glenn county, ca pre-plan & feasibility study

Glenn County, CA

PRE-PLAN & FEASIBILITY STUDY

P1 March 15

th 2012 2

nd Draft Ido Mizrahi Yair Zadik KVB Inc.

P0 Nov 27th

2011 Draft for comments Ido Mizrahi Yair Zadik Ido Mizrahi Jan 1st 2012

Rev. Date Description Written by Reviewed by Approved by Date

April 2012

Ido Mizrahi, Project Manger Arrow Ecology and Engineering Overseas (1999) Ltd

Glenn County.- Pre plan

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Table of Content

1. INTRODUCTION ........................................................................................................................ 5

1.1. GLENN COUNTY BACKGROUND ...................................................................................................... 5 1.2. MSW IN GLENN COUNTY ............................................................................................................ 6

Waste collection and transportation in Glenn County .................................................................... 6 Waste characteristics ...................................................................................................................... 6 Resource recovery and recycling ..................................................................................................... 7 Waste management constraints and problems facing local agencies ............................................ 7

2. PRODUCT ANALYSIS .................................................................................................................. 8

2.1 THE TECHNOLOGY ........................................................................................................................... 8 The common waste disposal techniques practiced today include: ................................................. 8 Landfills ........................................................................................................................................... 8 Incineration/Pyrolysis ...................................................................................................................... 8 Mechanical-Biological Treatments ................................................................................................. 8 Composting ..................................................................................................................................... 9

2.2 THE ARROWBIO® TECHNOLOGY ......................................................................................................... 9 The ArrowBio System Process ....................................................................................................... 12 The ArrowBio process .................................................................................................................... 14 Meeting Industry Needs- ArrowBio’s Core Competitive Advantages ............................................ 15 The company Background ............................................................................................................. 15

3. PRELIMINARY DESIGN ............................................................................................................. 18

3.1. BLOCK DIAGRAM ...................................................................................................................... 18 Arrow bio separation system process ........................................................................................... 18 Arrow bio Biological process ......................................................................................................... 20

3.2. SITE LAYOUT ............................................................................................................................ 22 Waste treatment plant Layout ...................................................................................................... 22

3.3. PLANT LOCATION ..................................................................................................................... 29 3.4. NETWORK SUPPLY .................................................................................................................... 29

4. ENVIROMENTAL REQUIRMENTS .............................................................................................. 30

4.1. AIR ........................................................................................................................................ 30 4.2. WASTEWATER ......................................................................................................................... 31 4.3. NOISE .................................................................................................................................... 32 4.4. ODOR .................................................................................................................................... 32

5. DESIGN REQUIREMENTS ......................................................................................................... 34

1.5. SAFETY RULES ......................................................................................................................... 34 Traffic security:.............................................................................................................................. 34 Human safety: ............................................................................................................................... 34 Fire Fighting .................................................................................................................................. 35 Buildings & Civil engineering ......................................................................................................... 35 Technical civil engineering requirements: ..................................................................................... 35

1.5. WATER CONSUMPTION ............................................................................................................. 36 Initial filling estimation: ................................................................................................................ 36 Estimated Daily consumption: ...................................................................................................... 36

5.3. ELECTRIC CONSUMPTION ............................................................................................................ 37

6. BUSINESS PLAN ..................................................................... ERROR! BOOKMARK NOT DEFINED.

6.1. GLENN COUNTY, CA. 70 TPD PLANT PROJECT .......................................................................... 38 Key Drivers ........................................................................................ Error! Bookmark not defined.


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6.1.1 Glenn County Municipal Solid Waste……………………………………………………………………………….39 6.1.1.1 Glenn County Population Growth…………….……………………………………………….………………….40 6.1.1.2 Economic Factors…………….…………………………..…………….…………………………….………………….42 6.1.1.3 Social/Ethnic Factors……….…………………………..…………….…………………………….………………….47 6.1.1.4 Packaging Trends…….……….…………………………..…………….…………………………….………………….47 6.1.1.5 Diversion and Exportation..…………………………..…………….…………………………….………………….48 6.1.1.6 Illegal Dumping………………..…………………………..…………….…………………………….………………….49 6.1.1.7 Summary of Factors.………..…………………………..…………….…………………………….………………….49 6.1.1.8 Waste Volume Forecast Methodology.………..…………….…………………………….…………………..50 6.1.1.9. Glenn County Curb-Side Recycling…….………..…………….…………………………….…………………..51 6.1.2 Closure of the Glenn County Landfill…….………..…………….…………………………….…………………..52 6.1.3 Fees……………………………………………….…….………..…………….…………………………….…………………..54 6.1.4 Catalyst for Development……………….…….………..…………….…………………………….…………………..54

6.2. PROJECT ECONOMIC ASSESSMENT.......................................... ERROR! BOOKMARK NOT DEFINED. 6.2.1 Project “Base Case”……………………….…….………..…………….…………………………….……………………57 6.2.1.1 Mass Balance ……………………….…….………..…………….…………………………….…………………………57 6.2.1.2 Financial Plan ……………………….…….………..…………….…………………………….…………………………59 6.2.1.3 Revenues & Opex………………….…….………..…………….…………………………….…………………………62 6.2.1.4 Profit & Loss ………………….…….………..…………….…………………………….………………………………..70 6.2.1.5 Cash Flow ………………….…….………..…………….…………………………….…………………………………….74 6.2.1.6 Summary of Base Case Financial Results.….…………………………….…………………………………….74 6.2.1.7 Sensitivity Analyses……………………………...….…………………………….…………………………………….78

7. ARROWBIO TEAM ................................................................................................................... 82

7.1. Project Timeline .............................................................................................................. 83

8. ANAEROBIC DIGESTION - BASIC THEORY ................................................................................. 85

8.1 INTRODUCTION- ANAEROBIC DECOMPOSITION PROCESS ........................................................................ 85 8.2 ANAEROBIC VS. AEROBIC TREATMENT ............................................................................................... 85 8.3 ANAEROBIC TREATMENT CATEGORIZATION ......................................................................................... 83 8.4 CHARACTERIZATION OF MSW ORGANIC MATTER ................................................................................. 84

8.4.1 Polysaccharides............................................................................................................... 87 8.4.2 Proteins ........................................................................................................................... 90 8.4.3 Lipids ............................................................................................................................... 90

8.5 ANAEROBIC BREAKDOWN STAGES ..................................................................................................... 90 1.5.8 De-Polymerization .......................................................................................................... 91 8.5.2 Acidogenesis and Acetogenesis ...................................................................................... 93 8.5.3 Methanogenesis ............................................................................................................. 94 8.5.4 Sulfate and Hydrogen disulfide ....................................................................................... 98

8.6 PROCESS AND REACTOR DESIGN ....................................................................................................... 99 1.6.8 Anaerobic Digester ......................................................................................................... 99 8.6.2 Methanogenic low solid reactor LSR ............................................................................. 100

8.7 METHANOGENIC REACTION PRODUCTS ............................................................................................ 102 8.7.1 Bio-gas flow .................................................................................................................. 102 8.7.2 Water effluents ............................................................................................................. 103 8.7.3 Sludge – soil amendment .............................................................................................. 104

1. APPENDIX ............................................................................................................................. 105

APPENDIX A: WASTE ANALYSIS ................................................................................................................ 106 APPENDIX B: PHOTOS OF PROPOSED SITES ................................................................................................ 124 APPENDIX C: PROPOSED BIOGAS GENERATOR SPECIFICATIONS ....................................................................... 126 APPENDIX D ........................................................................................................................................ 129

Certificate of Tel-Aviv water ........................................................................................................ 129 APPENDIX E ............................................................................................... ERROR! BOOKMARK NOT DEFINED.

Appendix E1: Certificate of Tel-Aviv compost ................................... Error! Bookmark not defined.


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AppendixE2: Certificate of Tel-Aviv compost .................................... Error! Bookmark not defined. Appendix E3: Certificate of Tel-Aviv compost ................................... Error! Bookmark not defined. Appendix E4: Certificate from Los Angeles, CA ................................. Error! Bookmark not defined. Appendix E5: Certificate from Douglas Partners Australia ............... Error! Bookmark not defined. Appendix E6: Certificate from Jacks Gully Sydney ............................. Error! Bookmark not defined. Appendix E7: Certificate from Jacks Gully Sydney ............................. Error! Bookmark not defined.

APPENDIX F1: CERTIFICATE OF TEL-AVIV NOISE PERFORMED BY GHD ................... ERROR! BOOKMARK NOT DEFINED. APPENDIX F2: CERTIFICATE OF NOISE AT LUCAS HEIGHT SYDNEY .......................... ERROR! BOOKMARK NOT DEFINED. APPENDIX G: CERTIFICATE OF TEL-AVIV ODOR PERFORMED BY GHD .................... ERROR! BOOKMARK NOT DEFINED. APPENDIX H: PG&E RATES ........................................................................ ERROR! BOOKMARK NOT DEFINED. APPENDIX H: ARROW BIO 2008 JUNIPER REPORT ..................................... ERROR! BOOKMARK NOT DEFINED. APPENDIX I: RECYCLABLE’S RATES .................................................................. ERROR! BOOKMARK NOT DEFINED. APPENDIX K: 3D DESIGN PICTURES ................................................................. ERROR! BOOKMARK NOT DEFINED.

The information contained in this document is confidential. The information

contained in this document is the sole property of Arrow Ecology and Engineering

overseas. Any reproduction in part or whole without the written permission of

Arrow Ecology and Engineering overseas is prohibited. In any contradiction or

discrepancy between the contents of this folder and the provisions of any binding

agreements – the provisions of the binding agreements shall prevail. Nothing

contained in this folder shall be interpreted or construed in any manner that will

impose any liabilities or obligations in excess of those included already in the

binding contracts between the parties. Please note that this folder contains also

material produced by third parties and is provided "as is".


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1. Introduction

1.1. Glenn County background

Glenn County was formed in 1891 from parts of Colusa County. According to the

2000 census, the county has a total area of 1,327.16 square miles (3,437.3 km2), of

which 1,314.79 square miles (3,405.3 km2) is land and 12.36 square miles

(32.0 km2) (or 0.93%) is water. Most of the land is farmland and agriculture is the

primary source of Glenn County's economy. Major commodities include rice,

almonds and dairies.

The population of Glenn County for 2010 was 28,122. The county consists of six

cities and towns; Butte City, Fruto, Hamilton City, Orland, Willows and Elk Creek.

All of which produce approximately 75 short tons (68 metric tons) of Municipal

solid waste (MSW) per day.

The County's existing landfill is about to reach its full capacity and will soon need

to be closed down. As a result, the County is looking to invest in a long-term

solution for the MSW. The County has signed a Memorandum of Understanding

(“MOU”) with KVB, Inc. for a solid waste conversion facility.

After reviewing alternative solutions, KVB Inc. made contact with Arrow Ecology

& Engineering Overseas Ltd ("Arrow"), the developer and owner of the patented

ArrowBio™ technology, to conduct a feasibility study for a "tailor made"

ArrowBio facility for Glenn County. This study investigates the possibility of

making the County's MSW treatment independent and self-sufficient from

surrounding counties, with the secondary possibility of making Glenn County the

MSW treatment provider for the other counties.

Key parameters of this assessment include, but are not necessarily limited to:

The core of the project is A Municipal Solid Waste (MSW) treatment plant

for the treatment of 62 tons per day (56 metric tons) during 350 days per

year.

The targeted Tip Fee (“TF”) is $70 USD per ton, however, if required a small

increase may be acceptable.

The establishment of an initial transfer station as part of the ArrowBio plant.


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1.2. MSW in Glenn County

Waste collection and transportation in Glenn County

Today, waste is collected by Waste Management (WM) Company in three streams;

Recyclable Materials, Green waste, and Household waste. This

report refers mainly to the household waste but will include information for the

recyclable waste.

There are two waste major waste collecting companies in the area, Waste

Management and Recology and a tender is issued every few years. At the present

time, Waste Management is under contract for the collection and transportation of

waste. This contract was recently extended by the County until December 31,

2016.

Waste characteristics

From a study conducted by AS Recycling, an organization of California State

University, Chico, sub-contractors, to Recology, at the request of KVB Inc. (see

Appendix A).

A sample of 5,940lbs (2.97 ton US) of waste was collected from Glenn County,

California. This waste was analyzed on November 12th and 13th, 2011, and will

be the reference for Arrow for this study. Table 1 summarizes the breakdown of

waste collected and analyzed for that study:

Table 1: Waste characteristics AS Recycling study.

List Of Material Percentage

(By Weight)

Weight (kg)

1 Food Waste 21.0% 605.61

2 Organic Liquid 1.0% 28.84

3 Compostable Paper 6.0% 173.03

4 Paper 14.0% 403.74

5 Plastics 10.0% 288.39

6 Plastic Film 4.0% 115.35

7 Garden Waste 18.0% 519.10

8 Textile 4.0% 115.35

9 Cardboard 4.0% 115.35

10 Diapers 4.0% 115.35

11 Cans & Bottles (CRV) 3.0% 86.52

12 Metal (Ferrous) 3.0% 86.52

13 Metal (Non-Ferrous) 1.0% 28.84

14 Glass 2.0% 57.68

15 Rock 2.0% 57.68

16 Fines 2.0% 57.68

17 Electronic 1.0% 28.84


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18 Wood 1.0% 28.84

19 Light Bulbs

20 Hazardous Material

21 Batteries

22 Other

Resource recovery and recycling

Apart from the separate collection of recyclable materials, all household waste is

diverted to the Glenn County landfill with no preliminary treatment despite the

35% recyclable materials in the waste.

Waste management constraints and problems facing local agencies

The main problem that the county is facing is the near-term closure of its landfill

site. At the time this report is written, the estimated time left for the landfill to

operate is about 5 years, though the County may opt to close the landfill sooner.

Once the Glenn County landfill is closed, the County will have to dispose of

household waste to a more distant landfill. Absent an alternative solution such as

the project evaluated in this study, this will require the County to build a transfer

station and may result in the County facing price and service uncertainty in the

future.


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2. Product analysis

2.1 The technology

The growing quantity of Municipal Solid Waste (MSW) is one of the largest

ecological problems of our times. Cities like New York (20,000 tons per day),

Barcelona, Los Angeles, Sydney, London, Athens, Beijing and others, have

recently declared their needs to find environmental and cost-effective solutions for

the treatment of their Municipal Solid Waste. Furthermore, the European Union

has defined its demands from all participants – Solid Waste has to be treated rather

than dumped or landfilled, thereby effectively applying new taxes to disposal via

landfills. Combined with the above driving forces, the approval of the Kyoto

Protocol, a United Nations anti global warming initiative signed by 126 countries,

which has entered into force, provides the “stamp of approval” to set the wheels

in motion to enable ArrowEcology to penetrate the global MSW processing

industry.

The above markets spend billions of dollars each year to treat waste, and their

need is rising in parallel to the growing metropolitan areas and the effects on the

environment and global warming.

There is a huge, worldwide market awaiting for a new, cost-effective solution,

today. Waste treatment prices are raising as the problem is growing, so prices like

US $250-300/ton (Japan), Euro 150/ton (Germany), US $140/ton (New York), or

AUD $120 (Sydney, Australia), are more dominant in the developed countries.

The common waste disposal techniques practiced today include:

Landfills

Landfills are still the most common method. This is the old way of dealing with

garbage but it is most harmful to the atmosphere (“The Greenhouse Effect”), to

well water and destroys growing amounts of land resources. The landfills in

Western Europe will be shut down by the end of the decade and in the U.S they

will be treated in a very expensive way.

Incineration/Pyrolysis

Incineration/Pyrolysis are methods which use heat and thermal conversion

treatment to lower the weight and the volume of the waste while producing energy

from it. Traditionally, those methods have been very expensive because of air

quality regulations and the need for materials that will be able to withstand the

very high temperatures. These technologies are also often limited by relatively low

capacity and high investment requirement.

Mechanical-Biological Treatments


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As an emerging technology, biological treatments such as Anaerobic Digestion

(AD) and Mechanical-Biological Treatments (MBT) today suffer from lack of

extensive market application because there are few companies in the world who

possess the ability and technology to successfully operate an AD/MBT plant.

However, as importantly, because biologic treatments can only manage organic

materials, high quality pre-sorting is a total prerequisite for good results. Even

though several countries and cities have implemented manual pre-sorting at source

(i.e. at the consumer’s home), the quality of such pre-sorting is rarely of a high

enough standard to enable biological treatment to be successful, and furthermore,

it is not controlled by the biological treatment companies, which increases

potential for operational problems.

Arrow’s process, which is an MBT-based process, reduces the need for extensive

pre-sorting at source, and as a result, is able to far more efficiently process MSW,

enabling its plants to efficiently produce Biogas and to recover materials that can

be used for recycling purposes.

Composting

Composting produces organic mulch for agriculture and other uses. A lot of energy

is required in order to dry damp MSW, which usually contains 35% water content .

Composting does not remove heavy metals and many other toxins, if they are

present in the feed stock and it can be highly odorific. Additionally, commercial

prices of compost, historically, have been low. Finally, energy is expended rather

than produced in the process of composting.

Frost & Sullivan research agency estimates the municipal waste management

industry in Europe to grow from US$31.62 billion in 2002 to US$38 billion by

2009, driven by rising investment in new technology and increasing pre-treatment

of waste. Similarly, the world is moving from landfills and incineration systems to

biological treatment of MSW, mainly through MBT and AD technologies.

Frost & Sullivan claims that buyers in this market, such as waste treatment

companies and municipalities, have come under increasing pressure to prove and

communicate their green credentials. These considerations may prompt companies

and municipalities to pay more than the minimum waste treatment costs in order to

obtain dependable technology from a reliable brand name.

2.2 The ArrowBio® technology

The unique technology (internationally patented) developed by Arrow Ecology is

the only one in the world capable of treating unseparated, mixed household waste.

The technology has many advantages over any existing technology:

Treats mixed waste with no need for pre-sorting – huge savings in logistics

of placing a large number of rubbish bins at residents' premises and their

collection by a large number of trucks which increases treatment price per ton.


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The system can be helped by the community separation methods, thus

lowering the cost per ton, but it is not dependent upon it, so there is no need

for a "perfect separation solution", which is very expensive and practically

impossible.

The only technology in the world that can separate by water means and

reach recycling percentages of up to 70%- 80%-which enables relatively

higher revenues from recyclables, sale of biogas and the use of clean organic

compost for commercial purposes which can be income-producing.

Proven technology – working commercially.

o Arrow Ecology designed, built, and operated a 100 tpd plant in Israel

that worked between 2003-2008.

o The company designed a 300 tons per day in Sydney, Australia, that is

operating since 2009. This plant is not operated by Arrow, and is

combined with other technologies.

o The company designed and built a 150-200 tons per day in Israel (an

upgrade to the basic plant built in 2002) that is currently operated since

2009 with proven results (see attached letter).

Technology renowned by international research that examined existing

technologies and has chosen Arrow as a leader in price per ton and also

ecologically as compared to other technologies1.

1 Appendix H: Arrow Bio 2008 Juniper report

The ArrowBio Solution and Competitive Advantage

Utilizes a unique technology (Registered Patent) that succeeds in treating

MSW while recovering materials from the waste and produces Biogas;

Sorts raw MSW through a liquid-based waste preparation and separation stage,

thereby consuming less energy without the need for pre-sorting.

Enables significantly lower construction costs and operational costs compared

to thermal solutions.

Recovers 70% to 90% of the recyclable materials from the waste.


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With respect to the recovery of material and energy resources from MSW, the

ArrowBio process has two major features distinguishing it from other systems:

One involves how water and gravity are employed to separate from the mixture,

hence, recover non-biodegradable traditional “recyclables” (e.g., metal, plastics,

etc.). The other feature concerns the transformation of the biodegradable organic

fraction to biogas, the primary energy product.

