meil methes corporate presentation - jsi - jan 2014
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MEILTRANSCRIPT
METHES ENERGIES INTERNATIONAL LTD.
Corporate OverviewJanuary 2014
All figures quoted in U.S. Dollars
PRIVATE AND CONFIDENTIAL
Forward Looking Statements
This presentation has been prepared by the company and includes information from other sources believed by management to be reliable. No representation or warranty, express or implied is made as to the accuracy or completeness of any of the information set forth herein. This presentation may contain summaries of the terms of certain documents and agreements, but reference is made to the actual documents and agreements for the complete information contained herein. The information contained herein is as of the date hereof and is subject to change, completion or amendment without notice.
This presentation contains statements, estimates and projections with respect to the anticipated future performance of the company that may be deemed to be “forward‐looking statements.” These statements, estimates and projections reflect various assumptions made by the company concerning anticipated results, which may or may not prove to be correct. All statements contained in the presentation that address operating performance, future direction, management and control of the company, events or developments that are expected to occur in the future (including statements related to earnings, expectations, sales of assets, capital expenditures, or statements expressing general optimism about future operating results) are forward‐looking statements. Actual results could differ materially from those reflected in the forward‐looking statements contained herein as a result of a variety of factors, many of which are beyond the company’s control.
The Company is in the development stage and to date has generated limited revenue. In the future the Company may not be profitable and the securities offered by the Company may, ultimately, have little value. Methes Energies International Ltd. trades on NASDAQ Capital Market under the symbol “MEIL”.
This is not an offering of securities. Any such offer must be accompanied by an Offering document.
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• Methes Energy International Ltd (“MEIL”) was founded in 2004
• MEIL has designed and built the first fully automated, compact, state of the art continuous flow biodiesel processor
• MEIL owns two production facilities in Ontario with a combined nameplate capacity of 14.3 MMGPY– Demonstration facility in Missisaugua, ON– New large‐scale production facility in Sombra, ON registered with EPA
(product eligible for Renewable Identification Number “RIN” generation)– Sombra expected to qualify for California Low Carbon Fuel Standard (LCFS)
program
• The company also sells its biodiesel processors and provides support services
Company Overview
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• Biodiesel is a clean‐burning, biodegradable and renewable fuel
• It is produced by reacting feedstock with short‐chain alcohols (methanol or ethanol) – Potential feedstock includes vegetable and seed oils, waste vegetable oil, animal fats, algae and sewage
sludge
• Biodiesel can be used in pure form or be blended with petrodiesel and used in most modern injection pump diesel engines
– Blends of 20% biodiesel (B20) or less can be used in conventional diesel equipment with little or no modification
• Use of biodiesel keeps engine performing better and cleaner– Provides increased lubricity over ultra‐low sulfur diesel which protects fuel systems and extends life– High cetane level leads to more complete combustion of fuel increasing engine responsiveness
What is Biodiesel?
‐ 4 ‐
The US Market for Biodiesel
• Through the Renewable Fuel Standards program (RFS), the United States Environmental Protection Agency (“EPA”) has legislated the use of 1.28 billion gallons of biodiesel and 2.20 billion gallons of advanced biofuel in 2014
• The EPA has mandated the blending of 36 billon gallons of biofuel into US gasoline and diesel by 2022
• 21 billion gallons of the 2022 mandate is for advanced biofuels which include:
– Biodiesel– Cellulosic biofuel (biofuel made from indigestible parts
of plant – usually forestry/agricultural/food waste)
• While corn ethanol production is already closing on the 2022 production target , advanced biofuels production is still small
US Biodiesel Mandate
0
5
10
15
20
25
30
35
2008 2010 2012 2014 2016 2018 2020 2022
Man
dated Use of T
otal
Rene
wab
le Fue
l (billion
gallons)
Source: United States Environmental Protection Agency
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0
5
10
15
20
25
30
2005 2007 2009 2011 2013 2015 2017 2019 2021
Biod
iesel (litres in billion
s)
Trade Balance
Source: OECD‐FAO Agricultural Outlook 2013 ‐ 2022
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$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
2006 2007 2008 2009 2010 2011 2012 2013
Diesel (NY Harbor Ulta‐Low Sulfur No 2 Diesel) (LHS) B100 Average Biodiesel Price (RHS)
The US Market for Biodiesel Con’t
B100 Average US spot price vs. Conventional Diesel
Source: EIA, Bloomberg
