Disclaimer:

No rights or obligations can be derived from the contents of this presentation. The contents of this presentation is intended solely for the addressee and is intended

as information only. It is not allowed to publish, reproduce, distribute or otherwise use the content of this presentation outside of the scope as described.

Everest Energy is not liable for damages resulting from the usage, the content or implications of the information provided.

The transition towards sustainable torrefied charcoal. An inclusive supply chain in Mozambique

Luca Soppelsa, World Bioenergy 2014 Jönköping, Sweden

4 June 2014

Everest Energy Independent global energy project developer and project advisor:

– Headquartered in the Netherlands with offices in Indonesia and USA;

– Specialized in structured and “hands-on” project development where bio-energy (biomass, biogas, biowaste and biofuel) is created and converted into electricity;

– Combines industry, project financing and technical expertise, thus increasing the chances of success and speedy execution.

– By executing both advisory and development assignments we service our clients with “real life” expertise, analytical background and in-depth content.

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Everest Energy projects Some examples:

– On behalf of a government investment fund, execute the commercial project structuring and valuation of 24 international bio-energy projects;

– Cluster of Project Portfolios based on Key Financial Parameters and matching of these Portfolios with Investors;

– Advise a US based trade company on EU wood-pellet market entry strategy.

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Everest Energy approach Projects are structured according to the EE “7 Building Blocks” principle:

– Each block is developed simultaneously and with equal weight;

– Allows to identify project key risks and potentials;

– Information is presented in an “investor-friendly” manner;

– Chances of obtaining project finance are dramatically increased.

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Everest Energy project structuring

EE has adopted this approach for many international bio-energy projects, improving their bankability, scalability & commercialization potential.

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1-Strategic Business Case Qualitative analysis

1- Project Description Description, Goals, Ambitions

2- Project Partners Who’s doing what and why

3- Process Flow Diagram Energy Balance & Graphic Display

4- SWOT-Analysis Based on Risk Analysis

5- Conclusion Qualitative presentation

2-Discounted Cash Flow Quantitative analysis

1- Project Cockpit Data & Risk (sensitivity) Summary

2- Project Inputs Inputs: cost, efficiency, caloric value

3- Project Finance Structure Inputs: lending structuring

4- Valuation DCF numbers and ratios

5- Project Balance Sheet and P&L Quantitative summary

Project Introduction The Mozambican charcoal market:

– USD 400 million a year;

– primary cooking fuel for > 80% of urban households;

– traditional kiln production: highly inefficient (10:1);

– absence of careful forest management plans;

This process has led to serious deforestation:

– 142,000 ha of forest are devastated every year only to serve the Maputo region (charcoal supply from the Gaza province: > 300km distance)

Project Goal: reduce Mozambican deforestation by providing households with a sustainable charcoal produced from renewable biomass making use of innovative torrefaction technology.

Everest Energy has tackled and structured this project according to its valuable “7 Building Blocks” principle.

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Source: Drigo, 2008

Sourcing Heterogeneous input homogeneous output

– Renewable biomass: forestry resources, agro-residues

Two phases:

1. Input sourced from existing farmer cooperations speed and reliability

2. Input sourced from our own smallholder network stability of supply, lower prices and sustained economic development

Small-scale farmers will earn and own a respectable share of the value chain.

Project will liaise with experienced international NGO

Smallholder agro-forestry model:

– Plantation of trees guarantee future biomass supply improve soil fertility and productivity

– Inter-cropping of food produce short-term profit use of residues for charcoal production

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Site selection, logistics and permits Location of the torrefaction plant:

– Gaza province 300-400 km north of Maputo

Torrefied charcoal will be transported to Maputo district via existing rail and road connections.

Ministry of Agriculture sets laws that govern the charcoal market:

– Forest exploration licence defines maximum production and exploration area;

– Fee paid per sack of charcoal traded;

– Lease plot of state owned land for 50 year time-span.

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Production Site

Source: Alem-mar

Project technology Torrefaction:

– Innovative (heterogeneous feedstock homogeneous output)

– Biomass is heated at 350°- 450° Celsius in absence of oxygen;

– Reduction of moisture and volatile content;

– High Caloric Value (ca. 22-26MJ/kg) fast and efficient process;

– Low emissions.

Installation of a facility equipped to produce 50,000 MT/year of charcoal briquettes (130,000 MT input):

– Conversion rate close to 40% (compared to 10-16% of traditional kilns)

Namibian supplier has the first right of refusal:

– Patented torrefaction technology;

– Many possible feedstocks: wood, agro-residues, etc;

– Runs a 2 tonne/hour pilot plant.

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Sales and Financing Main market for the sustainable charcoal district of Maputo

– Over 440,000 households and 87% charcoal users;

– Demand 850 MT/day and avg. 0.78 MT/year per household

Final product will be packed and retailed locally (50,000 MT 75,000 households)

– Through municipal markets & wholesale/retail venues;

– Sold at competitive market price (no premium needed)

Pilot already executed good user acceptance and willingness to buy.

Discounted Cash Flow valuation positive and attractive financial returns.

Focus on the entire value chain significant margin

1/3 of the CAPEX has already been secured:

– Lowers the risk & increases the implementation pace

– Attractive for other investors to join

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Project Benefits Economic:

– 150-200 new local direct jobs are created

– Small-scale farmers will earn and own a share of the value chain

– Charcoal producers can adhere to the sustainable certified brand

– Up to 75,000 households can reduce their energy costs (20% cost saving)

– Positive and increasing cash flows already in year 2

– Project can be replicated to other charcoal production communities

Environmental:

– 350,000 MT of biomass and up to 600,000 MT of CO2 can be saved annually thanks to the increased efficiency of the production process.

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Conclusions This project represents a perfect example of a high-potential business case, structured & developed by Everest Energy.

– Supports innovation with torrefaction technology;

– Generates high financial returns;

– Improves the rural and smallholder market system;

– Promotes development & use of renewable energy sources.

Everest Energy offers feasibility study & project structuring services leading to the successful development of bio-energy projects.

Our approach:

– Identifies project key risks & potentials;

– Bridges the gap between project developer and investor needs;

– Increases the chances of attaining project finance.

The 7 Building Blocks approach: a “Gateway Due-Diligence” to project success!

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Contact details

Luca Soppelsa Tel: +31-(0)30-7852409

Project Developer Email: lsoppelsa@everestenergy.nl

Everest Energy Group Website: www.everestenergy.nl

Address: 2e Dorpsstraat 54 - 3701 AB

Zeist, The Netherlands

Disclaimer:

No rights or obligations can be derived from the contents of this presentation. The contents of this presentation is intended solely for the addressee and is intended

as information only. It is not allowed to publish, reproduce, distribute or otherwise use the content of this presentation outside of the scope as described.

Everest Energy is not liable for damages resulting from the usage, the content or implications of the information provided.

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