Like other systems for processing MSW, ours employs the biological process of

anaerobic digestion. Unlike others, ours is able to employ the advanced variant

known as “Up-Flow Anaerobic Sludge Blanket” (UASB) digestion, which offers

many comparable advantages. Both distinguishing features are explained later in

this report.

The biogas product is translatable to electricity for export to the grid, or to be used

as vehicular fuel or other products of value depending on local market conditions.

The methane that might otherwise be generated in a landfill is thus withheld from

the atmosphere while potentially reducing the use of fossil fuel.

Moreover, using the ArrowBio technology, the majority of the mixed MSW mass

is utilizable, thus significantly lowering external landfill deposits and associated

tip fees that would be incurred otherwise.

ArrowBio’s Proven Track Record and Clear Business Strategy:

A fully industrial operating facility installed in Tel Aviv since 2003.

ArrowBio process approved by experts from the U.S., UK, Spain, and

Australia

Over 10 years of R&D, led by a team of top-class environmental experts.

Signed contracts in Australia and China, and selected as best available

technology in California, India, Italy, Mexico, and Puerto-Rico.

Vision: to become the world’s leading MSW treatment solution


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The ArrowBio System Process

The ArrowBio process is an integrated solution that receives either unsorted or

sorted, Municipal Solid Waste as an input, reducing the need for prior separation

or classification of mixed waste. The process automatically sorts raw MSW,

enabling the vast majority of metals, plastics, glass and sand, to be recycled, while

also efficiently producing clean “green” Biogas.

The preliminary liquid-based waste preparation and separation stage is based

on the principle that inorganic materials, such as metals, glass and sand, have a

specific weight that is greater than water, while plastics and biodegradable organic

matter have a specific weight that is equal to or less than water. While other

processes require energy to dry garbage, Arrow uses a diametrically opposite

approach, by actively using the 33% water content--usually found within garbage--

as a part of its process, thereby reducing both energy and water expenses. As

ArrowBio directly uses the water in the waste, it reduces the solid waste treatment

expenses significantly.

The heavy components that sink to the bottom and subsequently separate from

the organic stream include ferrous metals, non-ferrous metals, glass, sand and

other inert materials. These materials travel down a processing line, where they

are separated by a number of methods.

The remaining materials are returned to the dissolving tank for one last screening,

and finally end up as residue (usually about 15% of the initial weight), eventually

dumped as inert waste.

The light organic waste, already separated from the heavy components, is

transported down a chute into a rough shredder. It is soaked in the liquid in order

for the elements to absorb water as much as they can. Since plastics do not absorb

liquid like biodegradable material, they are lighter and can be separated by us ing

air-flow oriented systems away from the remaining mass, into separate recycling

containers.

The biodegradable material enters the hydro crusher and filtering systems. Here,

the biodegradable materials are crushed and residual contaminations are filtered

out. The remaining energy-rich, organic watery solution, referred to as “biological

soup”, contains biodegradable material, organic matter, paper and other substances

that can now be treated in the bio-reactors to yield fertilizer, water and biogas.


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In the biological section the fluid undergoes several treatment steps, carried out

by naturally occurring microorganisms. The fluid is separated into two streams –

high-solid and low-solid streams. The low-solid stream undergoes Acidogenic

fermentation to transform complex organic material into simpler organic acids and

fatty acids. This acid rich organic matter is then heated up to 36-40 degrees

Celsius, and transported to the Methanogenic reactor for anaerobic degradation of

the organic materials and the generation of biogas and water for reuse. The high-

solid stream is treated in a digester, where solids decompose and transform to

biogas and clean fertilizer. The Biogas is stored in inflatable buffer tanks and can

be sold as clean “green” energy for transportation and power plants. Biogas is

substantially less polluting than alternative fossil fuels.


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The ArrowBio process

The ArrowBio process products

Figure 1: ArrowBio system logic

Figure 2: Recyclables and Products

Recyclables and by products

8

Ferrous metals

PET

HDPE BiogasFilm Plastic

GlassNon-Ferrous

PaperCardboard Sand

Soil Additive

ArrowBio System logic

Hydro Mechanical Separation & Preparation Liquid Anaerobic Treatment


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Meeting Industry Needs- ArrowBio’s Core Competitive Advantages

The waste treatment industry is a capital-intensive industry that is continuously on

the lookout for solutions that:

Will treat unsorted or sorted (though contaminated) waste and reduce the

needs to landfill without polluting or contaminating the environment;

Offer low construction costs and a small foot print;

Require low operational costs; and

Afford a high recovery rate (70%-80%) and net clean energy.

ArrowBio’s solution offers a more efficient and cost effective waste treatment

system that exhibits the following core competitive advantages:

ArrowBio treats mixed waste with automatic sorting. This is achieved

by the unique and patented water-based process that lowers the need to

landfill to a minimum.

The system does not use high temperatures eliminating the need for

thermal processing/management.

The water pipe structure and tanks system prevent pollution from

entering the environment and water system, unlike the enormous

impact of landfills. This also helps to minimize odor.

Using standard machinery from the water industry lowers construction

costs. The modular design offers flexibilities that enable tailoring costs

to the specific customer, as has been done for Glenn County.

The net energy production and the clean products that prevent the need

for “post process treatment”, lower operating costs.

High green energy production plus low energy consumption offers

investment supporting income potential from the energy sales and

possibly also from carbon credits (Kyoto Protocol).

The company Background

Arrow Ecology & Engineering Overseas (1999) Ltd., (hereinafter: “ArrowBio”), a

private Israeli company, today offers a proven solution, based on over 9 years of

continuous development, which creates a paradigm shift in the Municipal Solid

Waste (MSW) processing industry. The company has been successfully operating

a processing plant in Israel since mid-2003, in order to demonstrate the technology

in a production environment and to provide a real-time platform for continuous

R&D. This plant, working in Tel Aviv, was designed to demonstrate the modular

capability of the technology operated with a single processing line. The ArrowBio

process is a unique technology (Registered Patent) that succeeds in treating MSW

ecologically, in a full commercial environment. ArrowBio recovers 70% to 90% of

the recyclable materials from the waste, and produces rich Methane biogas, which

is an alternative, clean and “green” energy for transportation and power plants.


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10

ArrowBio Plant in Tel Aviv ( since 2003)

Separation & Preparation I Receiving Area I Biological & Energy Farm

Figure 3: ArrowBio Tel-Aviv

13

Civitavecchia, Italy (artist concept)

Figure 4: ArrowBio Civitavecchia (concept)


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ArrowBio Ukraine (2013)

Figure 5: ArrowBio Ukraine


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3. PRELIMINARY DESIGN

The preliminary design process examines waste separation and treatment,

considering waste characterization data received by the client, KVB, Inc.. The

process takes into consideration the amount of organic, plastic, metal,

etc. contained in the assumed waste stream as well as current market values for the

noted recyclable materials found in the surveyed waste stream. The preliminary

design process also takes into account the manpower required in accordance to

local conditions and requirements, as currently published and understood by the

design team. Preliminary design parameters are used to estimate project capital

and operating costs presented in other sections of this report including Business

Modeling.

3.1. Block Diagram Arrow bio separation system process

Block diagram No. 100-D-001-A3


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Arrow bio Biological process

Block diagram No. 106-D-001-A3


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3.2. Site Layout

This preliminary Layout is based on the DWG file of the proposed sites and

Google earth. Please see Appendix B for more 3D pictures. The ultimate

placement of the plant on the KVB site may be modified, according to findings of

the detailed design stage.

The following items would be required before preparing a detailed design of the

facility: Soil survey, Geological survey, Geodetic survey, Civil engineering

survey, supply network survey and Environmental impact assessment.

Waste treatment plant Layout

Drawing No. 100-L-001


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Separation area- Layout

Drawing No. 100-L-002-A3

&

100-L-002.1-A3


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Biological area- Layout

Drawing No. 106-L-001-A3


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3.3. Plant Location

The Glenn County project site is to be located on land controlled by the Baker

Family Trust, situated approximately 3 miles east of Orland, CA on Highway 322.

This site was visited by the Arrow team and found suitable, for a number of

reasons:

It is a vast and leveled plane.

Hard groaned suitable for trucks and heavy machinery

Easy to access

Weigh station and Weighing bridge in site

Under KVB control

3.4. Network Supply

KVB Inc. will need to supply the following network connection points at the site

location:

1. Fresh water Pipe 6'' diameter, 5 atm pressure.

2. Sewage Pipe 16'' diameter.

3. Electricity cable Voltage 400 Volt, 3Ph, 60Hz

4. Communication cable. (telephone line and internet communication line)

2 39°44'41.00"N, 122° 4'26.93"W


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4. ENVIROMENTAL REQUIRMENTS

4.1. Air

According to our calculations from the mass balance and plant efficiency, the Gross

Power for the gas engine should be ±160 KW. The main parameters of the proposed

biogas generator mentioned in Appendix C are:

G3412NA Caterpillar engine or similar.

Biogas fuel.

1800 rpm /60Hz. Electric Efficiency 30.6%

Thermal Efficiency 56.3%

Note: The gas emissions from the biogas generator into the air will meet the local

regulations.


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4.2. Wastewater

The ArrowBio plant in Israel is fully compatible to the Israeli Requirements for

sewage, as seen in Appendix D (analysis from Tel Aviv discharge) and Table 4

below. However, wastewater discharge in Glenn County will be according to local

rules & regulations. We do not see any technological limitations to achieve these

goals, within the cost parameters presented later in this report.

We believe that achieving irrigation quality water discharge should be possible. Since

no final water regulations were established for irrigation in the County- that will be

finalised in the detailed design.

Table 4: Israeli Limits for discharge into the sewage system

Parameter Value Units

pH 6-9 pH

COD 2000 mg/L

SS 1000 mg/L

TS 3500 mg/L

Cl- +200 mg/L

SO4-2

+200 mg/L

S- 0.1 mg/L

CN- 2 mg/L

F- 1 mg/L

Oil 100 mg/L

Mineral Oil 20 mg/L

"hard" Detergents 1 mg/L

"soft" Detergents 40 mg/L

Chlorinated hydrocarbon compounds 0.2 mg/L

Phenols and cresols 3 mg/L

Chlorine 3 mg/L

Zn (Zinc) 5 mg/L

As(Arsenic), Cr(chromium),

Pb(lead)

0.25 mg/L

Co(Cobalt) 0.25 mg/L

B(Boron) 3 mg/L

Be(Beryllium), V(Vanadium) 0.5 mg/L

Al(Aluminum) 25 mg/L

Ag(Silver), Mo(molybdenum)

Se(selenium), Cd(cadmium)

0.05 mg/L

Hg(Mercury) 0.005 mg/L

Li(Lithium) 0.3 mg/L

Mn(Manganese), Cu(copper),

Ni(nickel)

1 mg/L

At the volume of waste anticipated to be processed daily by the Glenn County plant,

we estimate conservatively that the facility will produce approximately 20-26 cubic

meters per day. We believe that an active system (Aerobic treatment + Nitrification

and De-Nitrification) would be best approach for processing waste water for


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discharge back into the water table or for export agriculture irrigation uses, but a

wetland filtration design would work as well. Costs associated with waste water

mitigation are included in project Capex, presented later in this report.

Residues and Compost composition

In the following Appendixes, we display certificate analysis of Arrow Bio compost:

E1: Certificate of Tel-Aviv compost



E4: Certificate from Los Angeles, CA

E5: Certificate from Douglas Partners Australia E6: Certificate from Jacks Gulley Sydney E7: Certificate from Jacks Gulley Sydney

The Arrow Bio compost will meet local regulations.

4.3. Noise

Appendix F1: "Noise measurements taken in Tel-Aviv plant” shows the noise

levels are low and meet the local regulations.

Appendix F2: "Noise measurements taken in Lucas Heights Sydney Australia shows

that the noise levels are low and meet the local regulations.

We can conclude that:

The plant will meet the noise values allowed by local Glenn County

regulations.

Personal protection from noise for plan workers would be provided by

management personnel.

4.4. Odor

Odors are released:

During loading of waste to the plant- this area will be in a closed environment.

As fugitive emissions during waste processing.

During the handing and management of digestate.

During post maturation, secondary composting of the digestate.

During the treatment of wastewater.

Despite the fact that there are no bio filters or ventilation systems to treat odors in Tel-

Aviv plant, the analysis done by GHD, presented in Appendix G, shows that the

ArrowBio site in Tel-Aviv has “no obvious odor impact”.

The building design can include the following optional systems:

Ventilation system to recycle the air inside the building.


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Odor control unit.

Similar systems have been installed at the Jacks Gully site in Sydney Australia.


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5. DESIGN REQUIREMENTS

5.1. Safety Rules

The detailed project design will reflect local traffic security and human safety

requirements:

Traffic security:

The width and access of the connecting streets to the main road (CA State

Hwy 32) and inside the plant are suitable for the city garbage trucks and in

accordance with Glenn County regulations.

All junctions match the Glenn County regulation requirements.

Locate traffic sign inside the site.

The design of the concept layout (see Drawing No. 100-L-001) meets these

limitations.

Human safety:

Included:

Training from Arrow bio technical team in order to teach the staff how to

operate the plant;

Operational control of the plant with the assistance of a computer system

which can stop activity of the plant in case of an emergency;

Emergency stop buttons next to every machine;

Stop pull cords above conveyors for emergencies;

All chains, belts, wells, gears etc. must be covered with a removal cover;

Safety signs in every area of the plant;

To locate the following systems:

Cameras system

Loudspeaker system

Emergency alarm system

Fire Fighting systems see next paragraph

Washing emergency stations

Eye washing emergency stations

Match the design of the following to existing safety rules:

Control system

Machine operations

Walk ways and platforms

Maintenance platforms

Stairs slopes and steps

Ladders

Handrails

Personal protection inside the plant by wearing the following:

Safety helmets for head protection


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Suitable shoes for plant operations

Safety glasses for eye protection

Headphones for noise protection in specified areas

Masks covering the noise and mouth

Separation workers should wear protective gloves on their hands while

working

Fire Fighting

The requirements were taken from the Israeli and EU firefighting rules.

Clean area around the site-see Drawing No. 100-L-001-A3; site layout

There is access for fire trucks around the site to reach every point inside

the plant when it is needed, we will design the road surrounding the site

If the following systems for Fire Fighting required in the Glenn County

regulation, they will be in the detailed design:

Pipe net around the plant

Fire extinguishers

Fire hose

Sprinkler systems in the offices and laboratories include:

Pump

Diesel generator

Fire signs

The design of the Fire Fighting system/infrastructure and plan will meet the local

regulations and will be examined by the Glenn County Fire Fighting department.

Buildings & Civil engineering

Technical Light buildings requirements:

The Building should be covered with a roof, four walls.

The followings elements should be located at the site:

o Administration offices near the main entrance

o Storage area for the recycled materials

o Trucks weighing station in the inlet and the outlet of the site.

There is no special demand for height limitation in the proposed area for

building and tanks. The height and the area would be examined during the

detailed design. The proposed tank height is about 50' (15m), and building

height is about 40' (12m).

Technical civil engineering requirements:


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The road inside the site must be suitable for city garbage trucks use

Watchman room in the main entrance of the site

Bar gates in the inlet and the outlet of the site

Pedestrian gate

Parking care area respective to the staff of the plant

ArrowBio has matched the preliminary design according to the requirements

above. For more details please see Drawing No. 100-L-001

5.2. Water Consumption

Initial filling estimation:

At start-up, we need to fill up the reactor, tanks and vats with fresh water. This water

does not need to be drinking water, but rather any water not containing high salts or

poisons. The amount will be calculated according to the following table: Table 3: Reactors and vats volume:

Quantity D (ft.) D (m) H (ft.) H (m) Vol (ft

3) Vol (m

3)

Digester 1 34.1 4.01 1.0. 4101 63563 43.63

Methanogenic 1 34.1 10.4 1601 14.7 11.46 43116

Acetogenic Reactor 1 34.1 10.4 1.0. 12.2 63563 43.63

Balance 1 34.1 10.4 6101 9.8 18661 661

We need about 120,000 ft3 of water for the initial filling of the reactors, tanks and the

vats.

Estimated Daily consumption:

Type Worker

quantity Consumption

total estimate daily

consumption

Gallons m^3 Gallons m^3

worker’s needs (Washings,

toilets etc.), offices, laboratories

etc.

15 52 0.5 501 5.1

General cleaning & recyclable

cleaning - 000 3 000 3

Refreshing process water - 5810 55 1050 22

Total estimate daily

consumption -

- 7015 26.5

Estimated daily water consumption of about 7,000 Gallons (US) per day


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5.3. Electric consumption

The estimation of maximum electric consumption is calculated by summarising the

maximum electric consumption of each component in the plant. For project the

estimated maximum consumption will be:

Separation and sorting area- 400 kW

Biological area- 300 kW

From the experience of the existent sites and estimations, the average consumption for

1 hour is half of the maximum capacity of the installed electric motors:

The separation area is working a shift of 7 hours and the biological area is working

consistently all 24 hours. Throughout the year, it is assumed that there are 260

working days.

(


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6. Business Plan

6.1. Glenn County, CA. 70 TPD PLANT PROJECT

This section presents KVB’s business plan for the proposed Glenn County Solid

Waste Conversion Facility, as preliminarily planned and designed by ArrowBio. The

data and assumptions included in this section of the report are KVB’s, unless

otherwise noted.

Key Drivers

From a business perspective, the key drivers and parameters for this project are as

follows:

1. Waste volume—The Glenn County Solid Waste Conversion Facility should be

planned with the objective to be economically self-sufficient on the level of

Municipal Solid Waste (MSW) generated in Glenn County alone, but present

opportunities to municipalities, public organizations and other entities outside

the county to process their waste in a more ecologically conducive manner.

2. Landfill Closure—An agreement in principle has been reached with members

of the Glenn County Board of Supervisors assigned to the Solid Waste

Conversion Facility project (the “Project) working group (the “Working

Group”) that Glenn County (the “County”) would assume financial

responsibility for closing the existing Glenn County Landfill (the “Landfill”).

Under this scenario, and assuming the proposal is ratified by the full Glenn

County Board of Supervisors, the County would generate sufficient funds

through tipping fees and franchise fees collected prior to the closure of the

Landfill, and parcel fees after the closure of the Landfill to pay for the closure

of the Landfill either on a pay-as-you-go basis or, if debt can be secured, to

pay for closure over a shorter duration of time without charging an additional

closure payment to the proposed Glenn County Solid Waste Conversion

Facility. The purpose of this proposal is to enable KVB to absorb only capital

costs directly related to the Project which in turn would enable KVB to charge

lower tipping fees to the public once the conversion facility is operational.

Under the proposal, however, KVB would be still be responsible for post-

closure costs of the Landfill and thus fees would be set to enable the

generation of sufficient revenue to cover post-closure costs of the Landfill as

projected by the County and agreed by KVB/project investors and

CalRecycle/CA State agencies.

3. Fees—The project would be privately financed using a combination of equity

and commercial debt. Hence, net revenue from the project, comprised of

tipping fees and other commercial activity revenue, less operating expenses

must be sufficient to meet requirements of lenders and prospective investors.

While it is an objective of the project to keep consumer costs to the lowest


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possible level, if at any time, projected project revenues are insufficient to

meet financing requirements, tipping fees must be adjusted to make up the

anticipated shortfall.

4. Catalyst for development—To the extent possible, the project should serve as

a catalyst for economic development within Glenn County and the region. In

this regard, the project team will seek to develop alliances that will benefit the

project, benefit the region and benefit the citizens of Glenn County and the

surrounding region.

6.1.1 Glenn County Municipal Solid Waste

Municipal Solid Waste is a bi-product of society. Tonnage, therefore, is a reflection

of many social and economic factors including:

Population—as population increases, so too, typically, does waste. The actual

quantity per capita depends on various socioeconomic factors as well as trends

in product packaging.

Economic—waste is a reflection of a population’s consumption capacity

which in turn is a reflection of economic wherewithal. In general, there is a

direct and positive correlation between the economic capacity of a population

and their waste stream—as wealth increases or decreases, so too does the

waste stream. Also, people’s buying habits, and thus waste composition,

changes as wealth increases or decreases. These factors are highly relevant for

forecasting waste volume and composition.

