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May 2014
The Aeme�s Biorefinery Advanced Renewable Fuels and Chemicals Produced
by Conversion of Exis�ng Biofuels Facili�es
Certain of the statements contained herein may be statements of future expecta�ons and other forward-‐looking statements that are based on management's current views and assump�ons and involve known and unknown risks and uncertain�es that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addi�on to statements which are forward-‐looking by reason of context, the words “may, will, should, expects, plans, intends, an�cipates, believes, es�mates, predicts, poten�al, or con�nue” and similar expressions iden�fy forward-‐looking statements. Actual results, performance or events may differ materially from those projected in such statements due to, without limita�on: (i) general economic condi�ons, (ii) ethanol and gasoline prices, (iii) commodity prices, (iv) dis�llers grain markets, (v) supply and demand factors, (vi) transporta�on rates for rail/trucks, (vii) interest rate levels, (viii) ethanol imports, (ix) changing levels of compe��on, (x) changes in laws and regula�ons, including govt. support/incen�ves for biofuels, (xi) changes in process technologies, (xii) the impact of acquisi�ons, including related integra�on issues, (xiii) reorganiza�on measures and (xiv) general compe��ve factors on a local, regional, na�onal and/or global basis, (xv) natural gas prices, and (xvi) chemicals and enzyme prices. The ma�ers discussed herein may also involve risks and uncertain�es described from �me to �me in the company’s annual reports and/or auditors’ financial statements. The company assumes no obliga�on to update any forward-‐looking informa�on contained herein, and assumes no liability for the accuracy of any of the informa�on presented herein as of a future date.
Disclaimer
Aeme�s Value Proposi�on
§ Strong posi�ve cash flow from $178 million biofuels/biochemical revenues
§ Opera�ng plants in California and India cost $165 million to build/upgrade
§ Patented technology to produce advanced fuels by upgrading facili�es
§ High efficiency produc�on with significant scalability at low cost
§ Lower cost than tradi�onal gasoline and diesel, with high oxygen/octane
§ Strong management and board leadership with proven track record
Aeme�s means “The One Prudent Wisdom”: Replacing crude oil with renewable resources for fuels and chemicals
§ Ae means “the one” in Sco�sh § Me�s means “prudent wisdom”; Me�s is the mother of Athena, the Goddess of Wisdom
in Greek mythology
Table of Contents
1. Introduc�on 5 2. Company Overview 9 3. Industry Overview 23 4. Company Highlights 36 5. Financial Overview 43
4
Introduc�on
5
Execu�ve Management
6
Eric McAfee Chairman and CEO
Todd Waltz EVP and CFO
Andy Foster EVP and President,
Aeme�s Advanced Fuels
§ Joined Aeme�s in 2007 as Corporate Controller and became CFO in 2010 § Previously held senior financial management roles with Apple, Inc. for 12 years § Prior to Apple, worked with Ernst & Young and Li�on Industries
§ Joined Aeme�s in 2006 and has held senior leadership posi�ons § Previously served as an execu�ve at BMC So�ware, Cadence Design Systems, and eSilicon
Corpora�on
§ Served in the George H.W. Bush White House as Associate Director – Office of Poli�cal Affairs § Served as Deputy Chief of Staff for Illinois Governor Edgar
Sanjeev Gupta President, Aeme�s
Interna�onal Opera�ons
§ Joined Aeme�s in 2007 as President of Biofuels Marke�ng, Inc. § Managed construc�on of the biodiesel produc�on facility in Kakinada, India § President of Universal Biofuels, a subsidiary of Aeme�s, since 2009
§ Previously served as president of a global petrochemical trading company with $250 million in annual revenues
§ Founder, Chairman and CEO of Aeme�s since 2006 § Founder of energy companies including $800 million revenues Pacific Ethanol (Nasdaq: PEIX)
and $400 million market cap Evolu�on Petroleum (NYSE: EPM)
§ Founded seven public companies, including Procera Networks (Nasdaq: PKT)
Company Summary § Aeme�s, Inc. (the “Company”) was founded in February 2006 by biofuels industry veteran Eric McAfee and has since grown to
become a leading second-‐genera�on renewable fuels and specialty chemicals company with $178 million in revenues during 2013 § Since its forma�on, the Company’s primary focus has been the development and deployment of patented industrial biotechnology
to convert first-‐genera�on ethanol and biodiesel plants (which primarily use corn and edible oils as feedstocks) into advanced second-‐genera�on biorefineries (which are capable of using non-‐food subs�tutes to produce ethanol, biodiesel, renewable diesel and renewable jet fuel, and renewable chemicals and feed products)
§ The Company currently wholly owns and operates two integrated second-‐genera�on plants with combined produc�on capacity of 110 million gallons per year:
§ The Company operates a biotechnology R&D lab in Maryland and holds five advanced biofuels technology patents § The Keyes plant generated $10 million of Adjusted EBITDA in the fourth quarter of 2013 § The Company is a federally approved EB-‐5 borrower for up to $36 million of 3% interest rate subordinated debt funding, has
received the first $1 million from the EB-‐5 offering and has addi�onal amounts in escrow
7
Keyes Plant India Plant
Loca�on: Keyes, California (Northern California) Type: Ethanol renewable fuels plant Capacity: 60 million gallons per year Feedstock: Grain sorghum and corn In August 2013, Aeme�s Keyes became the first converted corn ethanol plant cer�fied by the EPA as a producer approved to use milo/biogas/CHP to receive D5 Advanced Biofuel RIN’s.
Loca�on: Kakinada, India Type: Biodiesel and renewable chemicals plant Capacity: 50 million gallons per year Feedstock: Waste tallow, cooking oil and Stearine In 2013, India began phasing out diesel subsidies, causing prices to rise and biodiesel margins to grow. The EU market and California are rapidly growing, profitable markets for the non-‐food, low-‐carbon biodiesel produced in India.