$/gal $/gal
‐ 6 ‐
The Canadian Market for Biodiesel
Ontario Biodiesel Mandate
• The Ontario government has repealed the fuel tax exemption for biodiesel and is moving towards creating a renewable content mandate
• The Canadian Renewable Fuels Association has recommended a content mandate of 2% renewable diesel content (estimated 42.3 MMGPY gallons of B100)
• Implementation of an Ontario provincial content mandate would increase local demand and reduce imports from western provinces and US
Canadian Biodiesel Mandate
• Effective December 15, 2010, fuel producers and importers were required to have an average renewable content of at least 5%
– These regulations include provisions for tradable compliance units
• Effective July 12, 2011, producers and importers of diesel and heating oil were also required to have an average renewable content of at least 2%
• Total Canadian Biodiesel demand is estimated at ~150 MMGPY (based off of 2012 demand figures)(1) while current and under‐construction production capacity is only 118 MMGPY(2)
(1) Source: Canadian Association of Petroleum Producers, Company Calculations(2) Source: Biodiesel Magazine
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MEIL Production Facilities
Equipment: 1 × Denami 600Capacity: 1.3 MMGPY(1)
Commercial Ops. Date: 2009Revenue: $5 – $6 MM per year(2)
Facility used to showcase equipment to prospective buyers
Equipment: 2 × Denami 3000Capacity: 13 MMGPY(1)
Commercial Ops. Date: 2013Revenue: $52 ‐ $60 MM per year(2)
Used for biodiesel production, storage and transloading (fleet of 36 rail cars)
Potential to double production using existing two existing Denami 3000s
Mississauga, ON Sombra, ON
(1) Nameplate Capacity(2) At full production ‐ 8 ‐
• Produced more Biodiesel in Sept – Nov 2013 period than all of 2012(1)
– Ramp‐up to 14.3 MMGPY nameplate capacity expected to be complete in Q1 2014
• Doubling of Sombra production to 26 MMGPY can be attained by retrofitting current Denami 3000s, reducing fixed cost per gallon significantly
Biodiesel Production
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50
100
150
200
250
300
350
Dec‐12 Feb‐13 Apr‐13 Jun‐13 Aug‐13 Oct‐13
‘000 gallons
MEIL Monthly Biodiesel Production 2014E Sombra Project Economics
Biodiesel Price($/gal) $4.30
Production Cost(1)($/gal) $3.56
Gross Margin ($/gal) $0.74
SG&A(2)
($/gal) $0.41
EBITDA(3)
($/gal) $0.33
Total Production(2)(gallons) 10.2 MM
Source: JSI Estimates(1) Includes credit for ecoENERGY incentive(2) Assumes 80% capacity factor(3) Excludes glycerine sales
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• Operations and Maintenance contract• Sale of feedstock and other input commodities• Sale of customers’ output in US and Canada• Feedstock tracking software to ensure compliance with EPA Quality Assurance Program• Royalty of $0.03 per litre (~$0.11 per gallon) charged on production
Equipment Licensing
Fully Automated, Modular and Scalable
Footprint: 11’ × 16’
One operator
Output: 1.3 MMGPY
Price: $980,000
Gross Profit: $190,000
Revenue: $5 MM/yr(1)
Fully Automated, Modular and Scalable
Footprint: 22’ × 16.5’
Eight operators
Output: 6.5 MMGPY
Price: $3.50 MM
Gross Profit: $2.00 MM
Revenue: $26MM/yr(1)
Denami 600 Denami 3000
Ancillary Services
(1) At full production ‐ 10 ‐
MEIL’s Technological Advantage
Provides capacity flexibility and profitability for a wide range of potential producersScalable, modular and flexible solution
Ensures integrity of product for large US market, assisting in QAP complianceProprietary feedstock tracking software
Enhanced safetyLow operating temperature and pressure
Input flexibility not available with competing biodiesel production technologyAbility to use wide range of feedstock
Denami Advantages
Lower labor requirement, can be remotely monitored with 24/7 continuous production
Fully automated and computerized system
Reduced CapEx to establish production facility
Fast‐to‐market (16 weeks vs. 26‐52 weeks)
Denami solution requires few input chemicals reducing corrosion
Proven technology with quality Ontario‐based manufacturer
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Equipment Sales
Noroxel Inc.Springfield, ONDenami 6002010
QFI Inc.St‐Jean Richelieu, QCDenami 6002010
U.S. Energy InitiativesSanta Clarita, CADenami 3000January 2013
Current
Signed LOIs
BioFuel ArubaOranjestad, ArubaDenami 600May 2013
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Equipment Sale Relationships
Ontario (2), Quebec, British Columbia, PEI
California (4), Colorado, Michigan, Ohio, Texas
China Costa Rica
Iran Morocco
Jamaica Aruba
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Revenue Streams
Sales of third party biodieselBiodiesel resale
Sales of biodiesel produced by MEILBiodiesel sales
Sales of Denami biodiesel processors Equipment
Software license fees paid by DenamioperatorsRoyalties
Sales of inputs to Denami operators as well as production by‐products
Feedstock and commodity sales
Per‐gallon incentive paid by Canadian government under the ecoENERGY programGovernment Incentive
Licensing of SAP‐based accounting and inventory‐tracking packageFuture: Software Licensing
‐ 14 ‐
MEIL’s Competitive Advantages