Social/Ethnic—there are appreciable differences in the consumption and thus

disposal habits of various ethnic groups. As the composition of an area’s

population changes over time, so too will waste composition and volume

change.

Industry packaging trends—as a response to increased environmental

awareness and regulation, manufactures and retailers over the past 10 years

have increasingly moved toward different types of packaging, in many cases

opting for more bio-degradable materials when possible and economically

viable. Trends such as the use of reusable bags and other society/regulation

driven sustainable behaviors may also affect both volume and composition of

an area’s waste stream. Mitigating against waste reduction trends are

phenomena such as Internet commerce, which often requires additional

packaging for consumer shipping purposes. Packaging adds both weight and

cost and thus, market forces will propel manufacturers over time to find

cheaper, lighter packaging materials that will still provide acceptable product

identification and protection performance. The totality of these trends means

that over time, the composition of a region’s waste stream will change and

overall, it is reasonable to assume that both regulatory and social forces will

push manufacturers toward more biodegradable packaging options, if not

lower content/weight options.


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Exportation and diversion—traditionally, MSW was disposed of in, or very

near the area where it was produced—each community had their own dump—

because of the relative low cost of landfilling and the relatively high cost of

transportation. More recently, however, the true cost of landfilling—including

both operational and environmental factors—has become more apparent,

making the expansion of existing landfills and the creation of new landfills

increasing difficult and costly. This phenomena is prompting many

communities to contemplate the exportation of some or all of their MSW to

remote landfill facilities and/or to impose increasingly strict recycling and

diversion requirements to reduce to a minimum the level of waste that

ultimately reaches their local landfill or any other landfill facility.

Illegal dumping—in many rural areas, illegal dumping and waste disposal is a

well ingrained cultural phenomena exacerbated by increasing municipal

disposal rates. To combat this problem, communities are adopting and

increasing efforts to enforce ever stricter mandatory collection policies as well

as fines for violations.

Each of these factors affect the volume of solid waste generated by a community, and

therefore, each must be taken into account in projecting the future volume of waste in

any community. The following discussion provides details of each of these factors as

they relate to Glenn County and the projected waste stream expected to support the

proposed Glenn County Solid Waste Conversion Facility.

6.1.1.1 Glenn County Population Growth

According to the US Census Bureau, Glenn County’s population grew by 6.5% from

2000-2010—from 26,416 to 28,129, which reflects an average annual growth rate of

0.63%. Table 1 presents historical population growth in Glenn County from 2000 to

2010.

Table 1 Glenn County Historical Population Glenn

County 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Population 26,416 26,450 26,651 27,016 27,122 27,393 27,652 27,775 28,019 28,100 28,129

Source: US Census, 2010

Exhibit 1 graphically presents Glenn County historical population growth from 2000-

2010. Exhibit 1 shows that while the county’s population has grown steadily, the

annual rate of growth slowed between 2005 and 2010, most likely due to a general

slow-down in Glenn County’s economy, discussed below.


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Between 2005 and 2010, Glenn County’s population grew at an average annual rate of

0.61%.

Economists and KVB expect this trend to once again increase as the nation’s and the

County’s economic conditions improve. The County’s General Plan, for example,

projects Glenn County’s population to nearly double by 2020, however, this forecast

is based on 2003/4 data, which was a period when the county’s economy was more

robust. A more recent forecast based on California Department of Finance data in the

2009-2010 Economic and Demographic Profile, published by the California State

University, Chico, Center for Economic Development (CED), projects the County’s

population to reach 31,929 by 2030.

For this report, KVB anticipates a more conservative annual population growth rate

than either the County’s General Plan or the CED report. To project Glenn County

population over the project’s 4-year planning phase plus 20-year

operational/financing phase, KVB applied the county’s average annual rate of growth

from 2005-2010—0.61%—from 2011 through 2035. By this methodology, total

population in Glenn County would reach 31,767 in 2030 and 32,748 by 2035. Table 2

presents projected population in Glenn County from 2012-2035 used to drive “Base

Case” economic projections for this project. KVB believes that this forecast is both

realistic and conservative.

Table 2. Projected Glenn County Population, 2012-2035

Planning and Construction Phase

2012 2013 2014 2015

Population 28,473 28,647 28,822 28,998

Operations Phase

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

29,174 29,352 29,531 29,712 29,893 30,075 30,259 30,443 30,629 30,816

Operations Phase

2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

31,004 31,193 31,383 31,575 31,767 31,961 32,156 32,352 32,550 32,748

25,500

26,000

26,500

27,000

27,500

28,000

28,500

00 01 02 03 04 05 06 07 08 09 10

Exhibit 1

Glenn County Population

Residents


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6.1.1.2 Economic Factors

Like the rest of the nation, Glenn County has ridden the rise and fall of the global

economy over the past 10 years. Today, signs are evident that suggest that the

County’s economy may have reached bottom and could be poised to begin an

upsurge, though the rate of economic growth in Glenn County is likely to be relatively

slow compared to other more populated areas. Supporting this view, unadjusted per

capita income in Glenn County grew from $14,069 in 1999 to $19,257 in 2009,

according to US Census data. However, once adjusted for inflation to 2004 dollars,

per capita income in the county from 2000 to 2007, shown in Exhibit 2, reflects a

wave pattern seen in several other indicators discussed later in this report.

According to the CED report, adjusted per capita income is expected to grow to

$39,890 by 2030. Additionally, nominal median household income also increased

from $32,107 in 1999 to $38,521 in 2007, according to the CED report, and to

$41,904 in 2009, according to US Census data.

On the negative side, unemployment in Glenn County over the past 10 years, while

similarly patterned to national trends, has been consistently higher year-on-year,

reaching a peak of 15.5% in 2010. Exhibit 3 presents a comparison of unemployment

rates in Glenn County compared to national levels from 2000 to 2011.

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2000 2001 2002 2003 2004 2005 2006 2007

Exhibit 2

Adjusted Per Capita Income

Adjusted Per CapitaIncome


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Source: US Bureau of Labor Statistics.

Several other factors provide insight into the overall strength of the County’s

economy. These include:

Agricultural activity and employment—the predominant industry in Glenn

County is agriculture, accounting for more than 23% of total employment in

the County. In 2010, receipts from County based agriculture commodity

sales exceeded $566 million, up 15% from 2009, according to the 2010

Glenn County Annual Crop and Livestock Report. Rice and almonds

comprise the County’s top cops by production value. Global agricultural

commodity demand and prices fluctuate year-to-year, but in general, the

value of rice and almonds have been and are expected to be generally stable.

Overall, agriculture related activities accounted for more than 25% of all jobs

in Glenn County in 2007, according to the CED’s Economic and

Demographic Profile, nearly twice the level of jobs provided by the services

sector and government sector, the next highest sectors of employment in

County in 2007. Jobs in other sectors including construction, manufacturing,

transportation, public utilities, finance and recreation all accounted for

approximately 5% of total County employment.

Construction activity—housing starts and other construction activity are a

reflection of both the strength of regional economic activity and in some

cases, in-migration. From a waste volume perspective, construction activity

tends to add significant tonnage to the overall stream, thus increasing tipping

fee revenue though little of this material ultimately would be processable by

anaerobic digestion technology. Like most areas of the country, construction

activity in Glenn County has declined steadily since 2005, exacerbated by the

national financial crisis which began in or around 2008. While construction

activity in the County rebounded slightly in 2009, overall, activity in the

building sector has been week since 2005. Exhibit 4 presents the activity

trend in residential housing unit starts from 2005 to 2010 while Exhibit 5

0

5

10

15

20

Exhibit 3

Comparative Unemployment Rates

(%)

Glenn County

National


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presents the corresponding trend in overall construction project value over

the same period of time.

Taxable sales—taxable sales are a reflection of economic activity in a

selected region but do not reflect all business activity. For instance, taxable

sales exclude items such as non-prepared food, prescription medicine and

services. Taxable sales, however, are a useful indicator of retail activity in a

region, which is also an indicator of growth in regional consumption. Retail

purchases also lead to disposal activity, since most purchased items come

with packaging and other non-consumable materials. According to the 2009-

2010 CED report, taxable retail sales in Glenn County grew relatively

steadily from $89.1 million in 1990 to $194.7 in 2007 while total taxable

sales grew from $172.0 million to $322.2 million over the same period.

Exhibit 6 shows taxable retail sales and total taxable sales in Glenn County

from 2000 to 2007. The data in Exhibit 6 show taxable sales activity track

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010

Exhibit 4

Residential Unit Starts

Residential Units

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

2005 2006 2007 2008 2009 2010

Exhibit 5

Construction Cost

Construction Cost


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other economic trend patterns of per capita income and unemployment in the

county.

Exhibit 6

Taxable Retail and Total Taxable Sales (in $ thousands)

In 2010, the California Department of Transportation published an economic forecast

report for Glenn County. This report can be viewed at

http://www.dot.ca.gov/hq/tpp/offices/eab/socio_economic_files/2011/Glenn.pdf. The

following are highlights from that report which expand upon the data presented

above.

• Total wage and salary job growth is forecast to increase from 2011 at a rate of 1.9

percent per annum. From 2011 to 2016, total employment growth is expected to

average 2.5 percent per year. Non-farm employment growth is expected to average

2.6 percent per year. Farm employment is expected to grow at a rate of 2.0 percent

annually over the five-year period.

• Average salaries adjusted for inflation are currently below the California state

average, and will remain so over the five-year forecast period. Inflation-adjusted

salaries are expected to rise an average of 0.5 percent per year from 2011 to 2016.

• Between 2011 and 2016, the momentum for employment growth is in farm,

manufacturing, and wholesale and retail trade. These sectors are expected to account

for over 64 percent of net job creation in the county during this time period.

• Annual population growth in the 2011 to 2016 period is expected to average 0.9

percent per year, with growth gradually accelerating over the forecast period.

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

2000 2001 2002 2003 2004 2005 2006 2007

Taxable Retail Sales

Total Taxable Sales

http://www.dot.ca.gov/hq/tpp/offices/eab/socio_economic_files/2011/Glenn.pdf


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• Net migration will remain negative in 2011 with an estimated 57 residents leaving

the county. Over the next five years, net migration is expected to average

approximately 85 net migrants entering the county per year.

• Real per capita income is forecast to increase 2.3 percent in 2011. From 2011 to

2016 real per capita income growth is expected to average 1.2 percent per year.

•Total taxable sales, adjusted for inflation, are forecast to rise at a rate of 2.7 percent

in 2011. Between 2011 and 2016 real taxable sales are forecast to increase an average

of 2.1 percent per year.

• Industrial production is forecast to rise 5.1 percent in 2011. From 2011 to 2016 the

growth rate of industrial production will remain strong, averaging 5.5 percent per

year. Total crop production, adjusted for inflation, is expected to increase by an

average of 2.3 percent per year between 2011 and 2016. The principle crop in the

county is rice.

County Economic and Demographic Indicators

Projected Economic Growth (2011-2016)

Expected retails sales growth: 16.1%

Expected job growth: 12.9%

Fastest growing jobs sector: Wholesale Trade

Expected population growth: 4.6%

o Net migration to account for: 32.6%

Expected growth in number of vehicles: 11.9%

Demographic (2011)

Unemployment rate (June 2011): 16.2%

o County rank in CA (58 counties): 45th

Working age (16-64): 61.5%

Population with B.A. degree or higher: 14.1%

Median home selling price: $125,000

Median household income: $39,157

Quality of Life

Violent crime rate (2009): 185 per 100,000 persons

o County rank in CA (58 counties): 4th

Average commute time to work (2011): 20.4 minutes

High school drop-out rate (2009): 17.5%

Households at/below poverty line: 15.3%

The data presented above provide a reasonable basis for a forecast of moderate but

sustained economic growth in Glenn County over the expected project finance period

through 2035. Correspondingly, because economic conditions, consumption and

waste are directly related, these data also support a forecast of moderate but sustained

growth in MSW over the same period as well.


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6.1.1.3 Social/Ethnic Factors

The consumption, and thus disposal characteristics between ethnic groups differ based

on several factors including but not limited to dietary customs, propensity to prepare

and eat meals at home, disposable income, social values and perspectives toward

environmental policies such as recycling. Specific data concerning these propensities

are very limited but studies are beginning to emerge as views regarding solid waste

management change in the United State. Empirical evidence received by KVB from

Recology representatives indicate that in general, waste collected from predominately

Latino neighborhoods tends to contain more food waste and other high-water content

material, leading to a higher weight per volume of waste compared to waste collected

in neighborhoods in with lower Latino concentrations. Thus, as the Latio population

grows relative to other ethnic groups in a community, it would be reasonable to

assume that average per capita disposal weight might also increase, all other factors

being equal.

According to data from the California Department of Finance, published in a report by

the California State Department of Mental Health, roughly 29.7% of Glenn County’s

population in 2004 identified as “Latino” or “Hispanic”. In 2010, US Census data

show that the relative percentage of Latio-identifying residents in the county

increased to 37.5%. While additional research and analysis would be needed to

accurately assess the actual impact on waste volume in the county caused by this

emerging trend in demographics, it is reasonable to conclude that this factor may add

weight to the county’s waste stream, all other things being equal.

6.1.1.4 Packaging Trends

The topic of sustainability is at the top of the list of issues causing change in both the

packaging industry and the retail sector today. Information on the topic abounds on

the Internet and virtually every major corporation, especially manufacturers and

retailers have or are in the process of adopting mission statements to move toward

more sustainable packaging strategies. The Dow Jones created a “Sustainability

Index” specifically to track corporations that pay significant attention to sustainability

in their operations—practices which often focus specifically on packaging.

According to the Sustainable Packaging Coalition, actions taken by companies toward

increasing “Sustainable Packaging” are typically directed at:

Improving how materials, products, and packaging are sourced, purchased,

designed and produced;

Reducing energy requirements throughout the product/package life cycle;

Using renewable and recycled materials;

Improving manufacturing processes and efficiencies;

Reducing package size and improving distribution/logistics efficiencies;

Supporting retailing efficiencies;

Diverting packaging waste to composting or recycling programs, or designing

products/packaging with cradle to cradle rather than cradle to grave scenarios;

Minimizing waste at every opportunity in the manufacturing and distribution

cycles.


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Leading the way in this movement is WalMart, who in 2007, according to packaging

industry consultants, Avira, adopted a policy with 66,000 suppliers globally aimed at

making its stores 25% more energy efficient, reducing solid waste by 25%, and

having 20% of its supply base aligned with sustainable products within a three (3)

year time frame. See: http://www.packagingspot.com/wp-

content/uploads/2012/01/Sustainable-Packaging-Separating-Myths-from-Truths.pdf.

According to the Avira report, Wal-Mart has a list of attributes called the “Seven

R’s” which reflects the company’s bottom-line focus of sustainable packaging that

includes:

1. Remove packaging – eliminate unnecessary packaging

2. Reduce packaging – right size and optimized package strength

3. Reuse(able) packaging – pallets

4. Renewable packaging – use materials from renewable sources

5. Reuse(able) packaging – use materials that include the highest recycle

content possible without compromising quality

6. Revenue – achieve all of the above at cost parity or cost savings

7. Read – packaging suppliers can provide a link to a web site or contact to get

more information

For the Glenn County Solid Waste Conversion Project, WalMart’s push toward

increasingly sustainable packaging has significant implications. Firstly, WalMart is

both the largest retailer in Glenn County and the fourth largest employer in the

county, employing approximately 200 people, according the 2009/2010 CED study.

This means that much of the waste currently generated in Glenn County from

packaging will be affected by WalMart’s sustainable packaging actions. Overall, the

County should see both a reduction in weight from packaging and a shift in content to

more sustainable/biodegradable material. The latter is especially important for the

Project because many packaging materials used today are not processable by

biological means such as anaerobic digestion. This material is often not recyclable

either and thus, absent alternative disposal technology, such material would need to be

deposited in a landfill. To the proposed Project, this means additional cost to

separate, transport and deposit these unusable materials in a landfill, reducing overall

Project financial performance and diversion impact. Over time, however, as WalMart

and other manufacturers/retailers switch to more sustainable packaging materials,

while waste volume may decrease marginally, the overall composition of waste

should become more processable/recyclable at the proposed plant, suggesting that the

trend toward sustainable packaging may be a net positive factor to the financial

performance of the proposed waste conversion facility.

6.1.1.5 Diversion and Exportation

The Integrated Waste Management Act (IWMA) of 1989 required each city and

county in California to divert 25 percent of its waste stream by 1995 and 50 percent

by 2000. The immediate impact of this law was seen in wide-spread implementation

of municipal recycling policies to reduce the amount of waste ultimately reaching

landfills. Subsequently, many large public institutions and non-municipal

http://www.packagingspot.com/wp-content/uploads/2012/01/Sustainable-Packaging-Separating-Myths-from-Truths.pdf

http://www.packagingspot.com/wp-content/uploads/2012/01/Sustainable-Packaging-Separating-Myths-from-Truths.pdf


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organizations have followed suit by adopting recycling and diversion programs of

their own.

With the emergence of the phenomena of climate change, awareness and assertive

action has grown amongst public organizations of all types to adopt sustainable

policies. Near Glenn County, four entities have developed substantial reputations for

their sustainable policies and practices. These are: the City of Chico, the County of

Butte, California State University, Chico, and Butte Community College. Each of

these organizations has adopted far reaching sustainability policies which serve as

models in Northern California, if not the nation. But while the efforts of these public

organizations to reduce the consumption of energy from non-renewable sources,

greenhouse gas emissions and the volume of waste that ultimately reaches landfills

has been laudable, the potential impact from their practices has until now been limited

by one key bottleneck—the lack of an alternative to landfilling much of the MSW

these organizations produce, much less the opportunity to create and reuse green,

renewable energy from their waste.

The proposed Glenn County Solid Waste Conversion Facility may provide these

leading organizations the opportunity to reach unprecedented waste diversion and

greenhouse gas reduction goals. Collectively, Chico, Butte County, California State

University, Chico, and Butte Community College produce and send to landfills more

than 400 tons of MSW per day on average. By reaching out to and forming

partnerships with these and other public organizations, as well as other large private

organizations near the proposed site of the Glenn County Solid Waste Conversion

Facility, KVB may have the opportunity to significantly expand the MSW volume

processed at the facility and enable high-profile organizations with well developed

environmental policies to reach their stated sustainability goals.

6.1.1.6 Illegal Dumping

Illegal dumping, though not rampant in Glenn County, is still a significant social

problem which, if left unaddressed, may greatly impact the County’s environment and

could affect the economic viability of the proposed Solid Waste Conversion Facility.

KVB will work with the County of Glenn to support the enforcement of existing

illegal dumping policies. KVB also believes that mandatory waste collection should

be invoked within Glenn County to ensure proper pick-up and handling of MSW and

to minimize illegal dumping. Such a policy would greatly help to preserve Glenn

County’s environment, support public health and provide increased assurance to

lenders and investors who back the proposed Solid Waste Conversion Facility by

ensuring that all MSW produced in the County is taken to the facility for processing.

6.1.1.7 Summary of Factors

The totality of factors examined above, though somewhat mixed, is generally positive.

Collectively, they provide a reasonable foundation for a conservative but sustained

forecast of growth in waste volume in Glenn County over the project finance period.


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The following section describes the methodology used by KVB to forecast the volume

of MSW expected to be available for the Glenn County Solid Waste Conversion

Facility project through 2035.

6.1.1.8 Waste Volume Forecast Methodology

As stated above, MSW is a bi-product of social behavior, influenced by a multitude of

factors which are ever changing. Over time, however, patterns emerge regarding a

community’s waste production from which reasonable predictions can be made

regarding future waste production volumes. The foundation of KVB’s MSW

forecasting approach is based on the historical relationship between Glenn County’s

population base and the volume of waste that it produced and deposited in the Glenn

County Landfill over the relative time period. Looking forward, annual projected

MSW tonnage is derived by multiplying an assumed amount (coefficient) of weight

produced per resident per day (365 days/year) by the projected population in each

forecast year.