Company Highlights
8
Strong Asset Coverage
§ Keyes Plant was originally constructed in 2008 at a cost of $132 million, then upgraded at a cost of $13 million for a total investment of $145 million
§ India plant was originally constructed in 2008 at a cost of $22 million and upgraded with glycerin refinery § $165 million aggregate construc�on cost for 100% owned plant assets
Strategically Located to Serve Large Addressable
Markets
§ Proximity of the Keyes Plant to the deep water port of Stockton and Union Pacific rail system provides access to milo feedstock from key interna�onal and domes�c markets
§ California is a $1.3 billion ethanol market and a $120 million wet dis�llers grains (“WDG”) market with more than one million dairy cows
§ 100% of ethanol and dis�llers grains, an ethanol by-‐product, are sold within 80 miles of the Keyes Plant § India is a large producer of waste Stearine and beef tallow, the key feedstocks for the India Plant
Favorable Demand / Supply Dynamics
§ Environmental regula�on and favorable secular trends are expected to drive substan�al increases in the demand for biofuels
§ Current produc�on capacity of advanced biofuels is well below future mandated levels
Healthy Margin Improvement
§ Produc�on of advanced biofuels using less expensive milo is expected to substan�ally improve profitability at the Keyes Plant
§ January 2013 deregula�on of diesel price in India is expected to result in substan�al margin improvement for Aeme�s’ biodiesel plant in India
Improving Free Cash Flow Profile
§ Plant conversion, industry trends and margin expansion are contribu�ng to improving cash flow § Achieved three consecu�ve quarters posi�ve EBITDA and record Adjusted EBITDA of $10 million in Q4’2013
Substan�al Upside from Next Genera�on Technology
§ Aeme�s has substan�al investment in patented next genera�on technology § Commercial scale algae solar-‐fiberop�c-‐CO2 reactor technology in development at Keyes Plant § First global licensee of renewable jet and diesel fuel technology from Chevron Lummus and Applied
Research Associates (“Chevron Lummus / ARA”)
Experienced Management Team
§ Founded in 2006, Aeme�s is led by biofuels industry veterans with extensive global experience § Members of the Board of Directors have extensive exper�se in the chemicals, agriculture, food,
molecular biology and biotechnology industries
Company Overview
9
Aeme�s Vision
10
G1 G3
PAST PRESENT FUTURE
G2
Tradi�onal Corn Ethanol and Vegetable Oil Biodiesel
Advanced Biofuels (Sorghum/Tallow Feedstocks)
Non-‐Food, Low Carbon, Less Land Fuels/Chemicals
Aeme�s is an interna�onal renewable fuels and biochemicals company using patented industrial biotechnology for the conversion of first-‐genera�on ethanol and biodiesel plants into advanced biorefineries.
Aeme�s Key Highlights
§ Owns and operates renewable fuels and chemicals facili�es in US and India − Acquired Cilion, Inc. 60 MGY ethanol plant in Keyes, CA in 2012 (build and upgrade cost $145 million) − Built 50 MGY advanced biofuel plant in Kakinada, India in 2008 (build cost $22 million)
§ Acquired Zyme�s, Inc., a novel biorefining technology company, for its patent por�olio and produc�on processes in 2011 − 5 granted patents on enzyme and microbe technology for biofuels produc�on − First global licensee of renewable jet and diesel fuel technology from Chevron Lummus / ARA
§ $178 million in 2013 revenues § Three consecu�ve quarters of posi�ve EBITDA and record Adjusted EBITDA of $10 million in Q4’2013 § 125+ employees worldwide
11
Key Customers
Key Company and Industry Milestones February 2007 Acquired Energy Enzymes -‐ Former DOE funded enzyme technology for enzyme produc�on and integra�on November 2008 Built 50 MGY non-‐food feedstock and biomass energy biorefinery in Kakinada, India to use waste stearine and tallow to produce
biodiesel and glycerin Mid-‐2009 Obtained necessary permits and approvals to sell biofuel into Europe, U.S. and Indian domes�c market April 2011 Leased, retrofi�ed and restarted opera�ons of 60 MGY ethanol plant in Keyes, California owned by Cilion, Inc. July 2011 Acquired Zyme�s, Inc., a novel biorefining technology company, for its patent por�olio and produc�on process December 2011 Federal $0.45 per gallon ethanol blender tax credit ended January 2012 Completed construc�on of India refining unit and obtained permits to sell into domes�c food markets in India April 2012 Glycerin refining and oil pretreatment units completed at India Plant, producing refined glycerin for pharma and industrial use July 2012 Acquired 60 MGY ethanol plant in Keyes through acquisi�on of 100% of Cilion, Inc. for 11% of common stock and $15m cash December 2012 EPA ruling that ethanol made from milo and biogas using CHP is advanced biofuel with 50% reduc�on in carbon content January 2013 India government begins phase out of 35% diesel subsidies, increasing the domes�c India sales price and margins for biodiesel June 2013 Achieved high-‐volume produc�on of lower-‐carbon ethanol using milo feedstock and a Combined Heat & Power (CHP) system in
an integrated process with tradi�onal feedstock June 2013 India Plant generated more than $32 million of revenue in 2013 and $2.5 million of posi�ve cash flow August 2013 Received EPA approval as the first converted corn ethanol plant approved to produce D5 Advanced Biofuels using milo and
biogas with the Keyes plant’s exis�ng Combined Heat & Power system February 2014 Announced commissioning of biodiesel dis�lla�on unit at India Plant, the only large-‐scale dis�lled biodiesel plant in India
