Future Fuels – Adviser Presentation January 2014.
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Transcript of Future Fuels – Adviser Presentation January 2014.
Future Fuels – Adviser Presentation
January 2014
2
Investment Benefits
A low risk opportunity to invest in a British Clean Technology business which has raised over £130 million to date, owns a $220 million ethanol plant in Virginia, USA as well as fully permitted land, with constructions works underway, to build an ethanol plant in the UK
For every £1 you invest in Tranche 3a, the Capital Allowances the LLP is entitled to should allow you to reduce your tax liabilities immediately by £1 in the current (2013/14) tax year (subject to your level of taxable income)
The reduction in your tax liabilities should effectively provide you with 100% capital protection for your investment
These tax allowances are entirely statutory and based only on actual expenditure incurred in acquiring c. £115 million of plant and machinery in the 2012/13 tax year
An expected annual post tax rate of return of 44.1%, based on the assumptions regarding the performance of the US plant alone
£1 invested today should return you £2.30 (post tax) over the next eight years. The equivalent pre-tax return, assuming a top rate taxpayer and 45% tax rates, is £3.37
Profits should start to be distributed following the 2014/15 tax year There is potential for additional profits through the build and operation of the UK site
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Key Project Milestones
2006 – Project begins Jan 2008 – FCP becomes involved Dec 2012 – offer to acquire 220m litre ethanol plant in USA March 2013 – Acquired Hopewell plant July 2013 – A strategic review of best outcomes for the project October 2013 – Project focus to re-commission US Operations October 2013 – Budget & timetable established for recommissioning November 2013 – CEO appointed; structure established December 2013 – Vireol Bio Energy LLC incorporated January 2014 – Initial staff (18) join February / March – Finalise recruitment, commission key plant items April – plant start-up
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Current Project Focus
Plant in excellent condition Expert counterparties identified and negotiations concluding US ethanol sector is strong:
legislative requirement of c.13.2 bn gallons of corn ethanol in 2014; & c.800m - 1bn gallon export opportunity
Total productive capacity in US c. 13.5 – 14 bn gallons (so market balanced) No material supply increase in the US since 2010 and none anticipated Strong local support and demand in Virginia US plant could produce an annual EBITDA of $32m (for around $10m of restart
costs) based on historic 3 year ethanol / 5 year corn prices
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Key actions for recommissioning
Recruitment of staff well underway 18 staff currently employed (inc. CFO, Safety & Quality Mgrs) Balance (c.20) to join in February
Plant condition remains as expected (very good) Katzen (technology providers) assisting VBE LLC re recommissioning Main contracts (corn supply / DDGS offtake; & ethanol offtake) well advanced Finalisation of marketing strategies in late February / early March Corn procurement to begin in March Key items of equipment brought to operational readiness through March Plant scheduled to begin production in April
The project is now focused on bringing the US plant into operation as quickly as possible
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Grain storage already operational
Grain Storage
Ethanol Storage
Grain Delivery
Fermenter Tanks
Stillage TanksDryers
Multi-track rail sidings
Distillation Columns
Control Building & Workshop
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Future Fuels LLP owned US Site
Grain Storage
Ethanol Storage
Grain Delivery
Dryers
Multi-track rail sidings
Distillation Columns
Control Building & Workshop
MillingCooling Towers
Offices
DDGS Store
Stillage Tanks
Evaporator
Fermenters
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Commercial overview
US$11m funding required Plant will be debt free Strong demand for ethanol (Mandate,
export, E15 & E85) Supply & demand balanced Corn prices have fallen dramatically
(<$4.20 / bushel) Attractive operating margin (ethanol &
DDGs less corn) State/City support (including from
Governor & Sec. Of State for Agriculture)
Local markets for supply and offtake for all products on strong commercial terms
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Projected returns from US plantBase Case: Ethanol – 3 year average price Corn – 5 year average price Sale at 5 x EBITDA
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Additional activity
The Technical Centre at Grimsby will continue to be built and rented. Initial works by Kier are underway
Alternative uses for the UK land will be considered if they produce income and do not prohibit a build of the intended ethanol plant
Corn storage & handling facilities at US plant already operational through short-term lease (until needed by the plant)
Additional opportunities identified to enhance revenues
Corn spinning – to produce biodiesel
Additional storage capacity
Development of E85 gas station
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Funding for Tranche 3A & 3B
Tranche 3A Initial requirement of $11,000,000 (incl. Contingency £2.5m) for re-commencing
operations These funds are required according to a cash flow plan over the next 3 months It is anticipated that capital allowances with a cash value equivalent to £7.8m
are available in 2013/14 The Tranche 3A “raise” is at an advanced stage
Tranche 3B An additional £5.2m will be raised for UK operational costs and contingencies Tranche 3B benefits from capital allowances of £4.2m (2014/15) and £1m
(2015/16) The LLP means to raise Tranche 3B by Q1 2014
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Financial appraisal of Tranche 3A & 3B
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Case Study – Tranche 3A
This investment opportunity is not suitable for ordinary retail investors. It is a high risk investment which is illiquid and should only be promoted to high net worth, sophisticated and professional investors. Further details are set out in the relevant Information Memorandum. Investors are recommended to seek professional advice. Issued by Future Capital Partners (FS) Limited which is authorised and regulated by the Financial Conduct Authority.
The values used in this presentation are based on commercial principles and financial models that make certain assumptions regarding the tax treatment of the overall project and certain individual elements within that project. The tax position of the legal entities within the project is subject to a final opinion being agreed with our advisers and may be subject to alteration from the assumed treatment in this presentation. It is important that cross border businesses are correctly structured in order to avoid double taxation. Whilst we consider that the calculations used to support this presentation have been prepared with due care and diligence and in line with advice received to date, they are subject to further adjustment once the final opinion has been received.
Important Information
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