Table 2 presents historical US Census population levels in Glenn County from 2000

to 2010 and annual MSW tonnage reported by CalRecycle as deposited at the Glenn

County Landfill over the same period. Annual tonnage, converted into pounds and

divided by 365, is then divided by annual population to yield pounds per resident per

day for each historical year.

Table 2. Historical Population and Reported MSW Tonnage Glenn County 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Population 26,416 26,450 26,651 27,016 27,122 27,393 27,652 27,775 28,019 28,100 28,129

Annual change

0.1% 0.8% 1.4% 0.4% 1.0% 0.9% 0.4% 0.9% 0.3% 0.1%

CalRecycle

Tons (1) 19,557 18,911 20,283 21,914 23,392 23,289 22,623 20,404 21,188 20,879 19,708

Lbs/Res./Day

4.06

3.92

4.17

4.44

4.73

4.66

4.48

4.03

4.14

4.07

3.84

(1) Source: ttp://www.calrecycle.ca.gov/LGCentral/Reports/Viewer.aspx?P=ReportName%3dExtEdrsMultiYrCountyWide%26C

ountyID%3d11

Over the reporting period, the average annual growth rate in Glenn County population

was 0.63%. Over the past 5 years, during a period where the county’s economy has

experienced greater uncertainty, population grew at an average rate of 0.61%.

Tonnage deposited at the Glenn County Landfill, grew at an average rate of 0.24% per

year from 2000-2010, according to data reported to CalRecycle. However, between

2005 and 2010, average annual tonnage deposited declined at an average rate of -

2.72%. Between 2008 and 2010, the rate of tonnage decline decreased to an average

annual rate of -1.07%, potentially signaling a flattening of the trend. Translated into

pounds per resident per day, these data break down as shown in Table 3.

Table 3. Average Population, Tonnage and Waste Per Resident Per Day. Average annual growth rate population 2000-2010 0.63%

Average annual growth rate population 2005-2010 0.61%

Average annual growth rate tonnage 2000-2010 0.24%

Average annual growth rate tonnage 2005-2010 -2.72%


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Average annual growth rate tonnage 2008-2010 -1.07%

Average lbs/res/day 2000-2010

4.23


4.20


4.02

The declining rates of population growth, tonnage, and weight per resident per day

from 2005-2010 most likely reflect the declining economic circumstances in the

County over that period of time. Given that there were corresponding increases in all

three elements during periods of economic growth—2002-2004/5—it would be

reasonable to assume that these factors may again increase once the County’s

economy recovers from the current national recessionary cycle. However, to be

conservative, KVB will use both the lower population growth rate and the lower

weight per resident per day factors to forecast tonnage for this report.

KVB estimates that the project planning, design and permitting phase will be

completed between 2011 and July 1, 2016. For planning purposes, KVB estimates

that the Date of Beneficial Occupancy (DBO) of the Glenn County Solid Waste

Conversion Facility will be January 1, 2016, though depending on final permitting

requirements, DBO may be as late as July 1, 2016. In this report, the first year of

projected tonnage volume relevant to plant operation would be 2016. Table 4

presents projected population and MSW tonnage in Glenn County from 2016 through

2035, produced according to the methodology described above.

Table 4. Projected Population and MSW Tonnage.

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Population

29,174

29,352

29,531

29,712

29,893

30,075

30,259

30,443

30,629

30,816

Projected

tons

21,393

21,524

21,655

21,787

21,920

22,054

22,188

22,324

22,460

22,597

2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Population

31,004

31,193

31,383

31,575

31,767

31,961

32,156

32,352

32,550

32,748

Projected

tons

22,735

22,874

23,013

23,153

23,295

23,437

23,580

23,724

23,868

24,014

6.1.1.9. Glenn County Curb-Side Recycling

Glenn County operates a curb-side recycling program where residents electively

separate recyclable material from non-recyclable material and place recyclable

material in a separate bin. Currently, according to the hauling contract that the

County of Glenn has in place with Waste Management (WM) through December 31,

2016, WM collects curb-side material separately and takes this material to a WM

facility for processing. Curb-side material is not included in the tonnage recorded by

CalRecycle at the Glenn County Landfill, and thus is excluded from the weight per

resident per day coefficient from which KVB has forecast future tonnage. Table 5

presents a summary of reported curb-side recyclable tonnage collected by WM in

2011.

Table 5. 2011 Curb-Side Recyclable Tonnage Collected in Glenn County


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Q1 Q2 Q3 Q4 Total

Glenn County 91.75 78.7 91.36 65.91 327.72

Orland 76.16 90.25 77.2 97.26 340.87

Willows 59.19 61.73 63.34 66.63 250.89

Total 227.1 230.68 231.9 229.8 919.48

Source: Waste Management, February 28, 2012.

Appendix L contains a complete breakdown of curb-side recycling material

collected/reported by WM in 2011. The individual waste components from WM’s

2011 report are factored into the final waste distribution percentage used in Section

6.2.1.1 to forecast specific recyclable components. As a fundamental assumption of

this business plan and associated financial projections, KVB assumes that the all

MSW produced in Glenn County, including recyclable material, would be delivered

to the Glenn County Solid Waste Conversion Facility. Furthermore, the wet Material

Recovery Facility (wet MRF) process included in the ArrowBio technology would

enable the County of Glenn to implement single container pick-up of residential and

commercial MSW. Single container pick-up would:

1. eliminate the need for a separate set of vehicles operated by waste hauling

companies to collect recyclable material on Glenn County routes;

2. reduce on-road fuel consumption, exhaust, noise and vehicular risk associated

with the operation of a separate fleet of waste hauling trucks to separately

collect recyclable materials;

3. reduce the imposition on the citizens of Glenn County to separate recyclable

materials from their household MSW stream; and

4. because of the above, would create tangible cost saving opportunities to

consumers for waste collection services.

As part of the secondary design and development process of the Glenn County Solid

Waste Conversion Facility, KVB would work with the County of Glenn to prepare for

a single container pick-up program, which could be implemented immediately upon

the expiration of the existing waste hauling contract with WM, assuming KVB’s

facility is then operational.

6.1.2 Closure of the Glenn County Landfill

In 2008, the County of Glenn determined that the existing landfill was reaching

maximum capacity and would need to be closed. Previously, the County had

established a Closure Fund to cover the costs of closing the landfill. The County

makes deposits to the Fund from tipping fee revenue collected at the landfill in excess

of operating expenses, augmented by a supplemental parcel fee assessed on Glenn

County property owners. As of February 29, 2012, the balance in the Closure Fund

was approximately $3,365,000.

In August of 2010, KVB signed a Memorandum of Understanding (MOU) with the

County of Glenn pertaining to the creation of a Solid Waste Conversion Facility in

Glenn County, designed to replace the existing landfill. According to the terms of the

MOU, KVB would be responsible to pay for specified costs associated with the

closure of the existing Glenn County Landfill, which are in excess of the funds


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available in the Closure Fund. In addition, following the execution of the MOU,

KVB and the County arrived at an agreement specifying that if the Solid Waste

Conversion Facility is completed, revenues from the project would be used to pay

agreed-to expenses associated with the County’s post-closure monitoring program,

required by CalRecycle, for a 30-year period following the complete closure of the

Landfill.

The County contracts with civil engineers, Lawrence & Associates (L&A) of Shasta

Lake, CA, for planning work associated the Landfill and its closure. In March of

2012, L&A presented the County with a report of projected costs associated with

closing the Glenn County Landfill as well as during the 30-year post-closure period.

According to the L&A report, closure costs associated with the Landfill are expected

to total $6,806,490, or $8,167,788 including a 20% contingency margin. L&A also

estimates that annual post-closure costs would total $140,260.

KVB expects that Solid Waste Conversion Facility will open by January 1 2016. By

that time, the County projects that the balance available in the Closure Fund will be

approximately $3,500,000, leaving an expected uncovered closure balance of

$3,306,490-$4,667,788.

In February of 2012, KVB presented preliminary estimates to the County indicating

that the closure payment terms included in Section 2.10 of the MOU would not be

financially feasible without a significant increase in tipping fees over the current rate

of $70/ton. At that time, in order to mitigate the potential impact on the public of

uncovered closure costs, the County and KVB agreed that KVB would spread closure

payments over an extended period of time to enable a lower increase in future tipping

fees while ensuring reasonable returns for potential lenders and investors.

Subsequently, at an April 5, 2012 meeting of the project Working Group, County

representatives focused on a principle objective of project at the time the County and

KVB negotiated the MOU. Specifically, County representatives noted that Section

2.3 of the MOU states, “…The parties agree that a central objective of the SWCF

would be to reduce the cost of tipping and/or parcel fees currently paid by Glenn

County residents and businesses as a result of the project.” County representatives

also noted that the County was already charging a parcel fee on Glenn County

property owners designed to pay for the cost of closing the Landfill and that the

County expected to keep that parcel fee in place after the DBO of the new facility. It

thus, did not make fiscal sense for the public to essentially pay twice for the closure of

the Landfill—once in parcel fees and again through tipping fees. The County

representatives also noted that regardless of the existence of the KVB project, closure

of the Landfill would be the County’s responsibility and thus, the County should

come up with a plan based on resources available to the County for paying the costs

associated with closing the Landfill.

As a result of the discussion at the April 5, 2012 Working Group meeting, it was

agreed that the Base Case of the KVB project would exclude any costs associated

with the closure of the Landfill, which the County expects to complete over


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approximately 10 years. It was agreed, however, that post-closure costs would be

assessed to the KVB project, for 30 years beginning in Year 11.

As a result of these discussions, KVB agreed to revise the feasibility Base Case to

exclude all costs related to the closure of the Landfill and to include post-closure costs

from Year 11 onward. To demonstrate the potential impact on tipping fees that might

occur should the County reverse its position in the future and subsequently require

KVB to pay closure costs which are in excess of funds available in the Closure Fund,

Sensitivity scenario 5 presents project results incorporating uncovered closing costs in

the project cash flow.

In all cases, KVB notes that assumptions incorporated in this Pre-Plan/Feasibility

Analysis have not been fully vetted with either commercial lenders or accredited

investors interested in the project and thus, the closure payment assumptions

presented in this report should be regarded as a guide and are subject to confirmation

and potential future adjustment. In the event that lenders and/or investors ultimately

find unacceptable the County’s proposed closure payment terms with KVB, KVB

reserves the right to propose a modification to the proposed method for handling the

cost of Landfill closure.

6.1.3 Fees

The proposed Glenn County Solid Waste Conversion Facility project, once

completed, will be either the first, or amongst the first major MSW conversion

facilities constructed in the United States as well as one of the first large-scale,

commercial anaerobic digestion projects in the United States. As such, it offers

tremendous potential to bring regional and national attention and follow-on economic

development to Glenn County. From the beginning, the objective of KVB has been to

privately finance this project using the most efficient combination possible of private

equity and commercial debt. However, being one of the first of its kind projects,

familiarity amongst prospective investors and lenders with both the technology and

business model of such a project is limited. When investor familiarity is low, risk is

typically assumed to be high until a track record of milestone achievement and

operating success has been established. This presumption has been confirmed by

KVB through a series of discussions about the project with accredited investors and

commercial lenders. From these discussions and further background research, KVB

expects that investors and lenders will need several key assurances about assumed

revenue streams in order to seriously consider investing in this project, much less

offering competitive terms of finance. Issues key to investors would include, but

would not necessarily be limited to:

1. Certainty of waste stream control—KVB will have to demonstrate that it has

adequate control, with highly defined conditions of term, price, circumstances

of adjustment, breach, cure and termination. The duration/term of control,

with acceptable conditions, will have to extend beyond the term of the debt

issued on the project, potentially by as much as 3-5 years. KVB further

expects that investors will want to see that there is potential to extend waste

provision contracts, if acceptable service levels are met.


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2. Certainty of energy off-take conditions—KVB will be required to establish

fully documented agreements with PG&E and any other prospective

purchasers of energy produced at the plant, disclosing complete details of

term, pricing, limitations on provision/redirection, circumstances of

adjustment, breach, cure and termination. Since renewable energy power

production is still relatively new and conditions affecting demand and thus

pricing for energy from renewable sources are rapidly evolving, investors

should be expected to significantly discount certainty of revenue from power

purchasers where the terms are either not well defined and/or do not extend for

a significant period of time.

3. Basis for forecasting recyclable materials revenues—a central feature and

benefit of the proposed Glenn County Solid Waste Conversion Facility is that

it will enable Glenn County to achieve nearly complete diversion and reuse of

recyclable materials. As reflected in the project financial model, revenue from

the sale of these materials comprises a significant percentage of total project

revenue, which also will enable KVB to keep consumer fees associated with

the project to the lowest possible level. Historically, however, recyclable

material values have fluctuated significantly depending on global supply and

demand. Investors will want to see that KVB’s business model does not rely

on historically high pricing levels, especially for significant materials such as

aluminum. That said, investors will also want to see that as part of its

management services/responsibilities, KVB has and effectively implements an

aggressive commodities management strategy that seeks to continuously

maximize revenue from the sale of recyclable materials.

4. Strategies and means for controlling operating costs—a significant

component of the assumed benefits of service privation is cost control

leverage. Tools and strategies available to private companies for managing

operating costs are often appreciably more effective than those available

within the public sector. Investors will expect that KVB will focus diligently

on operating cost control as a significant part of the management services

provided by KVB.

5. Methodology for setting and adjusting tipping fees—since tipping fees will

constitute the balancing component of the economic model of the Glenn

County Solid Waste Conversion Facility, investors will need a detailed

understanding of the process by which tipping fees will be established and

adjusted over time. KVB has proposed a public utility model for tipping fee

review and adjustment. Under this proposed model, KVB would present on a

quarterly or biannual basis, plant operating and economic statistics to an

oversight committee comprised by the County. During these meetings, KVB,

amongst other issues, would present justification for fee adjustments and

committee members would have the opportunity to query KVB management

on operating issues. Factors which would be considered by the committee

would include lender and investor requirements/expectations noted at the time

of facility establishment. Ultimately, the committee would have responsibility


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for confirming or rejecting public fee adjustment requests at the plant. In

extreme situations, a third-party appeal process may be appropriate.

Together, these components comprise the core of the proposed KVB business model

for the proposed Glenn County Solid Waste Conversion Facility project.

Assumptions for each of these components are documented in the financial model

presented later in this report.

6.1.4 Catalyst for Development

From the outset of this project, KVB has maintained that a key role of the Glenn

County Solid Waste Conversion Facility project would be to foster growth within

Glenn County of green/renewable energy technology and from this, broad-based

economic development that will positively impact the lives of Glenn County residents

and citizens of the North State. To achieve this goal, KVB has and will continue to

actively pursue strategic relationships with leaders in fields relevant to the project. Of

principal interest in this regard to KVB is California State University, Chico (“Chico

State”). Over the past three decades, Chico State has established itself as a national

leader in sustainability sciences and practices. These efforts now afford Chico State a

highly recognized brand which attracts students and faculty dedicated to sustainability

studies and research.

KVB intends to seek a close working relationship with key members of the Chico

State faculty and staff who focus on sustainability research, engineering and

sustainable development practices. KVB hopes to partner with Chico State to

complete various components of the secondary planning and design phase, which

KVB expects to launch immediately following the completion of the feasibility

assessment phase. Ultimately, KVB hopes to establish a sustainability research

facility on-site at the Glenn County Solid Waste Conversion Facility where scientists,

professors and students from Chico State, other academic institutions and private

researchers can come together to study ways of improving solid waste processing and

conversion, waste material recycling and integrated technology development

surrounding waste conversion centers. Through these efforts, KVB intends to

establish Glenn County as a national leader in green technology development.

6.2 Project Economic Assessment

The economic assessment of the proposed Glenn County Solid Waste Conversion

Facility project is facilitated by a financial model created by ArrowBio, with local

assumptions provided by KVB. The project financial model consists of five primary

worksheets, listed below, augmented with secondary worksheets containing detailed

topic analysis. Primary worksheet include:

Mass Balance—this worksheet presents a distribution of waste components,

based on October 2011 Waste Characteristics study performed by Recology

contractors, used for projecting recyclable materials; a breakdown of overall

processable and non-processable materials; the basis for projecting volume of

wet digestate used to create compost; anticipated water consumption at the


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plant; and the basis for the projection of renewable energy creation levels and

energy usage by the plant.

Financial Plan—this worksheet presents a breakdown of project capital

expenses (Capex), including elements to be provided by ArrowBio and

components to be locally supplied; a pay-off component for Lafayette Capital

Group International for land costs; estimated Landfill closure and post-closure

costs; and details of assumed project financing terms.

Revenues & Opex—this worksheet presents prices per ton for recyclable

materials found in the examined waste sample and assumed to comprise the

future waste stream; assumptions for key operating expense (Opex)

components including staff salaries, the cost of operating electricity per MWh,

equipment maintenance, and the price per ton for disposing of unprocessable

waste elements, including e-waste and non-exotic hazardous materials at an

outside landfill.

P&L (Profit & Loss)—this worksheet presents a 20-year projection of

revenues and operating expenses based on component assumptions and

projected waste levels; EBITDA; annual post-closure costs; and Net Income.

Cash Flow—this worksheet presents a 20-year projection of EBITDA; equity

requirements and timing; principal and interest payments; taxes paid by the

project; net cash flow and accumulated cash; and a summary of project

performance including IRR, NPV and Return on Investment.

Details relating to inputs and assumptions contained in each of these worksheets are

provided below in the presentation of the project “Base Case” and sensitivity

analyses.

6.2.1 Project “Base Case”

This section presents core inputs and assumptions incorporated in the financial model,

which KVB believes, in totality, represent the expected economic outcome of the

Glenn County Solid Waste Conversion Facility project, given information that is

presently available. Assumptions presented in the Base Case have been researched

and sourced by KVB, except as otherwise noted.

6.2.1.1 Mass Balance

On November 9, 2011, a load of MSW, collected from an established Glenn County

route was delivered to the Recology processing facility in Oroville. On November

12th

and 13th

, consultants under contract with Recology thoroughly evaluated this

sample, logging each element of the mass. Results from this waste characterization

study are presented in Section 1.2 of this report. That waste characterization analysis

serves as the technical basis of understanding of the waste stream for this project.

Upon reviewing this data, ArrowBio made certain adjusting assumptions to the

distribution to account for seasonal characteristics. Specifically, because the survey


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was taken during the autumn, ArrowBio assumed a decrease of 5% of weight from

Garden Waste to normalize the sample over a 12-month perspective. ArrowBio

redistributed this component to Organic Waste. The resulting assumed distribution is

shown in Table 6 below.

Table 6. Assumed Waste Characteristics

List Of Material Percentage (By

Weight)

1 E. Food Waste 26.0%

2 Organic Liquid 1.0%

3 Compostable Paper 6.0%

4 Paper 14.0%

5 Plastics 10.0%

6 Plastic Film 4.0%

8 E. Garden Waste 12.0%

9 Textile 4.0%

10 Cardboard 4.0%

11 Diapers 4.0%

12 Cans & Bottles (CRV) 3.0%

13 Metal (Ferrous) 3.0%

14 Metal (Non-Ferrous) 1.0%

15 Glass 2.0%

16 Rock 2.0%

17 Fines 2.0%

18 Electronic 1.0%

19 Wood 1.0%

To account for the manner in which the ArrowBio technology processes waste

components internally, ArrowBio made further modifications to waste distribution

percentages for the purposes of forecasting renewable energy and plant bi-products.

Table 7 presents the resulting assumed waste distribution percentages assumed by

ArrowBio and used in the financial model for projecting energy production,

recyclable material yields, wet digestate and residual waste not processable at the

plant.