12
$0 $100 $200 $300 $400 $500 $600
($ in th
ousand
s)
Ethanol Biodiesel
Cumula�ve Ethanol, Biodiesel and Other Revenue
Keyes Plant Descrip�on
13
General § Designed by Praj Industries, an industry leading builder of ethanol plants that has been involved in the design and development of more than 450 alcohol plants
Products & Produc�on
§ Stabilized produc�on capacity of more than 60 MGY, with permits allowing up to 75 MGY § Products include:
− Ethanol – $111.2 million of revenue in FY 2013 Approved by EPA in August 2013 for produc�on of advanced biofuels
− Dis�llers grains – $30.2 million of revenue in FY 2013 − Corn oil – $2.6 million of revenue in FY 2013
§ Achieved 20 months of con�nuous opera�ons from May 2011 to January 2013; an industry milestone § In June 2013, achieved high-‐volume produc�on using milo and a Combined Heat & Power (CHP) system
in an integrated process with tradi�onal feedstock
Feedstock § In January 2013, the plant was retrofi�ed to accommodate the use of milo feedstock § 84 million pounds of advanced biofuels feedstock (milo) used in biofuels produc�on in 2013
Systems
§ Plant control system can be managed from the on-‐site control center or remotely by the plant’s opera�ons managers
§ Zero waste water discharge with on-‐site water recycling and purifica�on system § Combined heat and power system fully opera�onal § Steam genera�on system powered by three natural gas-‐fired Victory Energy steam boilers § 4.5 MW steam turbine generator supplies the electrical power required for produc�on by using natural
gas or biogas
Keyes Plant Descrip�on (con�nued)
14
Loca�on
§ Access to the Union Pacific rail line provides access to key feedstock markets § Close proximity (40 miles) to the deep water Port of Stockton provides access to less expensive milo
from key interna�onal feedstock markets (e.g., Argen�na) § 100% of ethanol and WDG produc�on sold locally § California is one of the largest ethanol markets (1.3 BGY) and represented approximately 10% of the
total U.S. ethanol market in 2012 § Strong regulatory support for ethanol includes the California Low Carbon Fuel Standards and the
California Energy Commission biofuels grant programs
Customers
§ 100% of dis�llers grains produc�on is sold within 80 miles of the Keyes Plant loca�on, thereby elimina�ng the need and cost of large dryers
§ 100% of the ethanol produced at the Keyes Plant is sold to refiners within 80 miles of the Keyes Plant, and is blended into gasoline sold in San Jose, Sacramento and San Francisco
Value § Original build cost of $132 million in 2008, upgraded for $13 million and acquired by the Company in
July 2012 § Total build cost $145 million
Keyes Plant Aerial View
1) Union Pacific Rail System access 2) Two corn/milo storage tanks (owned by A.L. Gilbert) and one
feedstock bin (owned by Aeme�s) 3) Liquefac�on Area 4) Three 1.15 MG fermenta�on tanks and one 1.5 MG beer well 5) Dis�lla�on and Evapora�on 6) Cooling Towers and three boilers 7) Dis�ller Grain processing and loading area
8) One 1.05 MG denatured ethanol storage tank, two 210,000 gallon 200-‐proof ethanol storage tanks and one 63,000 gallon 190-‐proof ethanol storage tank
9) Ethanol truck loading area 10) 3,100 sq. �. office building 11) 1.5 MG water storage tank 12) Control center and laboratory
1
2 3 4
11
6
5
7
8
9
15
10
12
A.L. Gilbert Feedmill
Keyes Plant Photos
16
Technology & Produc�on Process
17
1) Aeme�s’ dis�llers grains are sold wet and therefore do not require large and expensive industrial dryers which o�en require significant maintenance.
Typical Dry Mill Ethanol Process(1)
Aeme�s Process Benchmarking
Aeme�s sells ethanol in California where it demands a premium price over ethanol sold in the U.S. on average. The Keyes Plant is one of the most efficient and produc�ve facili�es in the industry, with a higher yield than the industry average.
18
1) Source: Oil Price Informa�on Service. 2) Source: Industry average yield -‐ Renewable Fuel Associa�on.
2.90
2.80
2.50
2.55
2.60
2.65
2.70
2.75
2.80
2.85
2.90
2.95
3.00
Keyes Industry
Series 1 Los Angeles Ethanol Price vs. Mid-‐West Ethanol Price Yield (gallons/bushel)
4% higher efficiency than the industry(2)
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
6/1/11
9/1/11
12/1/11
3/1/12
6/1/12
9/1/12
12/1/12
3/1/13
6/1/13
9/1/13
12/1/13
LA Ethanol Price Chicago Ethanol Price
$0.18 higher ethanol pricing(1)
Des�na�on Model a Compe��ve Differen�ator
West Coast loca�on and large local markets provide several advantages over Midwest ethanol producers
19
CA Dairy Concentra�on Map
Keyes Plant
§ 10% ethanol mandate in California is approximately a 1.3 billion gallon market yearly § Given limited produc�on capacity, California must import over 1 BGY of ethanol to
meet demand
§ Ethanol produced in California has a much lower carbon content which translates into higher selling prices per gallon
§ Less expensive to ship corn to California than to ship ethanol and dis�llers grains to California − Unit trains (100 cars); ease of handling; short turnaround �mes; fewer delays
− Proximity to customers avoids the need to dry dis�llers grains, significantly reducing energy and handling costs
§ Ethanol shipments from the Midwest competes with crude oil for rail access which has driven up the price of ethanol to the benefit of producers in California − Rail tanker car shortage driven by demand for rail cars from new oil fields (e.g.
