Biofuel Production Plant Pre Feasibility Study

VILLAGE-SCALE BIO-FUEL PRODUCTION PLANT BUSINESS OPPORTUNITY PROJECT SUMMARY

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Partnerships in Local Enterprise Development and Governance Sustainability (PLEDGES) Program BUSINESS OPPORTUNITY PROJECT SUMMARY VILLAGE-SCALE BIO-FUEL PRODUCTION PLANT PROJECT CONCEPT: The Project adopts the concept of a Village-Scale Waste Vegetable Oil (WVO) Bio-Fuel Plant with a WVO processing capacity of 60 liters per hour (LPH) or 1,440 liters per day (LPD) assuming 24 hours continuous operation. Blended with 10% regular petro-diesel fuel, the end-product is a “clean and green” bio-fuel that can be used directly as diesel engine fuel in stationary diesel engines and in most indirect injection (IDI) diesel-fed automotive vehicles without any further blending with petro-diesel fuel or any alteration of the fuel systems. The basic process is shown in the diagram below:

FIGURE 1. PROCESS FLOW DIAGRAM: WVO BIOFUEL PRODUCTION

WASTE VEGETABLE OIL (WVO) STORAGE/SETTLIN/ PRE-FILTRATION

PRE-FILTERED WVO 10% DIESEL FUEL MICRO-FILTRATION/DEHYDRATION CLEAN&GREEN BIO-FUEL

DAILY PRODUCTION (24-hours): 1,300 Liters of “Clean and Green” Bio-Fuel ANNUAL OPERATING INCOME: PhP 1.96 ESTIMATED TOTAL PROJECT COST: PhP 2.0 million RETURN ON INVESTMENT RATE (R0I) /PAYBACK PERIOD: 200% p.a. / 0.5 years FOR MORE INFO, PLEASE CONTACT: SOPREX Foundation MSU-IIT Campus, Tibanga, Iligan City 9200 Tel./Fax: (063)223-8481/223-8077 Cell Phones: 0918933172 (Maya); 09189420065 (Yesnoy)

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I. PROJECT DESCRIPTION a. Basic Concept The Project adopts the concept of a Village-Scale Waste Vegetable Oil (WVO) Bio-Fuel Plant with a WVO processing capacity of 60 liters per hour (LPH) or 1,440 liters per day (LPD) assuming 24 hours continuous operation. Blended with 10% regural petro-diesel fuel, the end-product is a “clean and green” bio-fuel that can be used directly as diesel engine fuel in stationary diesel engines and in most indirect injection (IDI) diesel-fed automotive vehicles without any further blending with petro-diesel fuel or any alteration of the fuel systems. The basic process is shown in the diagram below:

FIGURE 1. PROCESS FLOW DIAGRAM: WVO BIOFUEL PRODUCTION

WASTE VEGETABLE OIL (WVO) STORAGE/SETTLIN/ PRE-FILTRATION

PRE-FILTERED WVO 10% DIESEL FUEL MICRO-FILTRATION/DEHYDRATION CLEAN&GREEN BIO-FUEL

b. Purpose and Objectives The project shall produce on a small scale, and profitably sell to consumers in the immediate community where it is based, a vegetable oil-based alternative fuel to substitute up to 90% of petro-diesel consumption of diesel engines, at adequate volumes and at the same price as petro-diesel fuel. The ultimate purpose is to serve the country and the people by contributing to:
the reduction of the operating cost of transport and other industries that will redound to decreased costs of goods and services and improved purchasing power of the peso;
a significant increase in the use of indigenous and renewable energy resources, thereby reducing importation of petro-diesel fuel and improving the balance of payment situation; and
the shift to clean and green fuels leading to the improvement of over-all environmental quality.

c. Plant Site The plant is ideally located in or close to an urban area but not necessarily in the city or town center. Being a small-scale plant with no large motors or engines used and no hazardous chemicals and very minimal process wastes, the plant can be located even in noncommercial/industrial zones, e.g., a low-density residential area. The final products can be delivered to the target outlets: e.g., garage/service stations of organized transport groups, diesel-fired plants, fishing ports. The minimum requirements are: road accessibility, sufficient power and water supply, and adequate land area of at least 500 sqm and a building area of 100 sqm. If available at affordable rates, a land parcel with an existing building will be the most ideal for a quick startup. Preferably, a property of at least 2,500 sqm will allow for future expansion. d. Production and Marketing Program As designed, the Project shall be able to produce about 1,300 liters of 10% diesel-blended bio-fuel per day. This fuel is ready to use “as is” in any diesel engine without any alteration in the engine’s fuel supply and combustion system. This entails the recovery of 1,440 liters of WVO per day at the competitive buying price of Php 10/liter. Opening the door of opportunity to the suppliers (e.g., hotels, restaurants, canteens) to join as shareholders, the Project is well positioned to corner the local supply. Since the raw material and the process are both inexpensive, the Project shall be able to offer the product at the same price of petro-diesel. The marketing task is not expected to be difficult. The priority target market is the public transport service sector. Small fleet operators or cooperatives/associations with their own service station shall be the best client with whom a long-term supply-purchase agreement shall be given priority. The scope of the marketing effort is also very manageable. At the least bio-fuel ratio of only 10%, the target number of vehicles (at the low daily fuel usage of 20 liters per vehicle) is about 650 only. At the maximum bio-fuel ratio of 70%, which is not unlikely given the competitive pricing and over-all beneficial impact, the target number of vehicles is less than a hundred. This market volume threshold is very possible to attain even in medium-sized towns with basically an agricultural economy where small diesel engines are the mainstay of agricultural machineries and post-harvest facilities. e. Organization and Management Plan The Project shall be established and managed as a joint-venture enterprise of the co-investors. To be regis-tered as a stock corporation, the business shall be managed under the corporation code with management involvement and income sharing in proportion to the equity shares of the shareholders. These shall include both consumers, i.e., public transport service firms, especially cooperatives or associations of drivers and operators, and suppliers of the raw material, i.e., food service establishments. Any person or entity willing to put up the land and/or buildings where the Project can be located is also welcome.