Table 7. Assumed Waste Distribution Percentages for Financial Model

Waste Components

Assumed

% of Total

Projected Annual

Weight

Food/Kitchen waste 30.00%

Paper 17.00%

Cardboard 4.00%

Diapers 4.00%


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HDPE 5.00%

LDPE 5.00%

Film Plastic 4.00%

Ferrous metals 3.00%

snun lunimulA 3.00%

Other non ferrous 1.00%

Garden waste 12.00%

Glass 2.00%

Medical Hazardous 0.00%

Electronics 1.00%

Liquid Hazardous Waste 0.00%

Wood 1.00%

Textiles/Clothing 4.00%

Dust/Rock/Dirt 4.00%

Others 0.00%

TOTAL 100.00%

Source: ArrowBio.

After the analysis of waste characteristics and basic plant components and operations,

ArrowBio estimates that 70%+ of waste which would otherwise be destined for

landfill would be suitable for recycling or conversion in the plant—estimated 70%+

landfill avoidance. This distribution, when applied to the ArrowBio technology

would produce approximately 19% by weight of potentially marketable soil

amendment. Finally, with the assumed volume of annual waste and plant size,

ArrowBio estimates that the plant would produce approximately 650,000 m3/year of

biogas and would consume approximately 7,000 gallons of water per day for staff

purposes, recycled material washing and plant operations.

Note: While the sample of waste analyzed in the waste characterization study did not

reveal any e-waste, medical or hazardous materials, KVB notes that over the span of

any year, these materials are present in the flow of MSW produced in Glenn County

and presently disposed of at the Glenn County Landfill. These materials are not

processable with anaerobic digestion and thus would be hauled with all other

unprocessable materials to an appropriate landfill for disposal.

6.2.1.2 Financial Plan

Estimated capital costs associated with the planning, design, permitting and

construction of the proposed Glenn County Solid Waste Conversion Facility project

are presented in Table 8. Estimated unit costs of Local Works presented in Items

2.1-2.9 of Table 8 were confirmed by KVB. Assumed project design and supply

components were provided by ArrowBio, with the exception of estimated Full Project

Design costs which were provided by KVB, based on preliminary discussions with

representatives of Chico State. KVB will seek to partner with faculty and graduate

students from Chico State’s Institute for Sustainable Development, College of

Engineering and College of Natural Sciences to complete elements of project design

and environmental planning/evaluation. Cost estimates included in the Base Case for

these activities—$250,000—reflect KVB’s assumptions of maximum payment for


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access to Chico State staff and students to complete project planning elements

necessary for project permitting. The impact of potentially higher project planning

costs are assessed in the sensitivity analyses included at the end of this section.

Table 8. Estimated Project Capex

1 Project Design & Supply – Arrow

1.1 Pre-Plan Study $ 50,000

1.2 Full Project Design $ 250,000

1.3

Pre Sorting and Separation systems, including: Conveyors, vats, supporting elements,

Trommels, Drum screens, settling tanks, air blowers, work stations

$ 2,751,973

1.4

Electric and Hydraulic machinery, including: Shredders, magnets, eddy-currents, hydro-

crushers, filters, shaft-less, engines and gears

1.5

Control systems, including: Computers, software, laboratory, gauges and testing

systems

1.6

Machinery for Biological and Output systems, including: Screens, sludge treatment,

filters, Pumps, valves, gauges, heat exchangers, screw pressers, Pipes, $ 1,289,093

1.7 Equipment Procurement Management, including: administration and engineering

1.8 Onsite integration management, testing, run-up and training $ 300,000

1.9 Contingency including: consulting (10%) Freight CIF $ 464,107

Total for Arrow $ 5,105,173

2 Local Works - customer's responsibility

2.1 Local procurement for Separation area: Bobcat , feeder and piping $ 780,216

2.2

Local procurement for bio area: Tanks, water treatment and energy center including:

generator and biogas systems $ 1,867,828

2.3 Local design $ 300,000

2.4 Roads (25,000 ft2) (may be optional) $ 60,000

2.5 Separation area construction & building $ 260,000

2.6 Control room $ 20,000

2.7 Weigh bridge $ 50,000

2.8 Electricity (Supply & Install) $ 750,000

2.9 Estimated Infrastructure & Civil works, including: concrete infrastructure $ 250,000

2.10

Local Project management and Integration, including: Procurement, design, integration

workers and overall management $ 300,000

2.11 Contingency $ 463,804

$ 5,101,848

Total Capex Waste Conversion Facility $ 10,207,021

3.0 LCGI Payout $ 2,200,000

Total Project Capex $ 12,407,021

Table 8 shows that total estimated project Capex is approximately $10.2 million,

including 10% contingency. While KVB believes this to be a reasonable estimate for

project Capex, Sensitivity scenario 4 below examines the potential impact on tipping

fees in the event that project Capex were to come in at a significantly higher level

($14.2 million) due to unexpected escalation of labor costs, additionally required plant

features or site preparation costs.


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In addition to project Capex, Table 8 reflects a $2.2 million component designated for

the payout of the loan presently in place between the Baker Family Trust and

Lafayette Capital Group International (LCGI) for the plot of land designated for the

project. With the LCGI payout component, total estimated Base Case project Capex

is $12.4 million.

Table 9 reflects assumed post-closure costs associated with the Glenn County

Landfill, estimated by Lawrence & Associates to be $140,260 per years. As a result

of the April 5, 2012 project working group meeting, it was agreed that the KVB

project would assume post-closure costs in Year 11 for a 30-year period.

Table 9. Assumed Landfill Post-Closure Costs

Total projected cost of closure (including 20% contingency)

$ 8,167,788

Less: Total projected fund balance, Glenn County Landfill Closure

Fund 3,500,000

Equals: Net Landfill Closure Costs to be paid by Glenn County

from Parcel Fees and other non-project related sources $ 3,306,490

Years Over Which Net Closure Costs Would be Paid 10

Annual closure payment assigned to Project—Base Case $ 0

Assumed Annual Post-Closure Costs $ 140,260

Number of years for post closure costs 30

Table 10 presents assumed project financing assumptions, based on input received by

KVB through discussion with prospective commercial lender, Union Bank. On

January 26, 2012, KVB presented preliminary project information to senior staff with

Union Bank’s National Environmental Services Group. Union Bank staff indicated

that to be considered for commercial financing, documentation noted above for the

project in Item 6.1.3 would have to be well developed and acceptable to the Bank.

Union Bank staff also indicated that because of the lack of well established norms for

waste conversion plants in the United States, the Bank would likely view this project

from a conservative perspective with maximum gearing levels estimated around 65%-

70% over a 12- to 15-year term. Given today’s cost of money, interest parameters

would likely be between 5% and 6%, unless project risk warranted a higher level for

other reasons. Union Bank indicated that in the event that the project team had

exceptionally strong experience, operating credentials and financial resources, project

gearing could be as high as 80% over 20 years, but such a structure would likely

require multiple trenches of debt, most likely including a subordinated debt

component with higher interest terms. The sensitivity analyses included at the end of

this section examine the potential impact of more favorable—higher gearing/longer

term—debt assumptions.

Table 10. Assumed Project Finance Terms

Project Capex $ 12,407,021

Debt 65% $ 8,064,564

Equity 35% $ 4,342,457

Debt – interest 6.0%

Debt term – years 12


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Depreciation – years/per year

amount over term 12 $ 850,585.09

Table 11 presents associated principal and interest components on a fully amortizing

noted according to terms presented in Table 8.

Table 11. Assumed Principal and Interest Payments Payment

Year Principal Interest Total Payment

1 $ 478,043 $ 483,874 $ 961,917

2 $ 506,726 $ 455,191 $ 961,917

3 $ 537,130 $ 424,788 $ 961,917

4 $ 569,357 $ 392,560 $ 961,917

5 $ 603,519 $ 358,398 $ 961,917

6 $ 639,730 $ 322,187 $ 961,917

7 $ 678,114 $ 283,804 $ 961,917

8 $ 718,800 $ 243,117 $ 961,917

9 $ 761,929 $ 199,989 $ 961,917

10 $ 807,644 $ 154,273 $ 961,917

11 $ 856,103 $ 105,814 $ 961,917

12 $ 907,469 $ 54,448 $ 961,917

13 $ - $ - $ -

14 $ - $ - $ -

15 $ - $ - $ -

16 $ - $ - $ -

17 $ - $ - $ -

18 $ - $ - $ -

19 $ - $ - $ -

20 $ - $ - $ -

Total $ 8,064,564 $ 3,478,443 $ 11,543,006

6.2.1.3 Revenues & Opex

Revenue Assumptions

The methodology used in the ArrowBio model to forecast revenues and operating

expenses (Opex) is unit cost per year extrapolation—the value/cost of a single unit is

multiplied by the number of projected units of that type for each year of operations.

Assumptions relating to Opex units have been provided by ArrowBio, based on

anticipated plant operations. Assumptions relating to unit values have been

researched and confirm by KVB, except as otherwise noted.

In assembling the assumptions for recyclable material unit values, KVB consulted

Recology management on December 9, 2011 for unit values of the materials listed in

Table 12. On March 15, 2012, KVB consulted Fair Street Recycling of Chico for

prices on the same list materials. Table 12 and the Base Case reflect unit prices

provided by Fair Street Recycling. Table 12 presents assumed revenue units and


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values used in the financial model Base Case for the Glenn County Solid Waste

Conversion Facility project.

Table 12. Revenue/Opex Units and Values.

Annual Revenues – Assumptions

Units/Tons US$

Annual renewable Electricity Gross (MWh)

1,439

USD per renewable MWh $ 150

HDPE

1,105

USD per ton HDPE $ 540

LDPE

1,091

USD per renewable LDPE $ 560

Plastic film

873

USD per renewable Plastic film $ 50

Aluminum cans

591

USD per ton aluminum can stock $ 1,520

Glass

452

USD per ton glass $ 10

Metal per ton (Ferrous)

663

USD per ton metal $ 200

Metal Non Ferrous

196

USD per ton non ferrous metal $ 1,360

Cardboard

893

USD per ton cardboard $ 121

Paper

3,938

USD per ton paper $ 115

Tons of Stable Digestate (wet)

4,124

USD per ton Stable Digestate sold for agriculture $ 10

CER per ton waste

-

USD received per carbon credit $ -

Other income received $ -

Source: Opex Cost Units—ArrowBio.

Recycling unit values—Fair Street Recycling, 3/15/2012.

Renewable energy created at the plant, designed according to ArrowBio’s

specifications, processing the MSW stream configured as noted in the waste

characterization study, is expected to produce approximately 0.719 MWh of

electricity per ton, by converting biogas (projected 648,000m3/yr) into electricity.

According to pricing information on the PG&E website, the value per renewable

MWh is $150. In the first year of operation, revenue from renewable energy sales is

projected to be approximately $216,000. Electricity rates from PG&E are included in

appendix H.


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Revenue from recyclable materials factors significantly into KVB’s business model

for the Glenn County Solid Waste Conversion Facility. Unit prices for recycled

materials generally track global commodity prices for each material type, but are also

significantly reflective of the volume exchanged by the selling entity and the broker

relationship the selling entity has access to. Brokers, depending on size, typically buy

material at between 10%-25% below commodity prices and on-sell at or near

commodity prices thereby realizing their commercial margin. Historically, over the

past decade, prices for recyclable materials have fluctuated greatly. To the KVB

financial model, certain material, in particular Aluminum, factors more significantly

into project performance than others both because assumed project weight of

Aluminum in the overall waste mass (3.00%) and the current, thus projected unit

value per ton--$1,520. To assess the reasonableness of aluminum prices used in the

model, KVB consulted IndexMundi.com, a data portal that gathers facts and statistics

from multiple sources. Data sourced from IndexMundi.com on aluminum commodity

prices from February 2002-February 2012 are presented in Table 13. In the first year

of facility operations, revenue from recycled aluminum is projected to be

approximately $976,000.

Table 13. Annual Aluminum Commodity Price.

Month 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total

Avg

Jan -- $1,379 $1,609 $1,836 $2,383 $2,799 $2,456 $1,420 $2,230 $2,440 $2,151 $2,070

Feb $1,371 $1,422 $1,685 $1,883 $2,453 $2,839 $2,785 $1,338 $2,053 $2,515 $2,208 $2,050

Mar $1,405 $1,387 $1,657 $1,988 $2,432 $2,757 $3,012 $1,338 $2,211 $2,556 -- $2,074

Apr $1,370 $1,334 $1,732 $1,892 $2,624 $2,817 $2,968 $1,432 $2,314 $2,667 -- $2,115

May $1,344 $1,400 $1,625 $1,741 $2,852 $2,805 $2,908 $1,464 $2,045 $2,587 -- $2,077

Jun $1,357 $1,411 $1,682 $1,732 $2,491 $2,681 $2,968 $1,586 $1,929 $2,558 -- $2,040

Jul $1,338 $1,441 $1,708 $1,783 $2,512 $2,738 $3,067 $1,674 $1,989 $2,525 -- $2,078

Aug $1,293 $1,457 $1,692 $1,871 $2,462 $2,513 $2,763 $1,928 $2,110 $2,381 -- $2,047

Sep $1,302 $1,417 $1,731 $1,838 $2,484 $2,395 $2,524 $1,836 $2,171 $2,293 -- $1,999

Oct $1,311 $1,477 $1,830 $1,934 $2,657 $2,445 $2,122 $1,876 $2,342 $2,181 -- $2,018

Nov $1,373 $1,512 $1,817 $2,057 $2,702 $2,507 $1,857 $1,957 $2,324 $2,080 -- $2,019

Dec $1,376 $1,558 $1,853 $2,251 $2,824 $2,383 $1,504 $2,181 $2,357 $2,024 -- $2,031

Avg $1,349 $1,433 $1,719 $1,901 $2,573 $2,640 $2,578 $1,669 $2,173 $2,401 $2,180 $2,040

Source: IndexMundi.com, March 17, 2012.

The trend of average annual aluminum prices is presented in Exhibit 7.


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The average annual commodity price for aluminum over the studied 10-year period is

$2,040. The unit value for recycled aluminum incorporated in the Base Case of

project financial model is $1,520 per ton, or approximately 75% of the 10-year

average commodity price. In only 1 year—2009—since 2005 has the annual average

price ($1,669) been lower than the 10-year average. Based on this information, KVB

believes the value incorporated in the model is reasonable to use as a basis for

forecasting future recycled aluminum revenue.

KVB intends to establish a commodity brokerage service as part of the management

services KVB will provide to the Glenn County Solid Waste Conversion Project—see

discussion on KVB Management Responsibilities below for further details. Hence,

KVB anticipates realizing the highest possible unit prices for all recyclable materials

extracted from the waste stream processed at the plant. This will ensure maximum

project profitability and minimum consumer impact regarding the need for future

tipping fee adjustments.

The final item listed on the revenue projection worksheet is Carbon Credits.

Under the Kyoto Convention each country receives a grant certificate for

collecting Carbon Credits originating in organic waste. The current price of such a

certificate on the free market is $10. Due to future uncertainties in the value of

Carbon Credits, for this analysis, we have assumed no economic value from

Carbon Credits, however, KVB intends to establish internal expertise to enable the

efficient management of Carbon Credits in the future, if sustainable opportunities

arise.

Opex Assumptions

Unit assumptions and prices for operating expenses (Opex) are presented in Table 14.

According to ArrowBio, until daily the processed waste level exceeds 120 tons, the

envisioned plant would be able to operate on one processing line and one daily shift,

comprised of the employee complement reflected in Table 14. At no time during the

$-

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

Exhibit 7

Average Annual Aluminum Prices

2002

2003

2004

2005

2006

2007

2008

2009


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20-year forecast period does projected daily tonnage exceed 100 (92tpd max).

Employee salary levels reflect assumed fully loaded costs. For conservative

forecasting purposes, costs associated with employee salaries are escalated by 3% per

year over the forecast period, however, KVB believes that improvements on this

forecast could be made through active employment contract management. Electricity

consumption levels are based on projected annual tonnage and current energy prices

published by PG&E, escalated by 3% per year over the forecast period. Generator

maintenance and general maintenance costs include expected spare parts for plant

machinery, based on the operating experience of ArrowBio. Maintenance costs are

escalated annually at a rate of 5%. Consumables reflect general office supplies.

Technology licensing costs reflect anticipated charges associated with maintaining the

plants waste handling license. Residue waste per ton, represents approximately 30%

of total annual tonnage forecast to be handled at the plant. This number represents the

converse of the percentage of waste which is expected to be recycled and converted at

the plant. The estimated cost per ton ($55) to pick up and haul residue waste to an

appropriately certified landfill, including e-waste and non-exotic hazardous material,

was provided by Recology. At present, no heating gas is assumed in the operation of

the plant. There is an additional $100,000 contingency per year assumed for

operating the plant.

Table 14. Opex Assumptions

Annual OpeEx - Assumptions

Units USD

Number of Lines

1

Number of shifts

1

Number of simple employees per shift & line

8

Yearly cost of a simple employee

$ 50,000

Number of technicians/operators per shift

3

Yearly cost of a technician/operator

$100,000

Number of managers per shift

1

Yearly cost of a plant manager

$120,000

Annual Electricity Consumption (MWh)

1,300

Cost per MWh (regular price)

$ 150

Maintenance including spare parts

$150,000

Generator maintenance (per line)

$ 15,000

Consumables (per line)

$ 10,000

Technology license (per ton)

$ 5

Residue Waste per ton

6,618

Cost of Residue waste landfilling per ton

$ 55

Tons of Stable Digestate (wet)

4,124


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Heating Gas (6 month)

--

Other expenses per line

$100,000

Compost Sales

In addition to the revenue and Opex assumption noted above, KVB anticipates selling

compost made from the wet digestate produced at the plant. According the estimates

provided by ArrowBio, the envisioned plant would produce approximately 19% wet

digestate per ton of processed waste, at the assumed composition. This would equate

to approximately 4,000 tons annually. According to ArrowBio, this material would

serve as a viable commercial quality soil amendment by itself, but if mixed with rice

straw and dairy manure, the digestate could make an even more valuable compost

product. Developing this product would also enable KVB to establish potentially

useful relations with both rice farmers and dairy operators, which may further develop

into other commercial waste conversion opportunities in the future. Research

performed by KVB suggests that medium grade compost sells in the local area for

$90-$120 per ton. For conservative forecasting purposes, KVB assumes a product

sale price of $50 per ton and an input price—rice straw and dairy manure combined—

of $20 per ton, for a net value of $30 per ton (it is very possible that in the future,

KVB may actually generate tipping revenue for ag waste products that would be

combined into compost). These digestate selling/handling values are included in the

Base Case.

KVB Roles, Responsibilities and Management Fee

The personnel related Opex units/costs included in Table 14 do not include executive

oversight of the proposed Glenn County Solid Waste Conversion Facility and the

surrounding property, which KVB intends to develop in a manner that is both

consistent with the proposed waste conversion plant and in a way that will bring other

green technology jobs to Glenn County. The vision of KVB is to bring multiple

tenants onto the site of the proposed solid waste conversion facility and, to the extent

possible, facilitate the inter-connection of tenants and technologies to create

synergistic value. For example, residual waste from the ArrowBio facility might be

utilized by a secondary service provider/technology, thereby creating a new revenue

stream, additional employment opportunities on the site, improve facility

efficiency/reduce operating costs and reduce, if not eliminate, waste from Glenn

County destined for a landfill.

The Profit & Loss statement discussed below in Section 6.2.1.4, includes $500,000

per year, not escalated over the 20-year project horizon, for KVB management

services which would include, but would not necessarily be limited to the following:

1. Facility Management. KVB would fulfill the role of facility/property manager,

overseeing and maintaining common area grounds (assuming multiple tenants in

the future), managing relationships with and between tenants and dealing with


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outside parties, with the assistance/support, as needed, from facility tenants. As

part of this role, KVB would assume responsibility to plan, carry out and oversee:

a. Public relations activities for the facility including customer service/fee

collection at tip point and post transaction service, public education and

advertising as appropriate/necessary;

b. Government relations activities for the facility including communication

regarding waste provision agreements, public pricing, environmental

oversight and reporting;

c. Inter-tenant relations including monitoring of material flows, confirmation

of contractual performance and dispute resolution; and

d. General administrative services.