Bakken and Canada) without pipelines − Safety concerns regarding older tanker cars; new tanker regula�ons − Long lead �mes coupled with limited availability of new rail cars will likely result in
a prolonged shortage of tanker cars
India Plant Descrip�on
20
General § Built and 100% owned by Aeme�s subsidiary Aeme�s Interna�onal
Products & Produc�on
§ 50 MGY nameplate biodiesel produc�on capacity § 50 MGY addi�onal capacity can be added at a cost of approximately $15 million § Products
− Biodiesel: $4.3 million in revenue for FY 2012 and $16.6 million for FY 2013 − Refined glycerin: $2.1 million in revenue for FY 2012 and $4.6 million for FY 2013 − Natural refined palm oil and other: $7.8 million in revenue for FY 2012 and $11.6 million for FY 2013
§ India subsidiary received an Indian Pharmacopeia license in Q1 2012, enabling sale of refined glycerin to the pharmaceu�cal industry
Feedstock § Largest India plant to use waste stearine and beef tallow, saving 8-‐10% compared to edible palm oil § Feedstock requirements sourced from local suppliers § Currently the only India plant not paying 10% tariff when using imported feedstock
Systems § Glycerin refining and oil pretreatment units completed in Q2 2012
Loca�on § India is a large producer of stearine and beef tallow, the key feedstocks for the India Plant
Customers § Pharmaceu�cal and industrial customers for refined glycerin § Con�nued European sales of biodiesel
Value § Original plant build cost of $22 million in 2008
Market Dynamics
§ Historically, the Indian government subsidized petroleum-‐based diesel, which made biodiesel uncompe��ve. As a result, the India Plant focused on expor�ng biodiesel and producing glycerin
§ In January 2013, the Indian Government announced it would gradually end subsidies to the diesel market, allowing local prices to rise over �me to the world price, which is about 35% higher
§ The Company currently sells its biodiesel in India at a small discount to diesel and an�cipates plant u�liza�on will grow in 2014 based upon elimina�on of diesel subsidies, as well as expanding EU and California shipments
India Plant Photos
21
Intellectual Property
The Company operates an R&D lab in Maryland and earned five granted advanced biofuels technology patents.
22
5 Awarded Licensed
§ Five awarded patents on enzyme and microbe technology:
− Patented plant wall degrada�ve compounds and systems
− Patented chi�n degrada�ve compound and systems
− Patented cloning abili�es
− Patented degrada�on of whole plant materials by saccharophagus degradans
− Patented processes for plant polysaccharide conversion
§ Chevron Lummus / ARA renewable Jet and Diesel Fuel:
− Cataly�c hydrothermolysis process converts plant oils to crude oil intermediates
− High pressure high temperature process in single reactor
− Only known 100% replacement “neat” jet fuel
− November 2012 Canadian Na�onal Research Council, first flight of 100% renewable jet fuel
Industry Overview
23
U.S. Ethanol Produc�on § Ethanol is high octane (113) and cleaner burning motor fuel derived from corn, grain sorghum and other plants which can be
used safely in virtually every gasoline engine at varying levels § Ethanol is mandated by Federal Air Quality and renewable fuels laws to replace the carcinogenic chemical MTBE
§ With more than 13 billion gallons of annual US produc�on, ethanol represents approximately 10% of the U.S. gasoline supply § The majority of American consumers are using E10 ethanol blends (10% ethanol), and E15 (15% ethanol) and E85 (85%
ethanol) availability is increasing § The U.S. ethanol industry has grown to 211 plants opera�ng in 29 states and consump�on has grown at a CAGR of 18.7% from
2000 to 2012
24
1,622 1,765 2,140 2,810 3,404
3,904 4,884
6,521
9,309 10,938
13,298 13,929
13,218 13,312
600
2,600
4,600
6,600
8,600
10,600
12,600
14,600
16,600
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
(millions of gallons)
U.S. Ethanol Produc�on (1)
1) Source: U.S. Energy Informa�on Administra�on, December 2013 Monthly Energy Review 2) Source: Aeme�s management es�mates based on YTD produc�on (as reported by EIA) and recent industry trends
(2)
Drivers of Ethanol Demand
§ The U.S. ethanol industry has grown to 211 plants with annual capacity of 15.2 billion gallons § Last year, in the midst of a severe drought, the industry produced about 13.3 billion gallons of ethanol, very close to 2010
levels
− One of the primary drivers of Ethanol Demand in the U.S. is government mandates for renewable fuels − The Environmental Protec�on Agency requires gasoline blenders to use a certain amount of ethanol and other bio-‐fuels
§ The minimum levels for ethanol to con�nue to increase from 13.8 billion gallons in 2013 to 15.0 billion gallons in 2015 (1)
§ Refiners can meet the requirement by buying biofuel and blending it into gasoline or by accumula�ng credits known as RINs and applying them to such requirements
§ Next year, blenders are expected to blend more ethanol to meet the increasing mandates § Every �me ethanol is mixed into gas, or fuel already blended with ethanol is imported, fuel blenders receive a credit from the
government (a “RIN”), and that credit can be sold to other companies that don’t blend ethanol to help them meet federal requirements
§ If fuel blenders and refiners fall short of their biofuel blending obliga�on, they can face fines of $32,500 a day
1) On November 15, 2013, the EPA proposed a change to the 2014 Renewable Fuel Standards. A final 2014 RFS RVO is due in June 2013.
