The Bioenergy Fund (Australia) PCC Ltd
THE
AUSTRALIA
CONTENTS 3// THE OFFERING / CURRENT GLOBAL ENVIRONMENT 4// THE OBJECTIVE 5// BURMAN BIOENERGY 6// MILLETTIA PINNATA 7// WHY AUSTRALIA? 8// INVESTMENT PROCESS 11// REVENUE STREAMS 13// INVESTMENT PREDICTIONS 14// RISKS AND MITIGATIONS 15// CONTACTS
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SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
The Offering At the same time, many parts of the world are suffering food shortages. Food crop prices are regularly reaching all-time highs, driven by increase in demand and by the higher cost of production resulting from increased fuel costs. The situation has deteriorated so much that in some countries there have been food riots. Across South East Asia food price inflation is running into double digits; India for example is struggling to cope with unprecedented annual food inflation of 18%2.
The Bioenergy Fund (Australia) PCC Limited is one of the first regulated investment funds offering direct investment in the advanced biofuel and energy crop Millettia Pinnata at an infrastructure level. The Fund has partnered with the world leader in Millettia Pinnata plantations, Burman Bioenergy. Not requiring prime agricultural land and long predicted as a super fuel crop of the future, Millettia Pinnata produces;
• Crude green oil • Very high protein organic animal feeds • Organic fertiliser
The high price of crude oil is also pushing up food prices. In addition, government subsidies to encourage biofuel production are compelling farmers to switch land previously used for food production to the production of biofuel and energy crops.
This is achieved using a minimum amount of water, fixing nitrogen in the soil thereby increasing its fertility, and at the same time sequestering carbon dioxide from the atmosphere which reduces the greenhouse effect.
In the United States 416 million tonnes of grain were harvested in 2009. 28% of this went to produce bioethanol which is enough to feed 350 million people for one year3. As a result, the annual growth in global consumption of grain has doubled from an average of 21 million tonnes per year between 1990 and 2005, to 41 million tonnes per year between 2005 and 20104.
Current Global Environment As the world begins to understand the true value of our remaining forests, further large scale deforestation is unlikely. It is vital that existing fertile land should be used efficiently to produce the food required for our growing global population.
This has another impact; many crops used for human consumption are also used for animal feeds; Feed price increases directly correlate with the wholesale price of meat, for which demand is increasing as the population grows. China alone increased its meat consumption by 9.3% in 20095. To sustain this increase in livestock production there must be a corresponding increase in the production of animal feed.
Growing from 3 billion in 1960 to around 7 billion today, the global population is predicted to reach 8 billion by 20201. Amongst the many issues raised by this increase is a shortage of sustainable supplies of fuels and food stuffs. The world has finite fossil fuel reserves. Future supply issues, recent unrest in some of the world’s largest oil producing nations, ecological disasters in the Gulf of Mexico and concerns over the safety of nuclear power have recently led to all-time high fossil fuels and energy prices. Add population growth and the rising affluence of developing nations and it seems unlikely that these price increases will abate in the near future. The world must look to new sources of renewable energy.
Average Global Grain Consumption Growth (Tonnes) 50,000,000 37,500,000 25,000,000 12,500,000 0
1990 - 2005 AVERAGE
PREDICTED
Mar-2013
Sep-2012
Mar -2012
Sep-2011
Mar-2011
Sep-2010
Mar-2010
Sep-2009
Mar-2009
Sep-2008
Mar-2008
Sep-2007
Mar-2007
Sep-2006
Mar-2006
Sep-2005
Mar-2005
Sep-2004
Mar-2004
Sep-2003
Mar-2003
Sep-2002
Mar-2002
115 103 91 78 66 54 42 30 17
Sep-2001
145 127
Mar-2001
US DOLLARS PER BARREL
Crude Oil Spot Price 2001 - 2013
2005 - 2010
Sources 1WDI & GDF Report 2010, 2IFPRI, 3Financial Times 6th Jan 2011, 4Foreign Policy Publication Jan 10, 2011 5Chinese Bureau of statistics. SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
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The Objective The objective of the Bioenergy Fund (Australia) PCC Limited is to own, establish and operate plantations of Millettia Pinnata trees. The Fund aims to establish Millettia Pinnata plantations of maximum size and optimal yields during the investment period. This is intended to provide investors with a large asset base which will sustainably produce strong, diversified returns for approximately 75 years. Peak production levels are achieved at the plantations towards year 7. Mareeba Oil (the Funds corporate director) together with their technology partner, Burman Bioenergy, use a combination of genetically superior seeds, advanced plantation establishment processes incorporating super-efficient mechanised management and harvesting process to produce a very early and high yielding crop which requires minimal manpower. The crop consists of seedpods and prunings.
