The Ethanol Project A Feasibility Study Government and

The Ethanol Project A Feasibility Study

Government and Policy

Progressive State Actions • Public Education about Ethanol • Direct Financial Incentives for Producers and Customers • Possible use in all state vehicles

Policies Regulating Ethanol Production • Recent Energy Bill secures market and increases demand – new plants will be needed • New plants must follow same guidelines as commercial refineries • Currently no other regulations, but more may follow

Overall Assessment • Prospects for local Ethanol plant is positive • New legislation supports the initiative • No major obstacles, regulatory or otherwise, facing new plant

Supply

Where will the corn come from? • Whenever possible, the feed stock will come from local suppliers. However, price will dictate the supplier of our input materials • If it is cheaper to truck in corn from outlying areas or haul corn in by railcar, then the material will be sourced that way

Local Corn Production • In Delaware about 160, 000 acres of corn are planted each year • At an average yield of about 100/bu per acre that produces 16 million bushels per year • Total production on the Delmarva peninsula in 1999 was over 39 million bushels • So, local producers grow more than enough corn to meet the needs of our proposed facility

What acreage is needed of Corn to supply needs? • Manufacturing states we need 8, 712, 000 bu/yr • Delaware produces on average, 100 bushels per acre • So, if all the corn is sourced from within Delaware a total of about 87, 120 acres is needed

What is the projected cost of the crop delivered into the plant? • The cost of the crop is based on the price from the source with the added cost of transportation • Assuming a crop price of $1. 94/bu • Trucking would add. 08/bu • Railcars would add. 70/bu

Total cost of crop • Since all our corn requirements can be met locally and we need 8, 712, 000 bushels per year, then with a cost of $1. 94/bu of corn and truck hauling cost of $. 08/bu • Our total cost for corn each year would be about $17, 598, 240

Total cost of crop cont. • In addition to our variable input costs, the fixed costs of land, rail sidings, and storage facilities would also have to be considered as a part of the total capital costs by the manufacturing division

Manufacturing

Objectives 1) Produce ethanol from corn at a minimum expense 2) Produce several co-products to enhance company profits

Assumptions 1) Corn supply could be transported on-site at a cost lower than that of production. 2) Corn prices will remain low enough to make production feasible. 3) Local customers will utilize all of our ethanol and co-products.

Assumptions cont. 4) Competition from Delmarva Poultry industry will not detract from profits of either. 5) Price assumptions • Corn @ $1. 94 per bushel. • Production cost @. 88 per gallon.

Results • Plant production capacity: 25 million gallons per year (330 Working Days) • Production Process: Wet Milling • Production Results 1)25 million gallon requires 8. 8 million bushels of corn. 2)Initial capital investment = $ 27. 9 million. 3)

Results cont. 1. 3) Annual operational cost = $ 22 million per year / $ 66, 667. 04 per day. 2. 4) Corn/Ethanol Transportation Considerations • Assuming 4000 bushels of corn per car, we require 33 cars in per week. • Assuming 10, 000 gallons ethanol per car, we require 38 cars out per week.

Co-products 1)Distillers Grain 2)Corn Gluten meal, 60% 3)21% Protein feed 4)Corn Oil 5)Carbon Dioxide

Wet milling Process

Marketing

Recommendations • Acquire help from American Coalition for Ethanol in regards to product development and advertising • Sell product to refineries – 80% gas – 20% ethanol

Recommendations cont. • The blend can be used in most engines – End of the line consumer: Typical car owner • Pursue a contract with a rent-a-car business – Only buy 80/20 blend – Shows a market for our product • Secondary product: Corn Glutton Meal – 60% protein – No negative side effects

Secondary Product • Target poultry industry • Establish a contract with Perdue or like company – Corn costs rise – Offer our meal at a reasonable price • Auctions