The present Business Plan is designed to present the viability analysis
of a plant producing pellets of compressed Southern Yellow Pine pulpwood. The pellets
are small cylinders (- diameter: 8mm - length: Max. 32mm) made from woody biomass with
an energy content of 5 MW/h, or (18 GJ/mt) per ton; which in the European power utility
market should be negotiated under 10% moisture content and low ash residue of
approximately 0.5%. The pellet combustion or co-generation is considered a
carbon-neutral cycle, for the reason that it will release back into the atmosphere the
same amount of CO2 it was consumed during the tree growth period through the process of
photosynthesis (offset operation); whereas fossil fuel add on to the atmosphere what was
already stored within the earth crust.
Consequently, making the wood-pellets a clean source of renewable
energy; the utility power plants, co-generating along coal, in Europe, are by far
the largest consumers of pellets. Depending on its particular feedstock and end
product quality, the pellets can also be used in home heating; however this Business
Plan is focused on the production of wood-pellets from compressed pine pulpwood with
utility scale quality for use in power plants, industries, or sold to large
wholesale buyers.
An initial focus on the European market is necessary for the reason
that it is a market of immediate consumption of our product; even with the
opportunity to market the pellets in the American utility market in the near future,
- currently there is a law proposition which would cap greenhouse gases emissions
being debated on the U.S. Congress-, at this time, it is not a variable to be
directly considered, for it ought to be marketed according to the world's most
immediate demand, which becomes clearly evident that the entire infrastructure must
be initially placed targeting export to the pellet-thirsty European market; which
later may be instantly adapted to serve the U.S Market.
The increasing global demand for energy, resulting from an annual rate
of GDP growth expected at 4.1% until 2030, creates a very attractive opportunity for
the development of projects related to energy production. Along with this increased
demand, there is a movement increasingly growing in environmental awareness, aiming
at reducing global warming, which brings with itself the need for new sources of
clean and renewable energy, at the same time allowing a sustainable economic growth.
In this respect, it can be mentioned the Kyoto Protocol and the Carbon Credit
Market, initiatives adopted by many countries with the aim of reducing the emission
of carbon dioxide into the atmosphere, tackling the problem of global warming. Due
to these favorable initiatives, it is expected that among various guidelines
associated with the Kyoto Protocol, which were sanctioned in the European Union, the
most important is:
By 2020, all member countries of the European Union must comply with
the mandate of upgrading its power grid's generation capacity to the use of at least
20% of its energy coming from renewable sources; if their particular quota is not
met, they will be penalized by having to buy certificates from the other industries
which might be complying in a faster pace, what in turn translates into an optimal
mechanism which forces utilities power plants to comply with the law or else face
economic penalties. The wood-pellet is the ideal product that will meet in a
harmonic way the economic and environmental demands of those guidelines set by the
European Union. The demand for the pellet will increase as the time to adapt comes
close to its expiration date. With a conservative increase in demand of 18% after
2010, it is estimated that demand could comport 80 million tonnes per year by 2020;
with an optimistic increase of 25% after 2010, it is estimated a demand of 140
million tonnes per year by 2020. How are they going to come up with that much amount
of feedstock, if world pellet production today is close to 11 million tons per year?
If according to current projections by 2012 the world pellet production will be
around 20 million tones per year?
Considering that the world production has increased only by about 2
million tons per year. If that wasn't enough, bear in mind that South America has
nothing substantial yet in terms of factual production on an industrial scale. And
if we take into account the current desperation to supply the U.S. domestic market?
It is expected that over time the market will try as best as it can to adjust to
demand; however, there is still much hard work to be done, and at the pace that
projects are being put into operation, it is realistic to expect that the supply
will always be dramatically below demand. It is a market opportunity that converts
skeptical in times of economical crisis into believers in Providence.
The European market is thirsty for pellets, by 2010 it is estimated
that the European consumption will be of 15 million metric tons - roughly three
times what it currently consumes; keep in mind that in 2008 the world production
reached 10.6 million metric tons, with 2 million metric tons consumed in the U.S.
residential market, 2 million metric tons in Canada and the great overwhelming
majority of 6.5 million metric tons on the residential and industrial European
market.
It is necessary to emphasize that the northeastern section of the state
of Florida is rich in wood resources. In the state of Florida there are roughly 16
million acres of planted forests, most of which in active commercial management,
covering 47% of its entire land mass of 34.6 million acres; to be precise, only in
northern section of Florida we have a forest density more extensive than the whole
area of commercial forests in Brazil, which accounts for 12 million acres, spread
across its massive area of continental proportions. That is reason why the southeast
U.S. is known as the wood-basket of the world.
There is a large and structured local market which is comfortably
subjected to the laws of free competition, and whose timber production is traded
openly. Currently, the region north of Florida maintains in its forests an abundant
output of roughly 8 million green tons of pine pulpwood, which is less than the
average of 10 million green tons harvested in the past decade; in 1995 there was an
output of 12 million green tons, which translates into a potential of 2-3 million
green tons that could be harvested again should new markets become available, what
would also incentivize forest owners to grow, maintain and keep their forests
despite the current economic crisis in the pulp wood industry, for the best way to
preserve a natural asset it is by creating a market for it.
As will be shown, the initial investment for the plant with pelleting capacity of
100.000 metric/tons per year, drawing 200.000 green tons of mostly pine pulpwood per
year, was estimated at U.S. $ 14,000,000.00, plus operational costs estimated at
U.S. $ 6,000,000.00. Starting from a selling price of U.S. $ 153.00 FOB per ton and
with a delivery price of U.S. $ 27.00 per ton of green pulpwood; a ROI of 221% with
a U.S. $ 5,000,000.00 profit margin; the project has a conservative Internal Rate of
Return above 35% and a Pay Back in a little less than 3 years, plus extra incentives
in Renewable Energy Certificates (REC's) estimated at over U.S. $ 5.00 per metric
ton.
The objective of this Business Plan is to raise the resources for the implementation
of a hi-tech wood pellet plant in the northeastern region of Florida, as can be seen
during the reading of the plan; it is a business extremely attractive for its
pioneering character, and its ability to meet the need for a clean renewable source
of energy, thereby contributing to a sustainable economic development.
Ezra Reis
Orlando, Florida
[email protected]
www.floridapellet.com
September 23, 2009