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SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
The seeds have exceptionally high oil content (approximately 50%) which produces crude green oil; the seed cake (seed residue and husks) are very high in protein and will be used to make organic animal feeds while prunings will be used to make organic fertilisers. No part of the tree goes to waste.
Burman Bioenergy With over 30 years’ experience in oil crops Neville Burman, the founder of Burman Bioenergy, is one of the world’s leading authorities in the establishment and management of sustainable high yielding oil plantations. He has provided consultancy and management services involving superior genetic material to corporations and governments in over 100 countries. Burman Bioenergy is in a unique position; able to extract optimum value from the crop whilst using extremely efficient management processes.
Burman Bioenergy is able to achieve significantly higher than average yields with many crops such as Jatropha, Millettia Pinnata and Palm Oil, through the implementation of strategically developed plantation management systems. Some of these include: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
Unique high density planting format. Superior high yielding plant genetics. Soil evaluation and intensive soil nutrition program. Long-term secured water tenure and superior irrigation system. High tech nursery establishment / seedling propagation including advanced crop specific mycorrhizal treatment aiding faster growth, tolerance and yield. GPS guided mechanical planting and harvesting system. Intercrop legumes that enhance carbon capture and assist soil fertility, as well as eliminating the use of weedicides. Superior pruning techniques designed to induce more flowering and subsequently more seed and higher yields. Introduction of bee colonies throughout plantations to aid pollination. Fast 24 hour harvest to processing system, ensuring highest oil recovery. Next generation oil extraction technology.
Millettia Pinnata Millettia is a species of tree in the Fabaceae family, native to tropical and temperate Asia, Australia and the Pacific Islands. It was formally known as Pongamia Pinnata. The tree has been used for many years in its native ranges for numerous purposes some of which include; lubricants, fuel for oil lamps, medicine, nitrogen fixing, and prevention of soil erosion. In recent years the Indian government, having realised the tree’s potential and as part of a co-operative with the local population, has planted more than 25 million trees; where excess seed pods beyond the needs of the individuals who have planted the trees can be sold back to the government for processing into biofuels. Commercial scale plantations are currently in operation in several countries around the world.
SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
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Millettia Pinnata Millettia Pinnata Key Facts: • Millettia Pinnata yields significantly higher oil than alternative crops at 18 tonnes per hectare, compared with Palm Oil at 10.5 tonnes per hectare and Jatropha at 9.5 tonnes per hectare per year1. • Millettia Pinnata has a productive life span of approximately 75 years. • Millettia Pinnata grows into a large tree with a 10-metre deep taproot, creating a large carbon sink sequestrating more than 50 tonnes of CO2 per hectare, per year. • Millettia Pinnata is a nitrogen fixing leguminous tree that can source moisture and nutrients from deep in the subsoil. • Millettia Pinnata is resistant to a wide range of potentially adverse climatic conditions including drought, light frost, water logging, moisture stress and salinity. It thrives in temperatures from 0oC up to 50oC. • Millettia Pinnata does not require prime arable land otherwise used for food or require the clearing of forests. • Burman Bioenergy has developed genetically superior seed stock. • Establishment and management process developed by Burman Bioenergy produce early crops from year 2 of planting and the oil yield continues to increase until peak yield at year 7. • The automated management process with mechanical equipment makes it super-efficient and cost effective. • Drip feed irrigation maximises water efficiency and enables targeted irrigation and nutrient distribution.