Provides exposure at different points of the value chain in an evolving industry
Multiple revenue streams including commodity sales, services and royalties
Higher margins, reduced dependence on government production subsidiesLow‐cost biodiesel production
Corporate Advantages
Company focuses on core business of production, R&D and ancillary servicesOutsourced Manufacturing
Provides blenders with a unique alternative to buying from large‐scale producers
Clients require little to no biodiesel experience of their own
High level of expertise in all business aspects from R&D, to solution development & sales Experienced management team
‐ 15 ‐
Acquisition of OTC Energy Technologies
• Owner of a gasification technology used to convert biomass into synthetic gas
• Inputs can be a range of organic materials
• Forestry & agricultural waste• Urban yard waste• Food waste• Sewage/Sludge/biosolids• Waste organic gas
• Outputs include• Alcohols (i.e. ethanol, methanol)• Hydrocarbon Fuels (i.e. gasoline)• Chemicals (i.e. ammonia)
• Only existing technology to produce high‐quality synthetic gas with almost no by‐products
• Output purity of up to 95% gas• Production costs low enough to
make products competitive with petroleum derived fuels without subsidies
• Provides technology to produce cellulosic biofuels – the segment of the EPA mandate with the highest future growth potential
OTC Energy Technologies Acquisition Highlights
The OTC acquisition provides the potential for MEIL to enter the rapidly growing cellulosic biofuels market with a game‐changing
technology
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Q1‐2014– Ramp‐up of Sombra production to 13 MMGPY– Estimated closing of OTC Energies acquisition– Sombra facility accreditation for California LCFS
2014 and beyond– Sale of Denami 3000 processors– Double production at Sombra to 26MMGPY– BQ9000 Producer Accreditation– International expansion to Europe, South America and Asia– Expansion of North American network
Key Milestones
‐ 17 ‐
Management
Chairman & CEO• Former military engineer with 6 years
business development experience in Europe• Founded asset management firm in 1992• Most recently acted as President and CEO of
a US publicly traded company involved in the solar industry in China
CFO• 25 years experience with NASDAQ listed
companies• Served as CFO of Naugles Inc., Gucci
Timepieces• Former Managing Director of Phoenix
Management Group LLC
President & Co‐Founder• Over 9 years experience in biodiesel• Software development and financial
expertise • Designer of Denami operating software as
well as feedstock‐tracking software
VP Operations & Co‐Founder• Over 9 years experience in biodiesel• Hands‐on engineering and R&D expertise• Designer of Denami hardware
Michel Laporte
Edward Stoltenberg, CPA Johann (John) Loewen
Han Swoong (Nicholas) Ng
‐ 18 ‐
Board of Directors
Independent Director• Senior Vice President at SNC Lavalin• Formerly Senior Vice President for Africa
Infrastructure & Construction at SNC Lavalin• Chair of Compensation Committee• Masters in Chemical/Environmental
engineering
Independent Director• President & CEO of Terrajay Holdings
Energy Consultants• Extensive experience in financing and construction of
renewable energy production facilities in Ontario• Over 10 years experience in energy and environmental
policy at Federal and Provincial level
Independent Director• 25 years management and advisory
experience in waste water treatment• Extensive list of publications in chemical
and environmental engineering• Ph.D. in Environmental Engineering and
M. Tech in Chemical Reaction Engineering
Kebir Ratani
John Pappain
Perichiyappan Senthilnathan
Independent Director• Extensive experience in business planning and
restructuring in the manufacturing industry• Board experience with large multinational US
manufacturing companies• Chair of Audit Committee
Anthony T. Williams, CPA, CA
‐ 19 ‐
Appendix
‐ 20 ‐
Corporate Timeline
2004
2007
2009
2010
2012
2013
Founded Methes Energies
Introduction of Denami 600
Commercial operations begin at Mississauga Facility
First sales of Denami 600 processors to producer clients
IPO of MEIL on NASDAQ
Commercial operations begin at Sombra facility
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Corporate Structure
Business Lines
Operating Entities
MEIL Corporate
Methes Energies International Ltd.NASDAQ: MEIL
Methes Energies USA Ltd.
Import Biodiesel to U.S.*Market Biodiesel in U.S.*RIN Generation*RIN Transaction*Feedstock Collection*
Methes Energies Canada Inc.
Biodiesel Producer Laboratory ServicesMarket Biodiesel LogisticConsulting R&DEquipment ProviderEngineering* IT / Software Services*
* Coming in 2014
‐ 22 ‐
Share Overview
Shares Outstanding
MEILSymbolNASDAQExchange$1.60 ‐ $5.4052 Week Range
$24 MMMarket Capitalization
0
200
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1,000
1,200
1,400
$0.00
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Nov‐12 Jan‐13 Mar‐13 May‐13 Jul‐13 Sep‐13 Nov‐13
Volume (‘0
00s)
Share Price
NASDAQ: MEIL
Source: BloombergAs of January 10, 2014
‐ 23 ‐
Share Information
25.7%Management
7.3%Institutional
67.0%Retail
Ownership Structure(1)
(1) As per September 23, 2013 Proxy Statement