374 389 405 421 438Staff Accomodation 10 100 104 108 112 117 122Rental for land 1 60 60 60 60 60 60Printing , Stationery & Postage 0 24 25 26 27 28 29Telecomunication Charges 10 60 62 65 67 70 73Insurance 0 173 180 187 194 202 210Professional fees 75 150 156 162 151 157 163Plant Operators wages 50 1,440 1,498 1,558 1,620 1,685 1,752Plant Maintenance 0 175 184 189 195 201 207Administrators & mgmt cost 50 840 874 909 945 983 1,022Start-up Expenses 200 300 0 0 0 0 0Total Operating Expenses 966 9,337 9,248 9,465 9,447 9,671 9,904EBITDA (266) 5,463 6,212 7,019 7,566 7,898 8,248Debt ServiceAnnual Interest 0 0 0 0 0 0 0Depreciation 0 850 850 850 850 850 850Tax 0 0 0 0 0 0 0

Profit/ ( Loss ) after tax (266) 4,613 5,362 6,169 6,716 7,048 7,398

Unappropriated profit / (loss ) b/f 0 (266) 4347 9709 15878 22594 29642

Profit available for appropriation (266) 4347 9709 15878 22594 29642 37041

Assuming - Pioneer status secured