20 15
Oil production in tonnes per hectare
10
5
0
Millettia
Palm Oil
Jatropha
The figures above illustrate Burman Bioenergy’s high yield, super intensively managed and established crops, which are themselves significantly higher yielding than standard crop plantations. The figures above relate to peak production and onwards. 1
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SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
Why Australia? Australia has some perfect locations in which to grow green oil producing crops and, compared to parts of Asia, Africa and South America, has a very low risk of political instability. It was ranked second in the world for political stability in the IMD World Competitiveness Yearbook 2009 and ninth for transparency of government policy among the 57 economies surveyed. It is a member of the United Nations, G20, Commonwealth of Nations, OECD, APEC, Pacific Islands Forum and the World Trade Organization. In addition, there is significant domestic demand for biofuels. There is insufficient production to meet the growing demand for electricity which is expected to keep electricity tariffs on a steady rise. A carbon tax on polluters is being proposed to incentivise further production of green energy. Australia’s population continues to grow: • Australia’s population grew by 2.1% during the year ending 31 March 2009 • Natural increase contributed 37% to total population growth • Net overseas migration contributed 63% to total population growth • Population is projected to increase from 30.9 million to 42.5 million by 2056 • Population is projected to increase to 62.2 million people by 2101
The Queensland Renewable Energy Plan The Queensland Government has created a raft of new actions and a broad policy platform to expand the clean energy sector and accelerate the state’s economy towards a clean energy future. The Queensland Renewable Energy Plan has been established to attract private investment in the new Queensland industry and secure the state’s fair share of Federal Government funding into renewable energy. The plan is a bold industry development strategy that embodies the Australian Government’s vision of achieving at least 20 per cent of investment generated through the national Renewable Energy Target. This will result in the generation of 9000 gigawatt hours of Queensland based renewable energy by 2020. The Queensland Government estimates that successful implementation of the plan will create up to AUD$3.5 billion in new investment, as well as up to 3500 jobs while reducing greenhouse gas emissions by more than 40 million tonnes by 2020. Australia’s senate recently passed a renewable energy target bill. This means that 20% of electricity production aims to come from renewables by 2020.
Low Source: KPMG Econtech
Medium
High
Year
Production
Consumption
Source: www.indexmundi.com
SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
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2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
2029
2027
2025
2023
2021
2019
2017
2015
2013
2011
2009
2007
0 2005
0 2003
200
2001
20,000
1999
400
1997
40,000
1995
600
1993
60,000 51,700
1991
800
1987
80,000
1987
1000
1985
100,000 93,300
1981
120,000
1980
Australia Crude Oil Production and Consumption by Year (thousand barrels per day)
Queensland Electricity Demand (GWh)
Investment process The entire investment process is overseen by the Fund’s Board of the Directors. Each stage of the process is budgeted and approved by the Board while Grant Thornton provides administration services to the Fund. The day to day operations, managed by Burman Bioenergy, are overseen by the investment committee, which is made up of members of Burman Bioenergy and The Bioenergy Fund (Australia) PCC Limited. The committee is mandated by and reports to the Board. Their role is 1) to research proposed investments and processes, collating all information with the lawyers for presentation to the board and 2) to provide ongoing reporting to the Board. The committee is directed by the Board and operates under the terms defined in the Funds PPM (Private Placement Memorandum). The final say on all investments and processes is made by the Board.
Key Personnel
Mr. Neville Burman
Technology Specialist
Mr. Marcus Wohlrab
EIF Director
Mr. William Redford
EIF Director
Mareeba Oil
Corporate Director
Full biographies available on our website or on request - www.mgc3.com
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SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
The investment process has three sectors;
1. Land Sourcing and Preparation Land is assessed for logistical position and access, weather, flooding, fire and drought risk. It is independently valued, subject to an agronomist survey, full inspections and verification of the government guaranteed water supply. Land will only be acquired if it is appropriately zoned for establishing plantations. Once all the above has been verified and reviewed by the Fund’s lawyers the investment is presented to the Board for approval. Land acquisition is managed by the Fund’s lawyers. Representatives of the Fund have met with the Australian Government at both State and Federal level. The Federal Government has recommended the Fund apply to the ‘Major Project Facilitation Program’ run by the Australian Department of Infrastructure and Transport which, in principle, fast tracks full Government sign off for the project. (www.majorprojectfacilitation.gov.au) Land preparation involves laser levelling, drainage, GPS mapping, installation of the drip feed irrigation system, vermin proofing and soil preparation. The irrigation system enables the manager to not only actively manage water supply to exact areas of the plantation, but also to administer nutrients through the irrigation system.
2. Plantation Establishment and Management At every subscription period the plantation manager is instructed to plant the relevant number of trees (1852 per hectare) in the nursery plantations. Burman Bioenergy use their genetically superior seeds and an advanced nursery process that gives the trees an extremely strong start to life. The trees grow in a protected environment in the nursery for the first 4-5 months whilst the land is prepared. Planting is done by hand but is GPS mapped in sun orientated rows. This method gives the Fund a large capacity from day one and also promotes maximum growth and seed production. Once established, beehives are placed strategically around the plantation to aid the pollination process and promote the maximum number of seeds. With the exception of the bees, the plantations are fully managed by mechanised processes. Tractors, pruning machines and harvesters all utilise state of the art, laser guided GPS mapping systems. This along with the drip feed irrigation and integrated fertilisation system enables Burman Bioenergy to manage the plantation extremely efficiently.
SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
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3. Crop Processing and Output Optimisation The two products from the plantation are seed pods and prunings. Harvesting and pruning is mechanised and the processing of the seed happens within 24 hours of the pods being taken from the tree. This reduces the loss of oil due to evaporation. The oil from the seed is extracted via a commercial press and is stored as crude green oil. The remaining seed cake is exceptionally high in protein at 50%, which makes it particularly attractive to animal feed millers. Pruning takes place at regular intervals. The prunings are taken to the processing plant where they are ground down into small particles, powder or pelletised. All of which are used as organic fertiliser or animal feed. The plantations create a carbon-neutral green crude oil source – this can be used for biofuels or any other crude oil derivatives such as bioplastics. The Fund is independently audited by KPMG.
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SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
Main revenue streams from the Millettia Pinnata Plantation
Product
Mareeba Oil sell product wholesale
Millettia Plantation
Process Seed Pods Alternative revenue product Processing Plant
Seed Cake
Bio Plastics
Millettia Crude Oil
Clippings & Prunings
Feed Mill
Refining Process
Electricity Generator
Manufacturing process
50% Protein Animal Feed
Bio Diesel
Bio Electricity
Organic Fertiliser
This plantation creates a carbon neutral fuel and energy source for 75 years as well as animal feeds that do not encroach on human food production. The numerous possible income streams effectively future proof the plantation from unforeseen changes in demand for biofuels and energy.
Bio Herbicide
The asset continues to produce at capacity for 75 years or more although the Fund will look to sell or float all or part of the assets at year 5-7 from inception (see page 11 & 12)
SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
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Investment predictions The aim of the Fund is to plant as many hectares of Millettia Pinnata as possible so producing the maximum amount of products and therefore returns to investors. The Millettia Pinnata tree begins producing at the end of year 2 and reaches peak capacity at year 7, at which point the asset may be floated or sold.
Investment Returns Investment Returns
Because of the mechanised process utilised by Burman Bioenergy, economies of scale will materially affect the returns from AUD$38,000,000 (1000 hectares) upwards in respect of land machinery and labour. Dividends are paid directly to the investor (net of Australian corporation tax) as and when they are available from approximately year 3 onwards.
Once the plantation has reached peak production, the maximum annual returns on investment are realised. At this point the Corporate Director will consider all the options open to them. This may include giving the investor the opportunity to reinvest into a second plantation at no cost in lieu of that year’s dividend. The returns going forward should increase exponentially.
The fund will look to execute an exit strategy which may include a trade sale and an IPO from year 5 onwards. As shown below the plantation reaches maximum production at year 7 and the Board will be looking to exit, maximising shareholder value as a first priority.
Projected returns based on a plantation size of 1000 hectares 100% 80% 60% 40%
Size
yr 1
yr 2
yr 3
yr 4
yr 5
yr 6
yr 7
yr 8
yr 9
1000 Hectares
0%
0%
25%
31%
43%
64%
99%
99%
99%
Year 10
Year 9
Year 8
Year 7
Year 6
Year 5
Year 4
Year 3
Year 2
0%
Year 1
20%
yr 10 99%
The Fund offers no guarantee to the forecasted returns of its modelling. The Fund’s figures are based on today’s prices of crude palm oil, animal feed and organic fertiliser. Other factors and revenue streams such as carbon credits and increased land value and economies of scale have not been taken into account in these figures, although Mareeba Oil would expect these to contribute towards the upside. All figures are available as an addendum to this document which are available upon request.
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SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
Illustration showing investment return for every €100,000 The following illustrates a predicted investment return (minus Australian corporation tax) and assuming an asset sale in year 7. Cumulative return
Year 1
ROI
0%
N/A
Year 2
ROI
0%
N/A
Year 3
ROI
25%
Gross Return
€25,000
€25,000
Year 4
ROI
31%
Gross Return
€31,000
€56,000
Year 5
ROI
43%
Gross Return
€43,000
€99,000
Year 6
ROI
64%
Gross Return
€64,000
€163,000
Year 7
ROI
99%
Gross Return
€99,000
Year 8
ROI
99%
Gross Return
€99,000
Year 9
ROI
99%
Gross Return
€99,000
Year 10
ROI
99%
Gross Return
€99,000
EXIT PAYMENT €396,000 achieved via asset sale or flotation
€658,000 This projection assumes an asset sale at year 7. This could be anytime from year 5 onwards.