2. Facility Marketing. KVB would assume responsibility for facility marketing

including outreach to municipalities, waste haulers, commercial entities and the

public to bring convertible waste to the site and to market recyclable products and

materials, energy produced on the site and bi-products produced from the energy

conversion process.

3. Technology Evaluation Coordination. KVB would coordinate an internal group

comprised of on-site tenants to evaluate deployed and potential new technologies

relevant to the site. Findings of the group would be used to develop/revise on-site

policies, support new technology/tenant acquisition efforts, provide input into

external communications and overall facility planning and management activities.

4. Hauler Relations. KVB would establish and maintain relations with regional

waste haulers who bring, or may bring waste to the site. KVB would liaise with

facility tenants to develop a clear understanding of desired and required waste

material and delivery standards and KVB would work to ensure that all desired

standards are consistently met. KVB would manage all external relations with

waste haulers regarding fees, charges, waste composition, standards and other

relevant policies on the site.

5. Site Safety and Security. KVB would assume responsibility for emergency

response coordination including policy development and response standards, on-

site facility policing through contract services providers, insurance liaison and

communications with public emergency services providers.

6. Environmental Confirmation and Reporting. KVB would liaise with

environmental agencies, municipalities and other appropriate stakeholders to

prepare and regularly update an environmental management plan for the facility,

identifying reporting requirements for all activities on and relating to the site.

KVB would work with tenant specialists and outside consultants to monitor site

related environmental operations/circumstances. KVB would provide tenants with

regular feedback on monitoring results against established plans and policies.

KVB would also liaise with the local public agencies (County of Glenn and cities

within Glenn County and other client municipalities) and outside environmental

agencies to report on site related activities and coordinate environmental related

actions, developments and responses relating to the site.


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7. Media Relations. KVB would address all media inquires relating to the facility,

supported as necessary by tenants.

8. Investor Relations. KVB would liaise with facility investors as appropriate.

KVB would assist tenants in reporting activities to tenant shareholders, if any, and

other parties to whom tenants must report.

9. Recycling Partnership and Development. KVB would work with tenants to

maximize utilization and marketability of potentially recyclable material brought

onto the site by the public, waste haulers, commercial entities and other parties.

These efforts may include liaison with on- and off-site research initiatives

performed in partnership with universities and other institutions. KVB intends to

become a licensed broker of recycled materials and as such, would be able to both

buy but also source material from/for site tenants.

10. Energy Sales and Contracting/Carbon Credit Trading. At a point prior to the

establishment of waste conversion technologies on the site, KVB, or a subgroup

established by KVB, would form an energy/carbon credit sales/trading group with

on-site tenants to negotiate with energy transportation, transmission and

production companies and carbon trading markets to market energy sources and

carbon credits produced on/attributed to site.

Anticipated Organizational Structure and Initial Staffing Plan—KVB Executive

Team

To carry out required facility management responsibilities as they develop on an

incremental basis over the lifetime of the project and its future/complete targeted

build-out, KVB would establish and expand as appropriate a management team of

qualified personnel, organized as presented below.

Total anticipated staffing levels: Executive management 3-5 FTE over time and with

growth.

CEO

Facilities, Safety

and Security

V.P and staff

Environmental

V.P. and staff

Business

Relations

V.P and staff

Public and Media

Relations

V.P and staff

(Outsourced) legal

and financial

(1-3)

Energy/Re-

cycled

Materials


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6.2.1.4 Profit & Loss

Exhibit 8 presents projected Base Case profit and loss for the Glenn County Solid

Waste Conversion Facility project, based on the assumptions presented in the sections

above. As shown, total annual revenues range from approximately $4.367 million in

Year 1 (2016) to $4.886 million in Year 20 (2035). Annual Opex is projected to

increase from approximately $2.408 million in Year 2016 to $3.524 million in Year

2035. Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) are

projected to be approximately $1.968 million in 2016 but decrease to $1.361 million

in 2035 due to the fact that revenue in the model is driven by an assumed constant rate

of population growth and a fixed assumed waste weight per resident which combined

is a lower rate of growth than the assumed rates of growth for individual Opex

components. Projected net income after assumed post-closure costs, interest and tax

increases from just over $1.357 million in Year 1 to approximately $949,000 in 2035.

Exhibit 8 Profit & Loss (page 1 of 4) Annual Revenues 2016 2017 2018 2019 2020

Tipping Fees (Year 1) $ 1,168,075 $ 1,175,201 $ 1,182,370 $ 1,189,583 $ 1,196,840

Electricity $ 215,782 $ 215,782 $ 215,782 $ 215,782 $ 215,782

HDPE $ 342,293 $ 344,381 $ 346,482 $ 348,596 $ 350,722

LDPE $ 599,013 $ 602,667 $ 606,344 $ 610,043 $ 613,764

Metal $ 128,360 $ 129,143 $ 129,931 $ 130,723 $ 131,521

Non Ferrous Metal $ 325,178 $ 327,162 $ 329,158 $ 331,166 $ 333,186

Aluminum cans $ 975,535 $ 981,486 $ 987,474 $ 993,498 $ 999,559

Glass $ 4,279 $ 4,305 $ 4,331 $ 4,357 $ 4,384

Paper $ 418,239 $ 420,791 $ 423,358 $ 425,941 $ 428,539

Selling Digestate $ 199,952 $ 201,171 $ 202,399 $ 203,633 $ 204,876

Carbon Credits $ - $ - $ - $ - $ -

Other Income (net value) $ - $ - $ - $ - $ -

Total Revenues $ 4,376,706 $ 4,402,090 $ 4,427,628 $ 4,453,323 $ 4,479,174

Annual Operating

Expenses

Salaries simple employees $ 400,000 $ 412,000 $ 424,360 $ 437,091 $ 450,204

Salaries technicians/shift

manager $ 300,000 $ 309,000 $ 318,270 $ 327,818 $ 337,653

Salaries secretary $ 75,000 $ 77,250 $ 79,568 $ 81,955 $ 84,413

Salaries manager $ 120,000 $ 123,600 $ 127,308 $ 131,127 $ 135,061

Electricity $ 195,000 $ 200,850 $ 206,876 $ 213,082 $ 219,474

Spare parts $ 150,000 $ 157,500 $ 165,375 $ 173,644 $ 182,326

Generator maintenance $ 15,000 $ 15,750 $ 16,538 $ 17,364 $ 18,233

Consumables $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000

Technology license (per

ton) $ 110,299 $ 110,299 $ 110,299 $ 110,299 $ 110,299

Residue Waste $ 352,990 $ 355,143 $ 357,310 $ 359,489 $ 361,682

Heating Gas (6 month) $ - $ - $ - $ - $ -

Handling Digestate $ 79,981 $ 79,981 $ 79,981 $ 79,981 $ 79,981

KVB Management Fee $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000

Other $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000

Total Operating Expenses $ 2,408,269 $ 2,451,372 $ 2,495,882 $ 2,541,849 $ 2,589,325

1.79% 1.82% 1.84% 1.87%


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EBITDA $ 1,968,437 $ 1,950,718 $ 1,931,746 $ 1,911,473 $ 1,889,849

Closure Costs $ - $ - $ - $ - $ -

Post Closure Costs $ - $ - $ - $ - $ -

Total Closure Related

Costs $ - $ - $ - $ - $ -

Interest Payment $ 483,874 $ 455,191 $ 424,788 $ 392,560 $ 358,398

Depreciation $ 850,585 $ 850,585 $ 850,585 $ 850,585 $ 850,585

Tax $ 126,796 $ 128,988 $ 131,275 $ 133,666 $ 136,173

Net Income (ex. Dep) $ 1,357,768 $ 1,366,538 $ 1,375,684 $ 1,385,248 $ 1,395,277



Electricity $ 215,782 $ 215,782 $ 215,782 $ 215,782 $ 215,782

HDPE $ 352,862 $ 355,015 $ 357,180 $ 359,359 $ 361,552

LDPE $ 617,508 $ 621,276 $ 625,066 $ 628,879 $ 632,715

Metal $ 132,323 $ 133,130 $ 133,943 $ 134,760 $ 135,582


Aluminum cans $ 1,005,657 $ 1,011,792 $ 1,017,964 $ 1,024,174 $ 1,030,422

Glass $ 4,411 $ 4,438 $ 4,465 $ 4,492 $ 4,519

Paper $ 431,153 $ 433,783 $ 436,430 $ 439,092 $ 441,771


Carbon Credits $ - $ - $ - $ - $ -

Other Income (net

value) $ - $ - $ - $ - $ -

Total Revenues $ 4,505,182 $ 4,531,350 $ 4,557,677 $ 4,584,164 $ 4,610,813

Annual Operating

Expenses

Salaries simple

employees $ 463,710 $ 477,621 $ 491,950 $ 506,708 $ 521,909

Salaries

technicians/shift

manager $ 347,782 $ 358,216 $ 368,962 $ 380,031 $ 391,432



Electricity $ 86,946 $ 89,554 $ 92,241 $ 95,008 $ 97,858

Spare parts $ 139,113 $ 143,286 $ 147,585 $ 152,012 $ 156,573

Generator maintenance $ 226,058 $ 232,840 $ 239,825 $ 247,020 $ 254,431

Consumables $ 191,442 $ 201,014 $ 211,065 $ 221,618 $ 232,699

Technology license (per

ton) $ 19,144 $ 20,101 $ 21,107 $ 22,162 $ 23,270

Residue Waste $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000

Heating Gas (6 month) $ 110,299 $ 110,299 $ 110,299 $ 110,299 $ 110,299


KVB Management Fee $ - $ - $ - $ - $ -

Other $ 79,981 $ 79,981 $ 79,981 $ 79,981 $ 79,981

Total Operating

Expenses $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000


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EBITDA $ 1,866,819 $ 1,842,329 $ 1,816,321 $ 1,788,736 $ 1,759,512

Closure Costs $ - $ - $ - $ - $ -

Post Closure Costs $ - $ - $ - $ - $ -

Total Closure Related

Costs $ - $ - $ - $ - $ -

Interest Payment $ 322,187 $ 283,804 $ 243,117 $ 199,989 $ 154,273

Depreciation $ 850,585 $ 850,585 $ 850,585 $ 850,585 $ 850,585

Tax $ 138,809 $ 141,588 $ 144,524 $ 147,632 $ 150,931

Net Income (ex. Dep) $ 1,405,822 $ 1,416,937 $ 1,428,681 $ 1,441,115 $ 1,454,308



Electricity $ 215,782 $ 215,782 $ 215,782 $ 215,782 $ 215,782

HDPE $ 363,757 $ 365,976 $ 368,209 $ 370,455 $ 372,715

LDPE $ 636,575 $ 640,459 $ 644,366 $ 648,297 $ 652,251

Metal $ 136,409 $ 137,241 $ 138,078 $ 138,921 $ 139,768


Aluminum cans $ 1,036,708 $ 1,043,032 $ 1,049,395 $ 1,055,797 $ 1,062,238

Glass $ 4,547 $ 4,575 $ 4,603 $ 4,631 $ 4,659

Paper $ 444,466 $ 447,177 $ 449,905 $ 452,650 $ 455,411


Carbon Credits $ - $ - $ - $ - $ -

Other Income (net

value) $ - $ - $ - $ - $ -

Total Revenues $ 4,637,625 $ 4,664,600 $ 4,691,740 $ 4,719,046 $ 4,746,518

Annual Operating

Expenses

Salaries simple

employees $ 537,567 $ 553,694 $ 570,304 $ 587,413 $ 605,036

Salaries

technicians/shift

manager $ 403,175 $ 415,270 $ 427,728 $ 440,560 $ 453,777



Electricity $ 262,064 $ 269,926 $ 278,023 $ 286,364 $ 294,955

Spare parts $ 244,334 $ 256,551 $ 269,378 $ 282,847 $ 296,990

Generator

maintenance $ 24,433 $ 25,655 $ 26,938 $ 28,285 $ 29,699

Consumables $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000

Technology license

(per ton) $ 110,299 $ 110,299 $ 110,299 $ 110,299 $ 110,299

Residue Waste $ 375,125 $ 377,413 $ 379,715 $ 382,032 $ 384,362

Heating Gas (6

month) $ - $ - $ - $ - $ -


KVB Management

Fee $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000

Other $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000

Total Operating

Expenses $ 2,909,040 $ 2,968,713 $ 3,030,390 $ 3,094,145 $ 3,160,053


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EBITDA $ 1,728,585 $ 1,695,887 $ 1,661,350 $ 1,624,901 $ 1,586,465

Closure Costs $ - $ - $ - $ - $ -

Post Closure Costs $ 140,260 $ 140,260 $ 140,260 $ 140,260 $ 140,260

Total Closure

Related Costs $ 140,260 $ 140,260 $ 140,260 $ 140,260 $ 140,260

Interest Payment $ 105,814 $ 54,448 $ 0 $ 0 $ 0

Depreciation $ 850,585 $ 850,585 $ - $ - $ -

Tax $ 154,437 $ 158,171 $ 332,270 $ 324,980 $ 317,293

Net Income (ex. Dep) $ 1,328,073 $ 1,343,008 $ 1,188,820 $ 1,159,661 $ 1,128,912



Electricity $ 215,782 $ 215,782 $ 215,782 $ 215,782 $ 215,782

HDPE $ 374,989 $ 377,276 $ 379,578 $ 381,894 $ 384,223

LDPE $ 656,231 $ 660,234 $ 664,262 $ 668,314 $ 672,391

Metal $ 140,621 $ 141,479 $ 142,342 $ 143,210 $ 144,084


Aluminum cans $ 1,068,718 $ 1,075,238 $ 1,081,797 $ 1,088,397 $ 1,095,037

Glass $ 4,687 $ 4,716 $ 4,745 $ 4,774 $ 4,803

Paper $ 458,190 $ 460,985 $ 463,797 $ 466,626 $ 469,473


Carbon Credits $ - $ - $ - $ - $ -

Other Income (net

value) $ - $ - $ - $ - $ -

Total Revenues $ 4,774,157 $ 4,801,966 $ 4,829,943 $ 4,858,092 $ 4,886,412

Annual Operating

Expenses

Salaries simple

employees $ 623,187 $ 641,883 $ 661,139 $ 680,973 $ 701,402

Salaries

technicians/shift

manager $ 467,390 $ 481,412 $ 495,854 $ 510,730 $ 526,052



Electricity $ 303,804 $ 312,918 $ 322,305 $ 331,974 $ 341,934

Spare parts $ 311,839 $ 327,431 $ 343,803 $ 360,993 $ 379,043

Generator

maintenance $ 31,184 $ 32,743 $ 34,380 $ 36,099 $ 37,904

Consumables $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000

Technology license

(per ton) $ 110,299 $ 110,299 $ 110,299 $ 110,299 $ 110,299

Residue Waste $ 386,707 $ 389,066 $ 391,440 $ 393,828 $ 396,230

Heating Gas (6

month) $ - $ - $ - $ - $ -


KVB Management

Fee $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000

Other $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000


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Total Operating

Expenses $ 3,228,194 $ 3,298,650 $ 3,371,506 $ 3,446,851 $ 3,524,778

EBITDA $ 1,545,963 $ 1,503,316 $ 1,458,437 $ 1,411,241 $ 1,361,634

Closure Costs $ - $ - $ - $ - $ -

Post Closure Costs $ 140,260 $ 140,260 $ 140,260 $ 140,260 $ 140,260

Total Closure

Related Costs $ 140,260 $ 140,260 $ 140,260 $ 140,260 $ 140,260

Interest Payment $ 0 $ 0 $ 0 $ 0 $ 0

Depreciation $ - $ - $ - $ - $ -

Tax $ 309,193 $ 300,663 $ 291,687 $ 282,248 $ 272,327

Net Income (ex. Dep) $ 1,096,511 $ 1,062,393 $ 1,026,490 $ 988,733 $ 949,047

6.2.1.5 Cash Flow

Exhibit 9—The Base Case Projected Statement of Cash Flow presents EBITDA,

assumed draw-down of project equity over the three-year project construction period,

annual principal and interest payments, closure related costs including post-closure

costs, net cash flow and accumulated cash flow.

Exhibit 9. Projected Statement of Cash Flow (page 1 of 5) Cash Flow (year) -2 (2014) -1 (2015) 2016 2017 2018

EBITDA $ 1,968,437 $ 1,950,718 $ 1,931,746

Plant (Equity) $ 2,605,474 $ 1,302,737 $ 434,246

Debt (Principal +

Interest) $ 961,917 $ 961,917 $ 961,917

Closure costs $ - $ - $ -

Tax $ 126,796 $ 128,988 $ 131,275

Net Cash Flow $ -2,605,474 $ -1,302,737 $ 445,479 $ 859,812 $ 838,554

Accumulated Cash $ -2,605,474 $ -3,908,212 $ -3,462,733 $ -2,602,921 $ -1,764,366

1 1 1

Exhibit 9. Projected Statement of Cash Flow (page 2 of 5) Cash Flow (year) 2019 2020 2021 2022 2023

EBITDA $ 1,911,473 $ 1,889,849 $ 1,866,819 $ 1,842,329 $ 1,816,321

Plant (Equity)


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Debt (Principal +

Interest) $ 961,917 $ 961,917 $ 961,917 $ 961,917 $ 961,917

Closure costs $ - $ - $ - $ - $ -

Tax $ 133,666 $ 136,173 $ 138,809 $ 141,588 $ 144,524

Net Cash Flow $ 815,891 $ 791,759 $ 766,092 $ 738,824 $ 709,880

Accumulated Cash $ -948,476 $ -156,717 $ 609,375 $ 1,348,199 $ 2,058,079

1 1 0 0 0


EBITDA $ 1,788,736 $ 1,759,512 $ 1,728,585 $ 1,695,887 $ 1,661,350

Plant (Equity)

Debt (Principal +

Interest) $ 961,917 $ 961,917 $ 961,917 $ 961,917 $ -

Closure costs $ - $ - $ 140,260 $ 140,260 $ 140,260

Tax $ 147,632 $ 150,931 $ 154,437 $ 158,171 $ 332,270

Net Cash Flow $ 679,186 $ 646,664 $ 471,971 $ 435,539 $ 1,188,820

Accumulated Cash $ 2,737,265 $ 3,383,929 $ 3,855,900 $ 4,291,439 $ 5,480,259

0 0


EBITDA $ 1,624,901 $ 1,586,465 $ 1,545,963 $ 1,503,316 $ 1,458,437

Plant (Equity)

Debt (Principal +

Interest) $ - $ - $ - $ - $ -

Closure costs $ 140,260 $ 140,260 $ 140,260 $ 140,260 $ 140,260

Tax $ 324,980 $ 317,293 $ 309,193 $ 300,663 $ 291,687

Net Cash Flow $ 1,159,661 $ 1,128,912 $ 1,096,511 $ 1,062,393 $ 1,026,490


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Accumulated Cash $ 6,639,920 $ 7,768,831 $ 8,865,342 $ 9,927,735 $ 10,954,225

Exhibit 9. Projected Statement of Cash Flow (page 5 of 5) Cash Flow (year) 2034 2035

EBITDA $ 1,411,241 $ 1,361,634

Plant (Equity)

Debt (Principal +

Interest) $ - $ -

Closure costs $ 140,260 $ 140,260

Tax $ 282,248 $ 272,327

Net Cash Flow $ 988,733 $ 949,047

Accumulated Cash $ 11,942,957 $ 12,892,005

6.2.1.6 Summary of Base Case Financial Results

Exhibit 10 presents a summary of Base Case financial results. Elements selected for

this summary exhibit represent those items which:

1. have the greatest potential to impact financial results—i.e., tonnage, Capex,

and financing terms;

2. are fundamentally critical to the viability of the project—i.e., Internal Rate of

Return (IRR), Net Present Value (NPV) and Return on Investment (ROI)

expressed as number of years to investment payback (equity and debt); and

3. are most politically sensitive—i.e., tipping fee levels.