25
The Increasing RFS Mandate (1)
In order to meet the increasing Renewable Fuel Standards, holding all other variables constant, obligated par�es are expected to blend greater amounts of ethanol § The current RFS was enacted with the Energy Independence and Security Act of 2007 (EISA2007)
§ RFS created two principal categories – renewable fuels and advanced biofuels − “Renewable fuels” must reduce greenhouse gas emissions by 20% rela�ve to gasoline or diesel and “advanced biofuels”
must reduce greenhouse gas emissions by 50%
− RFS includes specific volume requirements for three subcategories of advanced biofuels: unspecified, cellulosic biofuels, and biomass-‐based diesel
− Corn-‐based ethanol is excluded from the advanced biofuel category
26
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Biomass-‐based Diesel 0.5 0.7 0.8 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Non-‐cellulosic Advanced 0.1 0.2 0.3 0.5 0.8 1.0 1.5 2.0 2.5 3.0 3.5 3.5 3.5 4.0
Cellulosic Advanced 0.0 0.1 0.3 0.5 1.0 1.8 3.0 4.3 5.5 7.0 8.5 10.5 13.5 16.0
Conven�onal Biofuels 10.5 12.0 12.6 13.2 13.8 14.4 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0
0.0 5.0
10.0 15.0 20.0 25.0 30.0 35.0 40.0
Billion
s of G
allons
Renewable Fuel Standard Mandate Schedule (2)
Exis�ng U.S. Corn-‐Ethanol Produc�on Capacity
1) On November 15, 2013, the EPA proposed a change to the 2014 Renewable Fuel Standards. Once the proposal is published in the Federal Register, it will be open for a 60 day public comment period.
2) Source: United States Environmental Protec�on Agency
California Low Carbon Fuel Standard (LCFS)
§ LCFS is a state-‐enacted policy to reduce greenhouse gas emissions from motor vehicles § Under LCFS, every fuel has a “carbon intensity value” (CI)
− CI values es�mate the level of lifecycle greenhouse gas emissions of a par�cular fuel taking into account the feedstock, the produc�on process and plant loca�on
− LCFS requires subs�tutes for fossil fuels to have lower carbon intensity than the fuels they replace
§ Ethanol produced through an LCFS approved pathway can be sold at a premium because it reduces the carbon credits the blender is required to purchase in the market − The value of LCFS to the fuel producer depends on the price of a carbon credit and the CI value of the fuel
Lower CI values produce higher premiums Higher carbon credit prices produce higher premiums
27
90.1 80.7 73.75
56.66 68.91
51.82 70.7
53.62
0
20
40
60
80
100
Benchmark MW Corn + NG MW Corn + NG + LCFS
MW Corn + biogas + LCFS
CA Corn + NG + LCFS
CA Corn + biogas + LCFS
Milo + NG Milo + biogas
Chicago Aeme�s Pathways
Carbon Intensity Values(1)
Blenders Have Been Using Surplus RINS to Meet Mandate
As the supply of RINs diminishes, refiners will be required to blend greater amounts of ethanol in order to meet the increasing RFS mandate (4)
§ The last few years saw a build-‐up of a backlog of RINs as blending economics were strong and ethanol produc�on surpassed the RFS mandates, funded by $0.45 per gallon of taxpayer subsidy to oil refiners and fuel blenders
§ However, the RFS mandate is now higher than the 10% blend wall in 2013, resul�ng in no growth in RIN supply, growing biofuels demand and an expected deficit of RINs by late 2014
1) Source: U.S. Environmental Protec�on Agency, Aeme�s management es�mates 2) Es�mates only. May differ from EPA reported figures. 3) Carry Forward limited to 20% of mandate in the following year. 4) On November 15, 2013, the EPA proposed a change to the 2014 Renewable Fuel Standards. Once the proposal is published in the
Federal Register, it will be open for a 60 day public comment period.
28
Corn Ethanol (D6) RIN Stock Analysis(1)
What is a RIN? A Renewable Iden�fica�on Number (RIN) is a serial number assigned to a batch of biofuel for the purpose of tracking its produc�on, use, and trading as required by the United States Environmental Protec�on Agency's Renewable Fuel Standard. To ensure compliance, obligated par�es are periodically required to demonstrate they have met their RFS quota by submi�ng a certain amount of RINs to the EPA. Each RIN includes a code, preceded by the le�er D, which is used for iden�fying the renewable fuel category. D5 RINs meet the RFS criteria as an advanced biofuel while a D6 RIN is used for tradi�onal renewable fuels, including ethanol produced from corn.
Carry RINSSurplus RIN Stock(2) Forward Carry
Year Production Exports Mandate (Deficit) Starting Ending Limit(3) Forward2007 6,521 4,700 1,821 0 1,821 1,800 1,8002008 9,309 9,000 309 1,800 2,109 2,100 2,1002009 10,938 10,500 438 2,100 2,538 2,400 2,4002010 13,298 (399) 12,000 899 2,400 3,299 2,520 2,5202011 13,929 (1,195) 12,600 134 2,520 2,654 2,640 2,6402012 13,300 (742) 13,200 (642) 2,640 1,998 2,760 1,9982013 12,839 (563) 13,800 (1,525) 1,998 474 2,880 4742014 12,839 14,400 (1,561) 474 (1,088) 3,000 02015 12,839 15,000 (2,161) 0 (2,161) 3,000 0
RIN Pricing has Escalated with Diminishing Supply (1)
Aeme�s is one of the few plants equipped and geographically posi�oned to obtain milo for produc�on of the D5 RIN and capture the premium in the market § D6 RIN prices had historically ranged between $0.01 to $0.05 but appreciated significantly in early 2013
§ This increase in prices reflected the market’s concern that rising RFS-‐mandated volumes and the blend wall would significantly increase the cost to meet the RFS statutory volumes
§ Convergence is a result of D6 RIN scarcity, D5 has always been scarce
§ The price of RINs has decreased substan�ally since mid-‐July 2013 and the D5 / D6 pricing spread has widened to $0.07
29
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6 $ / gallon
Ethanol RIN Credit (D6) Advanced Biofuel RIN Credit (D5)
D5 / D6 RIN Pricing Spread in dollars (2)
$0.26 $0.33
1) On November 15, 2013, the EPA proposed a change to the 2014 Renewable Fuel Standards. Once the proposal is published in the Federal Register, it will be open for a 60 day public comment period.