The figures illustrated above are based on the returns for todays price of oil, animal feed and organic fertiliser which can rise or fall. The figures are illustrative of a 1000 hectare plantation assuming an asset sale or flotation at year 7. All figures are available as an addendum to this document. Between years 5 and 7 there are three main potential exit methods; 1// IPO/Flotation The Fund would be listed on the stock market, releasing a large cash sum for investors whilst also retaining liquid stock in the floated company. 3// Asset buyback by a third party A third party may be sought to buy the plantation in entirety.
2// Asset buyback by the Fund The asset will be producing returns for the investor from year 7 of approximately 100% p/a. If investors wish to realise the value of their investment, the Fund will offer a fair NAV bid or dealing opportunities.
SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
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Risks Risksand andMitigations Mitigations
The following are some of the main risks associated with an investment of this kind;
Risk
Mitigation
Fire risk
Fire risk is reduced by fire breaks and substantial irrigation. Plantation is insured against fire.
Flood/weather risk
Plantations are established in areas not prone to flooding at an altitude in excess of 400 metres above sea level.
Low yielding crop
Agricultural insurance will be sought.
Oil price fall
Risk mitigated by alternative revenue streams (electricity, nutrients & animal feed) offtake agreements being sought to fix price.
Fertiliser price fall
Risk reduced by necessity for fertiliser on plantation.
Animal feed price fall
Alternative revenue streams as well as high demand mitigates risk.
Insects and pests
Plant is slightly toxic making it resilient to insects, animals and pests.
New energy sources
Alternative energy sources are in exploratory stages. The demand for oil for plastics and industry remains strong.
Insurance is purchased to mitigate the standard risks associated with agricultural investment and farming. This includes fire and adverse weather conditions. A guaranteed water supply licence is purchased from the government.
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SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
MGC3 SUITE 10, EXCEL HOUSE ENGINEER LANE GIBRALTAR +350 200 64246 info@mgc3.com www.mgc3.com TELEPHONE:
THE FUND Bioenenergy Fund (Australia) PPC Limited Company Secretary (Funds registered office) Suite 10, Excel House 23 Engineer Lane Gibraltar
AUSTRALIAN SPV Renewable Technology Investments PTY Limited, Level 19,10 Eagle Street, Brisbane, QLD 4000
ADMINISTRATOR Grant Thornton Fund Administration Limited 6A Queensway Gibraltar
CASH CUSTODIAN Barclays Bank (Gibraltar) Ltd Regal House 3 Queensway Gibraltar
LEGAL COUNSEL Triay and Triay 28 Irish Town Gibraltar
AUDITOR KPMG Suite 3C, Eurolife Building 1 Corral Road Gibraltar
Risks and Mitigations
Fund details - Eligible investors Minimum Investment Open to Subscription Fund closed Redemption Leverage SIPP investments USD Feeder Fund ISIN WKN
100,000 EUROS or equivalent thereof All Non-US investors who meet the EIF qualified investors criteria as set out by FSC (Financial Services Commission - State Regulator Gibraltar) Monthly as per PPM As per PPM until year 5 From year 5 Zero The Fund will appoint a custodian to allow private UK pension investments. Contact company secretary for details. It is the intention of the Fund to open a regulated US feeder fund for investment from US Persons and companies. GI000A1JLJ29 A1JLJ2
Disclaimer This document does not constitute, or form any part of, any offer, or any solicitation of any offer, to buy or subscribe for any shares in the Bioenergy Fund (Australia) PCC LIMITED. ANY INVESTMENT IN THE FUND SHOULD BE BASED SOLELY ON THE INFORMATION CONTAINED IN THE PRIVATE PLACEMENT MEMORANDUM (“PPM”) ISSUED BY THE FUND ON OR ABOUT OCTOBER 2011. The Fund’s investments are subject to normal market fluctuations as well as the risks set out in the PPM and those inherent in the investment instruments in which the Fund will invest. THE VALUE OF SHARES IN THE FUND AND THE VALUE OF THE FUND’S INVESTMENTS MAY BE SUBJECT TO VOLATILE MOVEMENTS AND MAY FALL AS WELL AS RISE. THERE IS NO ASSURANCE THAT APPRECIATION OF A CELLS ASSETS WILL OCCUR OR THAT LOSSES WILL NOT BE REALISED BY THE INVESTOR. INVESTORS MAY NOT GET BACK THE AMOUNT THEY INVESTED. Past performance of similar investments is not necessarily a guide to future performance of the Fund’s investments. This Fund has been established in Gibraltar as an experienced investor fund. It is suitable only for those who fall within the definition of “experienced investor” contained in the Financial Services (Experienced Investor Funds) Regulations 2005.
SUSTAINABLE & SOCIALLY RESPONSIBLE INVESTMENTS
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