As discussed above in this report, KVB plans to privately finance the Glenn County

Solid Waste Conversion Facility project. As such, project financial performance, and

supporting agreements and conditions will have to be acceptable to participating

lenders and equity investors. Given the dearth of commercial MSW-to-energy

projects in the United States, banks and prospective investors have relatively little

actual operating data to review for due diligence purposes. Hence, presumed risk

levels may be seen by investors as higher for this project than other types of

renewable energy projects—e.g. wind or solar—for which detailed operating data are

widely available.

From an equity perspective, return requirements of venture capital investors typically

runs between 20%-30%, with an anticipated project exit expectation within the first 3-

5 years. The level of expected return reflects the anticipated level of risk that

investors commonly see in entrepreneurial projects and the failure rate in venture


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projects as a whole. The typical exit horizon, which assumes a liquidity event

intended to provide investors with a capital gain and an opportunity to invest in future

capital projects, also serves as a hedge against long-term project operating risk.

Typical investor exit expectations also reflect the fact that many private investors are

not intrinsically dedicated to a particular business or industry on a long-term basis.

The Glenn County Solid Waste Conversion Facility project is not like most other

equity investment opportunities for many reasons. First, when complete, the

necessary waste provision agreements underpinning the project will constitute an

effective monopoly within Glenn County for solid waste disposal. Necessary terms of

waste provision agreements will preclude the existence of competing waste disposal

facilities or the leakage of MSW to other facilities either inside or outside of Glenn

County. Unless KVB breaches conditions of waste provision without satisfactory

remedy, 100% of the MSW tonnage generated in Glenn County will be required to be

delivered to, and processed at, the facility for the duration of the agreement, which

will need to extend, at a minimum, 1-2 years beyond the term of project debt.

Additionally, in order to remain safe and efficiently operating, and to enable KVB as

operator to attract waste from sources outside of Glenn County, waste provision

agreements and other critical agreements that support the existence and operation of

the plant should include extension clauses that would enable KVB to raise expansion

capital, refinance debt and enter into long-term waste provision agreements with

outside entities.

On the assumptions that KVB is able to negotiate formal agreements as noted above

with the County of Glenn and cities within Glenn County for the provision of waste

and long-term plant operation, KVB would expect that equity return requirements for

this project will attract investors more committed to long-term positions in the project

at an anticipated return level marginally below typical venture investor expectations.

Based on this logic, KVB believes that a sustained return level (IRR) at or just above

16% would be viable for attracting equity investors.

As described earlier in this report, the economic methodology assumed by KVB for

this project is that tipping fees would be adjusted annually to ensure that both debt

covenants and equity requirements are met. Hence, as other economic factors

underpinning the project change, tipping fees would be adjusted to ensure that

financial requirements are met. Tipping fee levels shown in the Base Case and

sensitivity cases shown below have been adjusted to render in each case an IRR of

between 16%-17%, in order to reflect economic viability of the case from a financing

perspective.

Factors and assumptions reflected in KVB’s Base Case include:

Tonnage growth rate is driven from conservative population growth and

weight/resident/day assumptions;

Significant project design services to be provided by faculty and graduate

students at Chico State University;

Landfill post-closure costs would begin in Year 11 (2026) and would be

managed to the level estimated by Lawrence and Associates; and

Terms of debt are assumed at conservative levels expressed by Union Bank.


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Together, these assumptions would enable KVB to reduce tipping fees from the

current level of $70/ton to $55/ton from 2016 through 2035, all other assumptions

being equal/achieved.

Exhibit 10. Summary of Base Case Financial Results.

Base Case

Projected annual tonnage 2016, 2025, 2035 21,393 22,597 24,014

Full Project Design $ 250,000

Total projected cost of closure assigned to Project $ -

Debt 65%

Equity 35%

Term 12

Adjusted tipping fee per ton 2016, 2017, 2018-35 $ 55 $ 55 $ 55

IRR Equity 16.55%

NPV Equity $ 2,038,159

ROI Equity 6

6.2.1.7 Sensitivity Analyses

The purpose of a sensitivity analysis is to examine the potential impact of a change in

a key project factor or input on project performance. Since the underlying assumption

of project viability is acceptable financial performance, insured by the adjustment of

tipping fees to meet lender and investor expectations, the methodology used by KVB

for constructing individual sensitivity analyses is to modify an isolated input

assumption and adjust tipping fees in Year 1, Year 2 and Years 3-20 to levels that

would yield a project IRR of between 16%-17%.

The actual sensitivity scenarios presented in this report reflect factors that present the

greatest potential to change over both the development and operational phases of the

project. While it is likely that under actual operations, multiple factors would change

simultaneously, to demonstrate the potential impact, and thus project sensitivity, of

any one factor, sensitivity analyses presented in this report consider a change in each

item discretely.

Sensitivity 1. High Weight/Res/Day.

Base Case projections are based on conservative weight/resident/day assumptions

derived from the disposal trend of the last 5 years, which in part reflect recessionary

economic conditions in Glenn County and a weight/resident/day level lower that than

reflected over the past 10 years. Sensitivity 1 reflects the 10-year average

weight/resident/day level. Under this scenario, reasonable investor returns could be

achieved, all other things remaining equal, at a tipping fee of $46/ton held constant for

20 years.

High Weight/Res/Day


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Debt 65%

Equity 35%

Term 12


IRR Equity 16.69%


ROI Equity 6

Sensitivity 2. High Project Planning Costs.

Base Case project planning cost estimates are based on the assumption that KVB will

be successful at establishing a partnership with Chico State University to complete

project design and environmental evaluation services necessary for project permitting.

Cost estimates reflected in the Base Case reflect cost parameters discussed, but not

formally committed to, by Chico State faculty representatives. The original estimate

provided by ArrowBio for project planning, environmental evaluating and permitting

is $950,000. In the event that KVB is unable to strike an agreement with Chico State

representatives to complete required planning services, KVB may have to engage the

services of private engineering and consulting firms whose fees are expected to be in

the order of those anticipated by ArrowBio. As a result, tipping fees would be

adjusted to $60 in Years 1-20, all other assumptions being equal and achieved.

High Planning Costs




Debt 65%

Equity 35%

Term 12


IRR Equity 16.51%


ROI Equity 6

Sensitivity 3. Moderately Improved Financing.

Base Case projections incorporate conservative project financing assumptions

consistent with information received by KVB from Union Bank. It is possible that if

agreements underpinning the project are sufficiently clear and supportive of the

project—in particular, waste provision agreements and terms/process of future tipping

fee adjustment—actual financing terms may be more favorable than those assumed in

the Base Case. Sensitivity analysis 3 reflects the potential impact, all other

assumptions remaining equal, of gearing at 70% over 15 years instead of the Base


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Case assumed at 65% over 12 years. The resulting tipping fees would be $48 constant

in Years 1-20.

Moderately Improved Financing




Debt 70%

Equity 30%

Term 15


IRR Equity 16.59%


ROI Equity 5

Sensitivity 4. High Project Capex

The Base Case estimate for project Capex is based on a combination of cost analyses

and assumptions produced by ArrowBio and KVB using both industry standard

information and, where available and applicable, local costing information. The total

estimated Capex for the project included in the Base Case is $10.2million plus an

additional $2.2 million to pay off the existing loan with LCGI for a total estimated

project cost of $14.4 million. While KVB expects these estimates to reasonably

reflect actual costs, in the event that additional capital requirements are discovered

during secondary planning, or local construction prices were to increase substantially

prior to the start date of construction, there could be a material impact on the

projected Base Case tipping fee level. Sensitivity 4 considers the impact that an

additional $2 million in project Capex would have on tipping fees, all other

assumptions remaining equal and achieved. In addition to requiring a tipping fee of

approximately $69/ton held constant for 20 years, a material increase in project Capex

would also likely require an increased equity component, estimated below to increase

from a Base Case level of $4.3 million to $5 million.

High Project Capex


Total assumed project Capex $ 14,407,021

Projected equity requirement $ 5,042,457

Anticipated debt level at 65% gearing $ 9,364,564



Debt 65%

Equity 35%

Term 12

Adjusted tipping fee per ton 2016, 2017, 2018-

35 $ 69 $ 69 $ 69


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IRR Equity 17%


ROI Equity 6

Sensitivity 5. Landfill Closure Costs Assigned to Project.

Base Case projections incorporate the assumption that Glenn County will assume the

full cost associated with closing the Landfill. In the event that the County were to

assign the estimated cost of closing the Landfill ($8.2 million) to the project, less the

funding level assumed to be available at the time of closure in the Closure Fund,

tipping fees would be need to be increased over Base Case assumptions. Sensitivity 4

presents the potential impact, all other assumptions remaining equal, of assigning the

full projected cost of closing the Landfill to the Project. Resulting tipping fees are

estimated as follows: Year 1 (2016) $72, Year 2 (2017) $76, Years 3-20 (2018-2035)

$77.

Full Closure Costs Assigned to Project



Total projected cost of closure assigned to Project $ 8,167,788

Total projected value in Closure Fund $ 3,500,000

Net closure costs assigned to Project $ 4,667,788

Years over which closure costs assumed to be

spread 10

Annual assumed closure payment $ 466,779

Debt 65%

Equity 35%

Term 12


IRR Equity 17%


ROI Equity 6


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7. ArrowBio Team Project team &Communication List

Discipline Office Tel. Mobile E-mail

Arrow

Mr. Yair

Zadik CEO

+972-4-

8411100

+972-50-

5424239 [email protected]

Mr. Mizrahi

Ido

Project

Manager

+972-4-

8411100

+972-54-


Mr. Arie

Sayada CFO

+972-4-

8411100

+972-54-


Ms. Ayelet

Mitzafon

Procurement

Manager

+972-4-

8411100

+972-54-


Mr. Beraze

Moti

Engineering

Manager

+972-4-

8411100

+972-54-


Ms. Zobin

Kati

Logistics

Manager

+972-4-

8411100

+972-54-


Ms. Calanit

Logan

Office

Manager

+972-4-

8411100

+972-54-


Discipline Office Tel. Mobile E-mail

Ludan (sub cont.)

Mr. Yuval Alon Project

Manager

+972-8-

6258300 Ext.

305

+972-52-


Mr. Boris Sola Project

Engineer &

Coordinator

+972-8-

6258300 Ext

270

+972-52-


Mr. Arie Karpf Instrumentat

ion &

Control

Engineer

+972-8-

6258300 Ext.

279

+972-52-


Mr. Icko Literat Electrical

Engineer

+972-8-

6258300 Ext.

308

+972-52-


Mrs. Ilanit Ben

Zikri

Process

Engineer

+972-8-

6258300 Ext.

280

+972-54-


Mrs. Riki

Manheim

Document

Control

+972-8-

6258300 Ext.

281

[email protected]

mailto:[email protected]














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7.1. Project Timeline

The project timeline begins in the first of Jan 2013 and ends in Oct 2014. The

installation work can be done in parallel between the separation area and the

biological area. The project timeline also depends on the work force available for

the construction; this will affect the budget for the project and will be addressed at

the detail design.


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8. Anaerobic Digestion - Basic Theory

8.1 Introduction- Anaerobic decomposition process Anaerobic digestion is a naturally occurring biological process in which

microorganisms decompose organic material in the absence of oxygen. The anaerobic

process occurs in two phases: In the first phase, a group of microorganisms referred to

as acidogenic - “acid formers” - break down complex materials into smaller molecules

of organic acids. In the second phase, a second group of microorganisms referred to as

methanogenic - “methane formers” - breaks down the output from the first phase to

form biogas. In engineered anaerobic processes, the digestion of organic waste takes

place in dedicated reactors, where environmental conditions such as moisture content,

temperature and pH levels can be controlled to maximize microbe activity, gas

production and waste decomposition rates. Energy produced from the biogas is categorized as “green energy”. Therefore, the

processing of a range of waste streams, including source separated organic waste or

mixed municipal waste by anaerobic treatment contributes to sustainable and

renewable energy.

Anaerobic digestion has been used to stabilize biosolids (sludge) from wastewater

treatment plants for almost 100 years. However, wastewater treatment sludge is a

relatively homogeneous waste material. It is more challenging to handle the somewhat

heterogeneous and seasonal nature of municipal solid waste streams. In the last 15

years, the anaerobic treatment technology has become a recognized method for

processing solid organic waste from residential and commercial sources, turning them

from a nuisance into an energy resource, which can be sold off-site in the form of

heat, steam or electricity.

8.2 Anaerobic vs. Aerobic Treatment

Aerobic and anaerobic processes are two biological transformations in which organic

matter is decomposed. During the aerobic reaction, the organic material is oxidized

into carbon dioxide and water to create new cells and energy for cell maintenance.

The oxygen is the electron acceptor in this biochemical reaction.

On the other hand, the anaerobic reaction takes place in the absence of oxygen where

a number of different groups of microorganisms decompose the organic matter. The

anaerobic decomposition requires a number of stages resulting in production of

methane gas. The organic material and carbon dioxide serve as the electron acceptor.

Advantages of the anaerobic treatment:

Biochemical Process efficiency – A comparison between the aerobic and anaerobic

process formulas shows the energetic difference between the two processes. An

organic matter (e.g. Glucose) is decomposed as follows:


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arobic

6 12 6 2 2 2

anarobic

6 12 6 4 2

C 6O 6CO + 6H G -2826 kj

C 3CH + 3CO G -394 kj

H O O

H O

Aerobic microorganisms gain more energy from glucose than anaerobic micro-

organisms (38 mole ATP vs. 2–4 mole ATP per mole of glucose). As a result of lower

energetic yield from the organic matter decomposition, under anaerobic condition, the

active biomass required to process higher amounts of substrates to gain the same

energy for the biological process. On the other hand, more than 85% of the organic

matter energy is converted into methane. The rest of the energy is used for cellular

growth and maintenance.

Lower biomass yield – due to the lower biochemical efficiency, the anaerobic

treatment results in lower cell production (sludge production) by factor of about 6 to

8. Thus sludge processing and disposal costs are reduced greatly.

High Volumetric Load – Anaerobic processes generally have higher volumetric

organic loads than aerobic processes, so smaller reactor volumes and less space may

be required for the treatment.

Operational energy requirements - Anaerobic processes may be net energy producers

instead of energy consumers as in the case of aerobic treatment, were intensive

aeration is required. This advantage becomes significant for waste with high content

of organic material such as Municipal Solid Waste (MSW).

Disadvantages:

The major concerns with anaerobic processes are their longer start-up time, their

sensitivity to toxic compounds and their need to stable operation conditions. The

anaerobic microbial population is prone to changes depending on the environment and

the availability of nutrients.

8.3 Anaerobic treatment categorization

Anaerobic digestion processes are broadly defined by the following categories:

Solids content – “Wet” or “dry” technologies. Above 25% solids the

technology regards as "Dry".

Mode of operation – continuous or batch.

Number of stages – one-stage, two-stage or multi-stage. In a single-stage

digester, all bacteria inhabit the same volume and their relative growth rates

are kept in balance. If two tanks are used, the first tank used for hydrolysis,

acidogenesis and Acetogenesis, while the second tank is used for methane

production from volatile acids. A multi-stage system also includes different

criteria for solids and liquids.


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The benefits of the operation of process stages in the treatment of Organic Fraction of

Municipal Solid Waste (OFMSW) are:

Optimal environmental conditions for the different groups of

microorganisms in the process.

The methanogenic bacteria are protected from overload and toxins.

Reduction of retention time, thus achieving cost effective process.

The disadvantages are the need for more complex control and potential loss in

methane production due to loss of hydrogen and carbon dioxide in the initial stage.

8.4 Characterization of MSW organic matter

During anaerobic digestion of municipal solid waste (MSW), a high percentage of the

organic material remains non-degradable. The non-degraded organic matter is not due

to operational considerations, but rather due to biochemical limitations like: specific

enzyme shortage, structural limitations or incompetent bacterial population. For

better bio-accessibility the suspended organic matter is better be dissolved or at least

have a high surface area.

The MSW contains different type of organic matter, which is subject to

decomposition. The following paragraphs briefly describe the main groups in the light

of biodegradation procedures.

8.4.1 Polysaccharides

Polysaccharides – the main group of plants organic matter, such as cellulose, starch

and pectin. All go through hydrolysis by cellulase, amylase, and pectinase.

Lignocelluloses

The plant biomass is lignocelluloses, composed of three components: cellulose,

hemicelluloses and lignin. In most case the Organic Fraction Municipal Solid Waste

(OFMSW) contains approximately 40% cellulose, 12% hemicelluloses and

approximately 10-15% lignin (DM). The sources for these materials are paper

products, wooden surfaces, food industry etc.

The tertiary architecture of lignocellulose structures is directed by a variety of

covalent and non-covalent linkages. Cellulose is complexed with hemicellulose,

lignin, and other

components, which complicate their hydrolysis. These bonds are extremely resistant

to chemical and biological hydrolysis. On the other hand, amorphous regions within

the cellulose crystalline structure have a heterogeneous composition. Ultimately, this

asymmetrical arrangement is crucial to the biodegradation of cellulose.

Cellulose


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The initial structure of cellulose is a linear homopolymer made up of D – glucose in

1-4 β glycoside bonds. About 30 individual cellulose molecules are assembled into

fibril, which are packed into units called microfibrils, and these are in turn assembled

into the familiar cellulose fibers.

In the linear structure there is no delay in breakdown. Whoever, the secondary and

tertiary structures of cellulose are the most difficult parts for breakdown. The

cellulose in the plant cell is surrounded by a lamella made of lignin. The middle

lamella is composed of lignin and hemicelluloses. This layer acts as a material barrier

for the enzymes and therefore, enzyme diffusion is slow and difficult. In addition, the

lignin phenol groups act as an inhibitory for the enzymes.

Cellulose hydrolysis is performed by the enzyme cellulase which is composed of three

types of enzymes (Figure 6 The types of cellulase enzyme):

Endo – glucanases – randomly breaks down a glycoside bond.

Exo– glucanases – breaks down cellbioze or glucose type of monosaccharide

at the end of the chain.

Beta-glucosidase - catalyzes the hydrolysis of terminal non-reducing residues

in beta-D-glucosides.

Figure 6: The types of cellulase enzyme.

Following Cellulose hydrolysis it goes further enzymatic cleave to glucose (by

cellulose phosphorylases).


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Hemicelluloses

The hemicelluloses constitute a large number of different polysaccharide molecules. It

is a hetero-polymer composed of sugars such as D-Xylose, D-Mannose etc.

Hemicelluloses break down quicker then cellulose in anaerobic systems. Although,

the hemicelluloses breakdown is a simple procedure, the complexity of its enzyme

system is higher than that of cellulose. This is due to the different monomers which

compose of the polymer.

Lignin

A branched polymer, composed of aromatic components, made of phenyl propane,

which is bonded to each other by a carbon-carbon and ethereal bonds. Lignin is better

at breakdown in aerobic systems with the aid of fungi.

General view of lignin and the other is displayed in Figure 7.

Figure 7: Main components of wood – chemical structures of lignin, cellulose and

hydrolysis products

Pectins Pectins constitute a major component of dicotyledon higher plants. Pectins represent a

complex range of carbohydrate molecules whose backbone is composed chiefly of

chains of α -D-(1-4) galacturonan interrupted by units of α-L-(1-2) rhamnose. The

rhamnose-rich regions are frequently branched with side-chains composed of neutral

sugars of the arabinan/arabinogalactan type.

Pectin is decomposed by pectinases consisting of Pectinesterases and Depolmerases.

Starch


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Starch rapidly breaks down in anaerobic systems. In nature starch is divided into two

groups – amylose and amylopectin.

Amylose – unramified polymer contains glucose in 1-4 α bond.