2) Source: Oil Price Informa�on Service
10% Blend Wall Had Limited Growth Beyond Exis�ng Ethanol Produc�on
§ Prior to August 2012, gasoline / ethanol blends were primarily limited to 10%(1), referred to as E10, by the EPA § The term “Blend Wall” refers to the maximum amount of ethanol that can be blended in to gasoline as a result of this 10%
limita�on un�l fuel retailers add pump s�ckers to show 15% ethanol content
§ The Blend Wall was effec�vely eliminated in August 2012 when the EPA approved use of 15% ethanol blends (“E15”) in light-‐duty vehicles beginning with model year 2001 which represents approximately 85% of all vehicle fuel consump�on
§ Despite the approval of E15, U.S. oil refiners have ac�vely opposed blends higher than E10 § The 40% fall in corn costs in late Q3 2013 has created a large price gap between $105 crude oil and inexpensive sugars,
resul�ng in E85 fuel selling for only $2.65 per gallon in Iowa (compared to $4.00 gasoline prices)
30
(2,000)
0
2,000
4,000
6,000
8,000
10,000
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
2009 2010 2011 2012 2013
Gallons
% of U
.S. G
asoline Consum
p�on
Blending (LHS) 10% Blend Wall (LHS) Produc�on (LHS) Net Exports (RHS)
The “Blend Wall”
1) E85 is permi�ed for Flex Fuel vehicles. Source: United States Energy Informa�on Administra�on
Ethanol in Demand in Export Markets(1)
31
1) Source: Renewable Fuels Associa�on www.EthanolRFA.org
Canada 325
Philippines 52
Middle East 40
Mexico 31
Jamaica 10
Brazil 47
Europe 39
Africa 10
India 13
East Asia 8
Peru 30
2013 U.S. exports, in millions of gallons
Rest of world =15
Favorable Supply / Demand Dynamics
In the near term, Aeme�s is well posi�oned to benefit from the exis�ng supply / demand imbalance
32
1) Source: EPA; calcula�on based on 133 billion gallons of gasoline supplied during the last twelve months ending June 30, 2013. 2) Source: Renewable Fuels Associa�on; as of January 2013. 3) Sources: American Coali�on for Ethanol, Renewable Fuels Associa�on and the Energy Independent (BBI Interna�onal). 4) On November 15, 2013, the EPA proposed a change to the 2014 Renewable Fuel Standards. Once the proposal is published in the Federal
Register, it will be open for a 60 day public comment period.
Demand Factors Supply Factors
§ At 15% of U.S. gasoline consump�on, total ethanol demand would increase from 13.3 BGY in 2013 to 19.9 BGY(1)
§ Increased blending of ethanol is mandated by RFS (4)
− Corn-‐based ethanol mandate increasing from 13.8 BGY in 2013 to 15.0 BGY in 2015
− Advanced biofuels mandate increases from 2.8 BGY in 2013 to 3.8 BGY, 5.5 BGY, 7.3 BGY and 9.0 BGY in 2014 to 2017, respec�vely
§ As oil prices increase, refiners will likely increase use of ethanol in order to moderate gasoline price increases
§ The heightened focus on energy independence and security is an�cipated to con�nue to help shape U.S. energy policy and benefit the biofuels industry
§ The $40 billion ethanol industry is a significant contributor to the U.S. economy by employing more than 400,000 people and is a key industry for many rural communi�es providing a level of poli�cal protec�on for biofuels
§ There are 211 U.S. ethanol plants with aggregate produc�on capacity of about 15 BGY(2)
§ New construc�on of tradi�onal corn based ethanol plants has virtually halted and only 4 plants with aggregate produc�on capacity of 158 MGY are under construc�on or expansion(1)
Demand Outlook
Environmental policy, air quality, energy security and the growing need for domes�c fuel sources are an�cipated to drive growth for ethanol for the foreseeable future. Other factors driving ethanol demand include increased usage of ethanol for octane enhancement, high gasoline prices in recent years and a desire to boost rural economies.
33
1) On November 15, 2013, the EPA proposed a change to the 2014 Renewable Fuel Standards. Once the proposal is published in the Federal Register, it will be open for a 60 day public comment period.
2) Source: Renewable Fuel Associa�on – 2013 Ethanol Industry Outlook
U.S. Market
§ In the past two decades, ethanol demand has been dependent on environmental issues, oxygenated fuel requirements, reformulated gasoline programs in the U.S. and the phase-‐out of MTBE
§ The major legisla�ve issue affec�ng future demand for ethanol is the new RFS schedule in the Energy Independence and Security Act of 2007
§ With the more aggressive biofuel targets, RFS is having more of an immediate impact than the original renewable fuel standard
§ In 2012, the ethanol industry supported more than 87,000 direct jobs, 295,000 indirect jobs and contributed more than $30.2 billion in household income(1)
California Market
§ Regardless how the na�onal regulatory environment develops, California will likely con�nue to be a key market for ethanol
§ The California ethanol market alone is approximately 1.3 BGY
§ There are currently only three sizable ethanol plants opera�ng in California with aggregate produc�on capacity of 180 MGY, requiring 1.36 BGY imported from other states to meet California biofuels demand
§ At 60MGY, ethanol produc�on from the Keyes Plant represents only 4.6% of the total California market
§ California has a mandatory ten percent (10%) blend
Benefits of Milo as a Feedstock Alterna�ve to Corn
§ Milo is a genus of numerous species of grasses and is mainly grown in dry and hot climates of the U.S. which are not conducive for corn produc�on
§ From an ethanol feedstock perspec�ve, milo has several advantages over corn.