II. FINANCIAL PLAN AND PROJECT EVALUATION a. Project Cost and Funding Sources The total Project cost is estimated at Php 2.0 million more or less. Fixed assets will cost Php 893,000 inclusive of site development (perimeter fence, roads/drainage, water and power systems, and building construction), trans-port and office equipment. If local investor-partners already have these assets and are willing to put in the same as their share contribution, then the cash outlays for the machinery and equipment will be a minimal Php 150,000, mainly for the imported components. This will be sufficient as initial paid-up capital for purposes of registering the business with the SEC. The biggest cash outlay is the estimated requirement for initial working capital amounting to Php 937,000, part or all of which can be mobilized after incorporation and registration in the form of loans and/or grants. This includes a 1-month inventory each for raw materials costing Php 486 thousand and Php 304,000 more or less for finished products to ensure no disruptions in the production and selling operations. This cash outlay will be substantially reduced if the local suppliers of WVO are willing to join and contribute the basic raw material as part or all of their share capital. b. Project Evaluation The business as planned is projected to earn an annual net income of Php 1.96 million, thus yielding a very high return on investment (ROI) rate of almost 200% p.a. or four times the assumed hurdle rate of 24% p.a. Investors can thus expect to recoup their investment in only half a year and opt to plough back all or part of the profit for replication of the model plant in other areas. The proposed business is basically sound because it produces and sells a commodity that everyone needs and uses, directly or indirectly, as owners or operators of vehicles and factories using diesel fuel or as commuters and consumers of goods and services affected by transport and manufacturing costs. Its greatest advantage is that the raw material is renewable and indigenous. As the finite world petroleum reserves approach depletion levels, petro-fuels will become increasingly scarce and unaffordable. In fact, the crisis is now staring at us all in the face, rich and poor nations alike. Bio-fuel is no longer the future; it is here and now. For poor nations like the Filipino, investing in this and similar projects is a contribution towards assuring our national survival and return to the path of total and genuine development.

ANNEX: PRELIMINARY COST & BENEFITS SUMMARY BASIC PRODUCTION I. ASSUMPTIONS: 1 Operating Days Per Year Capacity/Hr. of Waste VegOil (WVO) Bio-Pass Processing System 2 (Liters) Hours of Operation/Day: 3 shifts @ 8 3 hrs./shift 4 Total Volume of (WVO) Processed per day (Liters) 5 Vol. of diesel fuel mix per day @ 10% of WVO volume processed Average Bio-Fuel Yield: % of WVO volume 6 processed Volume of Bio-Fuel Produced Per Day (Liters) + diesel fuel 7 mix Cost of diesel fuel per liter (aver. 5 years from 8 Project Yr. 1) Manual Labor: Man-Hrs/Day @ 3/shift @ 3 9 shifts/day 10 Skilled Labor: Man-Hrs/Day @ 1/shift @ 3 shifts/day Prod. Supervisors: Man-Hrs/Day @ 1/shift @ 3 11 shifts/day

300 60 24 1,440 144 80.0% 1,296 35.00 72 24 24

II. MARKETING TARGETS 1 Daily Production Volume of WVO Bio-Fuel (Liters) Average Petro Diesel Consumption Per Vehicle: 2 Liters/Day 3 Target Market: No. of Vehicles Buying WVO Bio-Fuel Per Day Bio-Fuel ratio to Petro-Diesel a. = 10% Bio-Fuel ratio to Petro-Diesel b. = 20% Bio-Fuel ratio to Petro-Diesel 50% c. = Bio-Fuel ratio to Petro-Diesel d. = 70% PROJECTED INCOME III. STATEMENT Gross Sales Income: Sale of WVO Bio-Fuel @ same price as diesel fuel Less: Rebate/Savings & Capital Build-Up Fund @ 8% Total Sales Income, Net Less: Cost of Sales

1,296 20

648 324 130 93

13,608,000 1,020,600 12,587,400 7,409,280

Gross Profit Less: Administrative & Selling Expenses Net Income Before Interest & Taxes (NIBIT) IV. ESTIMATE OF TOTAL PROJECT COST A. PRE-OPERATING EXPENSES B. FIXED ASSETS C. INITIAL WORKING CAPITAL TOTAL PROJECT COST V.

5,178,120 1,220,480 3,957,640

160,000 893,000 937,178 1,990,178

MAJOR INDICATORS OF VIABILITY/PROFITABILITY Return on Investment Rate (on total project cost): % per 1 annum Payback Period (on total project cost): 2 Years

198.9% 0.50