Amylopectin – a ramified polymer containing glucose in 1-4 α, 1-6 α every 30

monomers. Starch hydrolysis for the production of glucose requires the activity of

five enzymes:

a-amylases that endocleave α±1-4 bonds;

p-amylases that exocleave α±1-4 bonds;

amyloglucosidases that exocleave α±l-4 and α±l-6 bonds

debranching enzymes that act on α±l-6 bonds;

maltase that acts on maltose liberating glucose.

8.4.2 Proteins

Proteins are chemically complex, unstable and a subject to different methods of

breakdown. Some proteins are soluble in water while usually the solubility is limited.

Protein is composed of a large number of amino acids. Proteins are broken down by protoalite enzymes (proteases) for the creation of

peptides, amino acids, ammonium and carbon dioxide. Proteins are a source of

carbon and energy for the bacteria in anaerobic systems, the ammonium released

during hydrolysis is used as a nitrogen source.

8.4.3 Lipids

Fatty acids are the main fat component in waste and are divided into two main groups:

Simple lipids – fatty acids linked together in an esters bond to glycerol eg. –

triglycerides.

Complex lipids – fat that also contains – phosphate, nitrogen and sugars. e.g.

phospholipids and glicolipids.

For example: triglyceride hydrolysis by enzyme esterase releases fatty acids (saturated

and unsaturated) and glycerol. The glycerol acts as a bacteria substrate while the long

fatty acids go through break down for the creation of short fatty acids such as acetate,

propionateetc.

There are two main bacteria creating lipids hydrolysis: Anaerovibriolipolytica,

Syntrophomonaswolfei.

8.5 Anaerobic breakdown stages

The reactions below describe the hydrolysis of the main polymers present in OFMSW

(polysaccharides, proteins, fat) which make up the feeding for the anaerobic reactors

and.

The anaerobic process is complex and divided into 4 main stages:


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De-Polymerization

Acidogenesis

Acetogenesis

Methanogensis

Organic

polymers

Sugars

Amino Acids

LCFA

Electron sinks:

VFA:Lactate,Propionate.

Alcohols :Ethanol

Ketons : Acetone

CH3COO- H2 ,CO2

Biogas:

Methan

Carbon dioxide

De-polymerization

Hydrolitic/Fermentative Bacteria

Acidogenesis

Acidigenic bacteria

Acidogenesis

Acidigenic bacteria

MethanogenesisAcetate using

Methanogens

MethanogenesisHydrogen using

Methanogens

AcetogenesisObligate hydrogen-prodycing

bacteria

Figure 8: Anaerobic breakdown stages of organic matter

8.5.1 De-Polymerization

The initial stage in breakdown is De-Polymerization (DP) of solid polymers such as

lipids, proteins in a quarterly and tertiary structure and carbohydrates. The insoluble

(particular) organic polymers go through breakdown in order to create small soluble

molecules, this stage is also called “melting”.

The DP is created by a group of extracellular enzymes which are secreted by

microorganisms. Polymers hydrolysis may become a rate-limiting step for the

production of simpler bacterial substrates to be used in subsequent degradation steps.

Polysaccharides such as cellulose, starch, and pectin are hydrolyzed by cellulases,

amylases, and pectinases. The three cellulases enzymes act synergistically on

cellulose effectively hydrolyzing its crystal structure, to produce glucose. Microbial

hydrolysis of raw starch to glucose requires amylolytic activity, which consist of 5

amylase species. Pectins are degraded by pectinases, including pectinesterases and

depolymerases. Xylans are degraded with α²-endo-xylanase and α²-xylosidase to

produce xylose.


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Hexoses and pentoses are generally converted to C2 and C3 intermediates and to

reduced electron carriers (e.g., NADH) via common pathways. Most anaerobic

bacteria undergo hexose metabolism via the Emden-Meyerhof-Parnas pathway (EMP)

which produces pyruvate as an intermediate along with NADH. The pyruvate and

NADH thus generated are transformed into fermentation endo-products such as

lactate, propionate, acetate, and ethanol by other enzymatic activities which vary

tremendously with microbial species.

Proteins are generally hydrolyzed to amino acids by proteases, secreted by

Bacteroides, Butyrivibrio, Clostridium, Fusobacterium, Selenomonas, and

Streptococcus. The amino acids produced are then degraded to fatty acids such as

acetate, propionate, and butyrate, and to ammonia as found in Clostridium,

Peptococcus, Selenomonas, Campylobacter, and Bacteroides.

Lipases convert lipids to long-chain fatty acids. A population density of 104 - 10

5

lipolytic bacteria per ml of digester fluid has been reported. Clostridia and the

micrococci appear to be responsible for most of the extracellular lipase producers.

The long-chain fatty acids produced are further degraded by p-oxidation to produce

acetyl CoA.

At the end of the de-polymerization soluble substrates are available for further

microbial catabolism. A summary of the polymers and their products are display in

the table below. As the de-polymerization is the first stage in anaerobic digestion it

takes place in the acetogenic and the digester reactors in Arrow Ecology technology.

Table 1: Final products of the de-polymerization stage

Substrate Products

Polysaccharides Simple sugars

Proteins Amino acids

Lipids Fatty acids and glycerol


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8.5.2 Acidogenesis and Acetogenesis

Products of the DP stage are used as substrate for the groups of microorganisms –

fermentative organisms and anaerobic oxidizers. Those groups of bacteria are

composed of different species and sub species which include obligatory and

facultative bacteria. These groups convert the DP products into simple carbon

compounds such as: long fatty acids, short fatty acids, acetate, and butyrate, acetone

such as acetone and alcoholic compounds such as ethanol. This stage includes two

main pathways: Acidogenesis and Acetogenesis.

8.5.2.1 Acidogenesis Acid-producing bacteria, involved in the second step, convert the intermediates of

fermenting bacteria into acetic acid (CH3COOH), hydrogen (H2) and carbon dioxide

(CO2). These bacteria are facultative anaerobes and can grow under acid conditions.

To produce acetic acid, they need oxygen and carbon. For this, they use the bounded-

oxygen. only some acetate (20%) and H2 (4%) are directly produced by acidogenic

fermentation of sugars, and amino acids. This pathway is the fastest anaerobic

breakdown stage and has the highest energy yield. Acidogenesis produced acetate,

hydrogen and carbon dioxide.

8.5.2.2 Acetogenesis Short fatty acids such as lactic acid and other Volatile Fatty acids (VFA) that have a

large number of carbons cannot be used directly as a substrate for methanogensis and

should first be broken down by Acetogenesis process by Obligate hydrogen

producing bacteria and Acetogeneicbacteria in a process called acetogenesis. This is

a crucial middle stage for the creation of biogas. These bacteria are responsible for

converting the different VFA to acetic acid, hydrogen and carbon dioxide according

to the general formula: LFA + H2O Acetate + H2 + H+ + propionate + butyrate Some examples are displayed at Table 2.

Table 2: Long fatty acids metabolism for the creation of short fatty acids

The acetogenic bacteria have a low growth rate and are inhibited by the hydrogen

concentration. In order for this stage to exist there is a need in cooperating with

Hydrogen consuming bacteria and Syntropic Bacteria which use the hydrogen and

thus allowing the VFA to turn into acetic acid. This shows that co-dependence exists

Chain type Example Reaction

Even number

of carbons in chain CH3CH2CH2CH2CH2COO-+ 4 H2O

3 CH3COO- + 4H2 + 2H+

Odd number

of carbon in chain CH3CH2CH2CH2CH2CH2COO-+ 4 H2O

CH3CH2COO- + 2 CH3COO- +4 H2 + 2H+


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in the system between the different microorganisms, the hydrogen producers and

assimilators.

The hydrogen producing acetogenic reaction is made thermodynamically positive

when the partial hydrogen pressure is low (negative Gibbs free energy). This occurs

when the hydrogen consuming methanogenesis or sulfate-reducing reaction is viable

thermodynamically. some examples can be seen at Table 3.

Table 3 : Examples for co-operation between hydrogen Producing bacteria and the

acetogenic stage bacteria

Substrate

Microorganisms

Reaction

ΔG0 KJ

Ethanol

“S organism” 2ethanol + 2H2O 2acetate- + 2H+ +4H2 +19.3

Methanogen 4H2 + HCO3- + H

+ CH4 + 3H2O -135.6

Sum 2ethanol +HCO3- 2acetate

- + H

+ + CH4 + H2O -116.3

Butyrate

Syntrophomona

swolfei 2butyrate

- + 4H2O 4acetate

- + H

+ + 4H2 +96.2

Methanogen 4H2 + HCO3- + H

+ CH4 + 3H2O -135.6

Sum 2butyrate- + HCO3

- + H2O 4acetate

- + CH4 +H

+ -39.4

Benzoate

Syntrophusbusw

elii 4benzoate

- + 28H2O

12acetate- + 4HCO3

- + 12H

+ + 12H2

+359.0

Methanogen 12H2 + 3HCO3- + 3H

+ 3CH4 + 9H2O -406.6

Sum 4benzoate- + 19H2O

12acetate- + HCO3

- + 9H

+ + 3CH4

-47.6

8.5.3 Methanogenesis

The methanogenesis bacteria are a group belonging to the Archaebacteria. This is a

unique Eukaryotes group (genetically, phenotipically and metabolically)

The bacteria use organic and inorganic materials as electron donor and as electron

acceptor in the metabolism. A limited number of substrates can be used by the

methanogenics. The main substrates – acetic acid, hydrogen, carbon dioxide.

Secondary substrates are methanol, CO, amino methanol, and heavy metals.

Summary of different Methanogensis reaction is displayed in Table 4.

Methanogenics can be divided into two main groups: H2/CO2 users and Acetic acid

users.

General Methanogenic reaction can be summarized in the following formula:


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n 2 2 4

a b h a b h a bC + (n - - ) ( - + ) + ( + + )

2 4 2 8 4 2 8 4a bH O H O CO CH

8.5.3.1 H2/CO2 Methanogenesis

The process utilized carbon dioxide as an electron donator with the use of formyl,

methanol, methyl and carbon dioxide with the aid of unique co-enzymes for the

creation of methane.

The overall reaction is : 4H2 + CO2 → CH4 + 2H2O

These bacteria are also important for keeping a low hydrogen pressure which inhibits

methanogenic and acetogenic bacteria. Hydrogen using bacteria have the highest

growth rate among the anaerobic bacteria; therefore, hydrogen accumulation in the

system should be rare. For example: duplication time of

Hydrogenotrophicmethanoges is approximately 2.6 hours in comparison to 2-6 days

for classic methanogenes. Also, these bacteria are resistant to environmental changes

then the classic methanogenes and therefore, the classical path for methane production

is the limited stage in the system.

8.5.3.2 Acetate Methanogenesis

Also known as "acetoclastics" – these bacteria have an important role in completion

of the anaerobic digestion. There are a small number of bacteria that can create

methane from acetate (acitoclastical reaction). Main acetate users are:

Methanosarcina, Methanothrix spp. (Methanosaeta). The first are coccoids and the

second are rods that can growth as filaments.

The overall reaction is: CH3COOH + 4H2 → 2CH4 + 2H2O

Table 4 : Main reactions in the methanogenic stage

Reaction Substrate

4H2 + CO2 CH4 + 2H2O Hydrogen

CH3COOH CH4 + CO2 Acetate

4HCOOH CH4 + 3CO2 + 2H2O Format

4CH3OH 3CH4 + CO2 + 2H2O Methanol

4CO + 2H2O CH4 + 3H2CO3 Carbon monoxide


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Reaction Substrate

4(CH3)3N + 6H2O 9CH4 + 3CO2 + 4NH3 Trimethylamine

2(CH3)2NH + 2H2O 3CH4 + CO2 + 2NH3 Dimethylamine

4(CH3)NH2 + 2H2O 3CH4 + CO2 + 4NH3 Monomethylamine

2(CH3)2S + 3 H2O 3CH4 + CO2 + H2S Methyl mercaptans

4Me0 + 8H

+ +CO2 4Me

++ + CH4 + 2H2O Metals


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As a summary to the biochemical description, Figure 9 displays the overall process.

The relations between the organic source and its energetic content are displayed in

Figure 10.

Figure 9: Anaerobic biochemistry pathway of organic matter digestion

100 CH4

0 CO2

50 CH4

50 CO2

0 CH4

100 CO2

Co

mp

ositio

n o

f d

ige

stio

n

GA

S (

%)

Mean oxidation state of

carbon

-4 -2 -0 +2 +4

Oxlic acid

Formic acid

Carbon

monoxide

Citric acid

Carbohydrates

Acetic acid

Proteins

Algae ,Bacteria

Fats

Methanol,Methylamin

e

Figure 10: Composition of digestion gas vs. mean oxidation state of carbon


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8.5.4 Sulfate and Hydrogen disulfide

Sulfate is found in as water, MSW and as part of protein, and is released during

protein breakdown.

Sulfate is processed at anaerobic condition for the creation of sulfide which is bonded

to hydrogen for the creation of hydrogen disulfide.

micro-organism 2 -2

4 2 2

2 +

2

S + H O +CO

+ 2H H

SO

S S

H2S – can be biologically oxygenated into sulfuric acid.

Controlling the H2S level is achieved by using ferric chloride to form iron salt and

thus decreases their presence in the bio-gas flow. The technique is based on the

creation of metal – insoluble sulfate.

Following the creation of immersed salt, there is a prevention of sulfuric hydrogen in

bio-gas.

+3 -22Fe + 3S 2FeS + S


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8.6 Process and Reactor Design

The "ArrowBio” waste treatment technology is based upon wet system (TS<15%).

The treatment process is executed in two main stages in which the different pathways

participates in the anaerobic process, in different reactors – digester, acetogenic and

methanogenic.

The "ArrowBio” waste treatment technology employs separation of the waste to two

streams: high solids and low solids. These streams are treated separately: the high

solid stream is treated in digesters while the streams containing dissolved organic

components are treated in a methanogenic Low Solids Reactor (LSR).

The Anaerobic Digester is Complete Stirred Tank Reactor (CSTR) where solids and

liquid have the same retention time. As opposed to the Anaerobic Digester in the

methanogenic LSR the Solid Retention Time (SRT) is kept different from the

Hydraulic Retention Time (HRT)

The advantage of using the LSR is the ability to treat high Organic Loading Rate

(OLR) in short retention time and the ability to preserve a high biomass concentration

in the reactor. The result is reduction of retention time for soluble material and

therefore more efficient and cost effective process. This approach is better suited to

the handle the non-homogenous nature and the variations in the waste characteristics

of the MSW.

8.6.1 Anaerobic Digester Streams containing high concentration of solids (total solid concentration ~ 8-15%),

are treated in the Anaerobic Digester (AD). The anaerobic digestion takes place in

complete Stirred Tank Reactor (CSTR), where attention is given to dispersion and

mixing of the solids. Mixing is designed to create optimal condition for diffusion of

organic material to and the reaction product from the microorganisms. Typical design

of jet mixing system is shown at Figure 11 .

The mixing system design was based upon a computer aided simulation by CFD

software. The purpose of the simulation is to verify the effectiveness of the mixing

and to determine the velocities and flow regimes expected in the reactor.

The digester dimensions are design according to the planed organic load and the size

of the suspended solids in the MSW feed. Accordingly further treatment can be

applied to the digester effluents or it can be directly be discharged from the anaerobic

system.

After the reaction in the digester is completed solids are drawn and separated. Some

solids can be recycled back to the reactor to elongate the SRT in the digester (at an

"activated sludge" concept). The sludge is further treated by dewatering to create

stabilized product which serves as soil amendment.


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Figure 11: Anaerobic digester mixing system

8.6.2 Methanogenic low solid reactor LSR

The LSR is fed by a low solids stream generated from preliminary treatment steps.

The methanogenic reactor can be divided into 3 main zones:

Sludge bed

Fluidized zone

Gas-Liquid-Sludge (GLS) separator

The LSR operate

Feed, which mainly contains soluble organic material, is introduced to the reactor via

diffusers at the bottom of the reactor, (feeding system can be seen at the bottom of 12

and also at Figure 13). The upflow in the reactor is design for better contact of the

organic matter with the active biomass. The upflow velocity is also design for creation

of the right condition for sludge suspension.

The organic material comes into contact with the sludge layer in the reactor and then

biological breakdown take place for the creation of biogas. The produced gas bubbles

ascend, while the biomass mostly remains in the lower part of the reactor.

Separation of the gas bubbles from the sludge and the liquid occurs in the top of the

reactor. Sludge concentration and retention time is controlled by the up flow velocity

and by the amount of sludge introduced into reactor.

Figure 14 shows the different parts of the reactor and the main principles of operation.


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Sludge Bed

Fluidized

Zone

GLS- Gas liquid

solids separator

Biogas up to GLS

Effluent

Biogas

Sludge

Influent

Figure 12: The methanogenic reactor structure

Figure 13: "Arrow Ecology" design for Methanogenic LSR


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Figure 14: LSR feeding diffuser ("flower")

The described general structure is the basis for the reactor's design. In view of our

expertise, we have developed additional methods/elements that improve the

methanogenic LSR functionality. Those improvements are kept in the company for

confidentiality reasons.

8.7 Methanogenic reaction products

8.7.1 Bio-gas flow

Bio-gas is the main product from the anaerobic reaction; it includes mainly methane,

carbon dioxide, hydrogen sulfide, ammonium and water vapor.

8.7.1.1 Methane (CH4)

Methane (CH4): also known as swamp gas is non-poisonous gas, colorless and

odorless, lighter than air. It has a high calorific value. Methane percentage in bio-gas

depends on the levels of substrate transformation. In general, bio-gas contains

approximately 55-80% methane.

Molecular weight: 16.04 gr/mol

Density: 0.717 kg/m3 (gas)

Melting temp.: 90.6 0k

Boiling temp: 111.55 0k

Water solubility: 35 ppm

Methane calorific value: 8088.5 kcal/m3CH4

When methane percentage in the air is in the range of 5-15%, the gas mixture is

explosive. Over these values, gas mixture is regarded as flammable.


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Typical values in literature for methane creation:

Theoretical - 0.35 m3 methane/kg COD

Y - 0.20- 0.29 m3 methane/kg COD

1kg BOD ~ 15.625 mol CH4 = 350 liter CH4

8.7.1.2 Carbon Dioxide (CO2)

Carbon Dioxide (CO2): inert gas, odorless and heavier then air. This gas is

moderately poisonous (causes asphyxiation) bio-gas contains approximately 20-45%

carbon dioxide.

Molecular weight: 44 gr/mol


Melting temp.: 216 0k

Boiling temp: 195 0k


Calorific value: 0 kcal/m3 CO2

High percentage of methane in the bio-gas flow is caused by high solubility of carbon

dioxide in water, where some of it is converted into bi-carbonate and creates the

buffer in water and therefore, the relative methane part increases in the bio-gas.

8.7.1.3 Hydrogen Sulfide (H2S)

Hydrogen Sulfide (H2S): poisonous gas, strong odor and corrosive (damages pipes).

Hydrogen Sulfide inhibits bacteria growth in its un-ionized form.

Controlling the H2S level is achieved by using ferric chloride to form iron salt and

thus decreases their presence in the bio-gas flow.

Molecular weight: 32.08 gr/mol


Melting: 190.85 0k

Boiling temperature: 212.87 0k


Calorific value: 47.72 kcal/kg

8.7.1.4 Other gases

8.7.2 Water effluents

The effluent from the anaerobic system is a water stream that can be recycled for

internal water utilization or other approved purposes.

The effluent quality may be further increased by aerobic wastewater treatment to

achieve higher level, according to the effluent sink and local regulation.


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8.7.3 Sludge – soil amendment

The withdraw biomass from the reactors are a low volume stream, due to the low

growth rate under anaerobic conditions. As the MSW contain different organic matter

(compare to sewage) the sludge has better characteristics than wastewater treatment

sludge. The sludge can be dewatered to a low moister percentage and to have better

physical properties. The sludge chemical properties allow it to be used as soil an

amendment with a high level of stabilized organic matter and nutrien


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glenn county, ca pre-plan & feasibility study

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