− Unlike corn, in the U.S., milo is used primarily as a feed grain for livestock and not for food products − Milo is more drought tolerant than corn and uses significantly less water to grow
− Milo is grown in hot and dry climates where land is less costly, and uses less fer�lizer than corn − When used along with advanced process technologies, such as biogas digesters and combined heat and power, ethanol
produced from milo at a plant powered by biogas has 52% lower greenhouse gas emissions compared to gasoline
§ In addi�on to these advantages, average imported and domes�c milo prices have historically been 5% to 10% below the price of corn, making it an a�rac�ve feedstock alterna�ve for ethanol
§ Aeme�s’ Keyes Plant was converted in 2013 to u�lize milo or corn, and can seamlessly combine feedstocks or switch produc�on between feedstocks depending on market condi�ons and prices
34
0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00
Price Re
ceived
($/bu)
Corn Milo
Sources: USDA, Na�onal Agricultural Sta�s�cs Service, Quick Stats Database
U.S. Corn and Milo Pricing
Corn $4.41/bu Dec. 2013
MIlo $4.19/bu Dec. 2013
Corn and Milo Prices Have Been Declining to Our Benefit
Corn futures prices are falling as U.S. corn produc�on for the 2013 / 2014 crop year is expected to reach a record level of 13.8 billion bushels according to USDA es�mates as of September 2013.
35
4.00 4.25 4.50 4.75 5.00 5.25 5.50 5.75 6.00 6.25 6.50 6.75 7.00 7.25 7.50 7.75 8.00
Price Re
ceived
($/bu)
U.S. Corn and Milo Pricing
Corn Milo
Sources: USDA, Na�onal Agricultural Sta�s�cs Service, Quick Stats Database
U.S. Corn and Milo Pricing
Company Highlights
36
Management Team
37
Eric A. McAfee, Chairman and CEO § Founding shareholder of $800 million revenues Pacific Ethanol (NASDAQ: PEIX) § Founding shareholder of several publicly-‐held energy companies including Evolu�on Petroleum (NYSE: EPM) § Founded seven public companies and funded twenty-‐five private companies as principal investor § Appointed as GlobalScot by First Minister to advise the country of Scotland on renewable energy
Andy Foster, EVP and President, Aeme�s Advanced Fuels § Joined Aeme�s in 2006 and has held senior leadership posi�ons including Senior Vice President, Chief
Opera�ng Officer and his current role as President of the advanced fuels business § Previously served as an execu�ve at BMC So�ware, Cadence Design Systems and eSilicon Corpora�on § Served in the George H.W. Bush White House (1989-‐1992) as Associate Director -‐ Office of Poli�cal
Affairs and was Deputy Chief of Staff for Illinois Governor Edgar for five years
Todd Waltz, EVP and CFO § Joined Aeme�s in 2007 as Corporate Controller and became CFO in 2010 § Previously held senior financial management roles with Apple, Inc. for 12 years § Li�on Industries five years in accoun�ng roles § Ernst & Young five years to earn CPA and tax training
Sanjeev Gupta, EVP and President, Aeme�s Interna�onal § Joined Aeme�s in 2007 as head of Biofuels Marke�ng and became Managing Director of Universal
Biofuels subsidiary in India in 2008 § Previously head of petrochemical trading company with about $250 million of annual revenue and
offices on several con�nents § Previously General Manager of Interna�onal Marke�ng for Britannia Industries, a subsidiary of Nabisco
Brands in India
Eric McAfee, Chairman and CEO, Founder § Founder of Aeme�s in 2006; Pacific Ethanol (Nasdaq: PEIX); Evolu�on Petroleum (NYSE: EPM);
Procera Networks (Nasdaq: PKT) § GlobalScot appointed by First Minister of Scotland to advise on renewable energy
Harold Sorgen�, Director/Chairman of Governance & Nomina�ng Comm. § Former President/CEO of ARCO Chemical Company (12 years including IPO) § Principal of Sorgen� Investment Partners (chemical investments)
John Block, Director § Former Secretary of Agriculture from 1981-‐86 under President Reagan § Food industry associa�on execu�ve for 18 years
Fran Barton, Director/Chairman of Audit Commi�ee § Former CFO of several mul�-‐billion-‐dollar revenues companies: AMD, Atmel, Amdahl,
UTStarcom, Digital Equipment (PC division)
Dr. Steven Hutcheson, Director § 25 years bacterial molecular biology and molecular gene�cs at University of Maryland § PhD University of California Berkeley in cellular biology § Founder of Zyme�s, Inc., acquired by Aeme�s in 2011
Board of Directors
20�
Strategically Located to Serve Large Addressable Markets
Aeme�s plants are strategically located to cost effec�vely serve three large target markets: renewable fuels, food & feed and biochemicals.
39
Pla�orm Products Market Size Market Drivers Aeme�s Strategic Advantage
California Biofuels Advanced Ethanol Renewable Jet and Diesel Fuel
California is a 1.3 billion gallon ethanol market U.S. jet fuel was a $66 billion market and diesel was a $189 billion market in 2012
§ Environmental Regula�on
§ High gasoline prices § Energy independence
and security § Economic contribu�on
to rural communi�es
§ Located in CA, the largest advanced fuel mandate in the U.S.
§ Proximity to Stockton, CA deep water port for shipping cost advantage to import milo feedstock or export biofuels
Food & Feed Dis�llers Grain and Corn Oil
California WDG market is over $120 million with over one million dairy cows
§ Popula�on growth § Increased demand for
meat / milk from higher median global per capita income
§ Proximity to more than 200 dairies and feedlots in CA
§ Reduced shipping distance eliminates costs to dry DG
India Biofuels Biodiesel Global market
§ Diesel deregula�on in India
§ Popula�on growth § Industrial expansion § Foreign investment
§ India is a large producer of stearine and beef tallow, some of the lowest cost non-‐food feedstocks for renewable fuels
Biochemicals Refined Glycerin and Isoprene
$30 billion market § Increased use of biochemicals in pharmaceu�cals
§ Asia-‐Pacific represents largest and fastest growing regional market for glycerin worldwide
Favorable Supply and Demand Dynamics
§ Increasing consump�on of advanced biofuels is mandated by the new renewable fuel standard (“RFS”) schedule in the Energy Independence and Security Act of 2007
§ Milo-‐based ethanol using milo, biogas and a Combined Heat & Power system was approved by the EPA as an advanced biofuel in December 2012 that contains 52% less carbon intensity than gasoline
§ Aeme�s’ Keyes Plant achieved high volume produc�on of milo-‐based ethanol in June 2013 and is the first corn ethanol plant to be approved by the EPA for the produc�on of Advanced Biofuels and D5 RINs using milo, biogas and CHP
40
1 1 1
2 2
3 3
4 4
4 4
11 13 14 15 17
18 21
22 24
26 28
30 33
36
0
5
10
15
20
25
30
35
40
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Billion
s of G
allons
Biomass-‐based Diesel
Non-‐cellulosic Advanced
Cellulosic Advanced
Conven�onal Biofuels
Renewable Fuel Standard (by type, 2009−22)
Exis�ng U.S. Corn-‐Ethanol Produc�on Capacity
1) On November 15, 2013, the EPA proposed a change to the 2014 Renewable Fuel Standard 2) Source: United States Environmental Protec�on Agency
Margin Improvement from Advanced Biofuel Produc�on at Keyes Plant
Aeme�s is the first converted corn ethanol plant that has received EPA approval to produce advanced biofuels (D5 RIN) using milo/ biogas/ Combined Heat & Power system § In June 2013, Aeme�s achieved high-‐volume produc�on of lower-‐carbon ethanol using milo feedstock and a Combined Heat
& Power (CHP) system in an integrated process with tradi�onal feedstock § Further deployment of this technology is projected to drive significant margin improvement as a result of lower feedstock cost
and the increased value of D5 RINs
41
An�cipated Gross Profit Expansion Corn Milo
Unit Economics -‐ $/gal
Ethanol Sales Price $2.31 $2.31
Advanced Biofuel RIN/LCFS Value $0.00 $0.20
Co-‐Product Sales Price (WDG) $0.78 $0.78
Total revenue $3.09 $3.29
Cost of Inputs (1) $1.99 $1.81
Cost of Transforma�on (2) $0.42 $0.68
Gross Profit $0.68 $0.80
Gross Margin 22.0% 24.3%
$0.68
$0.20
$0.17 ($0.20 )
$0.80
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
Corn-‐Ethanol Gross Margin
RIN Value & LCFS
Corn/Milo Spread
Natural Gas/Biogas Spread
Milo-‐Ethanol Gross Margin
Gross P
rofit (p
er gallon)
An�cipated Gross Profit Bridge
1) Based on average discount of milo to corn of 10%. 2) Includes chemicals, enzymes, denaturant, natural gas, electricity and transporta�on.
Margin Improvement from Deregula�on in India
January 2013, the Indian Government began to deregulate the diesel market, increasing the price of diesel and biodiesel in India and resul�ng in substan�al margin expansion for Aeme�s’ Kakinada India plant § Historically, the Indian government set the market price of diesel by providing diesel producers a subsidy that lowered the
domes�c India price of diesel significantly, which was poli�cally popular § However, the diesel subsidy excluded biodiesel, which le� producers of biodiesel at a substan�al disadvantage § In January 2013, amid persistent budget deficits, the Indian government decided to let the free market set the price for diesel
§ The subsidy is being phased out at a rate of 45 paise ($0.72 based on an exchange rate of 62.6 INR/USD) per month
42
55.00
65.25 66.40 66.40
51.00
64.25
40.00
45.00
50.00
55.00
60.00
65.00
70.00
January 2013 Es�mated Post-‐Deregula�on
Price per litre (Rs)
Delhi Diesel Price World Diesel Price Biodiesel Price
India Domes�c Diesel Prices
Estimated Biodiesel production cost
Source: Aeme�s’ management es�mates
Financial Overview
43
Aeme�s Historical Financial Performance
44
1) Excludes share-‐based compensa�on.
Summary of Aeme�s $36 million of Approved EB-‐5 Funding
§ Aeme�s is approved for up to $36 million of unsecured EB-‐5 financing by US Customs & Immigra�on Service (USCIS) § Aeme�s’ EB-‐5 Project company is compliant with EB-‐5 program job crea�on requirements § $1.5 million of funding has already been received by Aeme�s from the regional center escrow account for project
§ $3.5 million in escrow currently pending approval by U.S. authori�es § 50+ applica�ons submi�ed for ini�al review at $500,000 per investor
Benefits of EB-‐5 Financing to Aeme�s § Fully subordinated to the new Senior Secured Notes
§ 4 year notes at 3% interest with no principal payments un�l maturity § EB-‐5 investors may convert into common shares of Aeme�s at $30.00 per share a�er 36 months
Aeme�s Advantages to EB-‐5 Investors § U.S. ci�zenship granted for minimum subscrip�on amount of $549,000 ($500,000 to Aeme�s and $49,000 admin fee)
§ Investor funds can be immediately credited towards upwards of 1,300 direct and indirect jobs § Fully Insured FDIC Escrow Account holds funds un�l I-‐526 approval § Aeme�s subsidiary in India (Universal Biofuels Pvt. Ltd.) with Indian execu�ve management and staff facilitates
communica�ons with India investors
45
Advanced Renewable Fuels and Chemicals Produced by Conversion of Exis�ng Biofuels Facili�es
www.aeme�s.com
