Investment in Natural Resources - How to Do it Right

Transcription

1 FIELDFARE INTERNATIONAL ECOLOGICAL DEVELOPMENT plc 36 Kingfisher Court, Hambridge Road, Newbury RG14 5SJ, UK Tel +44 (0) Fax +44 (0) Registered company no VAT GB DANUBE DELTA in UKRAINE Harvesting Reedbed Biomass for Wetland Restoration and Renewable Energy Supply CONDITIONAL INVITATION TO INVEST May 2010 Distribution Restricted 1 1 This invitation is intended for existing shareholders and close acquaintances of Fieldfare International Ecological Development plc and is not, and should not be construed as, a general offer to invest. The document has not been subject to independent audit or verification and anyone wishing to invest should seek independent advice. The company accepts no liability for third party actions based on the contents of this document.

2 PROJECT OUTLINE In southern Ukraine, along the Danube floodplain and southern Black Sea coastal wetlands, reeds grow extensively and prolifically. In fact, the largest area and concentration of reeds in the world occurs in this region. Reedbeds are a valuable habitat that are essential for the survival of a wide variety of animals and plants, many of which are protected under national and international legislation. Reedbeds also perform vital ecosystem services such as flood regulation, nutrient recycling and erosion control. However, reedbeds are usually a transitory habitat. As they accumulate sediments and annual dead leaf matter, their level rises above the water surface. This can set in motion a succession to drier scrub and ultimately woodland. In the Danube delta, by contrast, there is a relatively stable stage that occurs widely in the region consisting of a tall and dense monoculture. This stage has very little biodiversity interest, nor can it be commercially harvested for thatch. Attempts to burn such rank reed monocultures to create open spaces and different age stands in order to improve biodiversity values have largely failed. Burning is also wasteful of a potential biomass resource and pollutes neighbouring areas with smoke and ash. On the other hand, carefully monitored rotational cutting (on a three year or more cycle) will provide a locally sourced sustainable source of biomass that can provide carbon-neutral energy for heating (e.g. schools, hospitals and municipal offices). It also improves the biodiversity value of the existing rank reedbeds, encourages diversification and innovation in rural areas, and provides local people with long-term employment. Following extensive field research on biomass availability and equipment trials conducted by Fieldfare over the last few years, we have developed a pelleting system suitable for processing reed biomass. Independent tests by SGS show that the system can produce high-quality pellets suitable for use in domestic biomass boilers that are already on the market. A short video illustrating the reed biomass energy chain can be viewed here: The project will produce about 3,000 t/yr of pellets from an area of 1,800 ha of degenerated reedbeds located near to the Danube river in the Odessa region of Ukraine. This quantity can provide heating for some 1,000 dwellings, but the initial production will be sold in bulk to combined heat and power stations in central Europe (transported by train and/or river barge) while the local market develops. The biodiversity results of harvesting the reedbeds will monitored by independent ecologists in order to achieve a net benefit from the current baseline situation. In the event of an unforeseen lack of reeds, alternative biomass feedstock is available from adjacent crop residues, including: cereal straw, sunflower cake and rapeseed straw.

3 Reed biomass harvested in Ukraine Pellet Mill System Reed biomass pellets Biomass boiler (60 kw)

4 FINANCIAL ASPECTS The project requires an initial capital investment of 275,000 and a further 75,000 for the first year of operations. With a forecast selling price of at least 80 per tonne delivered to an industrial power generator (the current price is around 110 per tonne), the capital would be fully recovered within 5 years, allowing for the annual operating costs. Fieldfare International Ecological Development plc will contribute some 90,000 of its own finance to set up and run the project. In addition, the company has been granted a loan of 50,000 from Barclays Bank plc. Through this invitation, the company is seeking additional investors to provide the remaining 210,000 needed to implement the project. Investors are invited to subscribe to bonds of 100 each, with a minimum subscription of ten bonds ( 1,000) which will be repaid over five and a half years, with 8% interest on the outstanding balance, paid annually in the first week of January. Purchases of bonds must be made on or before 30 June 2010, with the first interest period beginning on 1st July The capital and interest payment schedule per 100 bond is shown below: Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Total return Capital repayment Interest Annual payment Security The directors of FIED have thoroughly analysed the project implementation scheme and financial projections and are confident of its feasibility. The company has a demonstrable track record of profitability over the last five years and has successfully implemented several investment projects, which have resulted in the funds available for this venture. The company s audited accounts are available on request. It should be noted that the amount sought in the bond issue ( 210,000) is significantly less than the capital needed to acquire and install the pellet equipment ( 275,000). Accordingly, in the event of unforeseen circumstances, the equipment can be sold to repay investors (there is a high demand for quality pelleting machinery in Ukraine). The company also owns a number of other assets and properties in Ukraine which will also serve as collateral to provide security for investors.

5 CONDITIONS of OFFER Bonds will be offered on a first-come first served basis until fully subscribed and must be fully paid on or before 30 June The directors may at their discretion extend the subscription period or alter the number of bonds available. Irrespective of when bonds are purchased up to 30 June 2010, the interest period will start from 1st July 2010 and interest will be calculated on an annual basis on the outstanding capital value of the bonds. Bonds are not transferable. The bonds will be receipted and registered by the Company but no certificates will be issued. Loan repayments will be made net of UK income tax. Bond holders will be issued with tax certificates showing the deductions made. The directors reserve the right to redeem the bonds earlier than the full term, paying the full outstanding capital and interest pro rata. RISK ANALYSIS A variety of risks are associated with this investment. All potential investors should carefully consider the entire contents of this document including, but not limited to, the factors described below before deciding whether or not to subscribe. The information below does not purport to be an exhaustive list or summary of the risks affecting the project and are not set out in any particular order of priority. There may be additional risks which have not been identified. The success of the project depends largely upon the expertise of the Directors and their ability to implement it. The loss of one or other of the Directors may have an adverse effect on the project viability. However, the Company has Key Man insurance to cover this eventuality. The project may be adversely affected by changes in economic, political, judicial, administrative, taxation or other regulatory factors, as well as other unforeseen matters. Due diligence has been conducted in this regard and no negative changes were foreseen at the time this document was issued. In fact, regulatory changes currently being discussed are likely to be favourable as they will promote renewable energy investments. The project operations will be subject not only to statutory environmental and safety regulations, but also to regular monitoring of biodiversity benefits from the investments. This may require stricter or additional standards than those currently in effect, resulting in higher costs than anticipated. The following assumptions have been made and addressed in preparing the business plan for the project: There will be sufficient availability of and access to suitable biomass The equipment will perform as expected, based on trials and inspection of existing installations Sufficient capital will be raised to make the project financially viable One or more customers will purchase the pellets for at least 80 / tonne

6 FIELDFARE INTERNATIONAL ECOLOGICAL DEVELOPMENT plc 36 Kingfisher Court, Hambridge Road, Newbury RG14 5SJ, UK Tel +44 (0) Fax +44 (0) Registered company no VAT GB REED BIOMASS BOND APPLICATION NUMBER OF BONDS REQUESTED ( 100 each, minimum ten) I hereby apply for an allocation of the above number of bonds: NAME (Title, Forename, Surname, in CAPITAL LETTERS).. ADDRESS (will be used for all correspondence unless notified otherwise) No, Name, Street.. Town... Postcode Country I confirm that I have read, understood and accepted the conditions of the invitation to invest. Signature Date Bank account details where repayments are to be made: Bank name Branch address Account name Account number Sort Code Please send with this form with a cheque for the full amount (payable to F.I.E.D.) to the Company Secretary, at the address above, or by bank transfer to: Account Name: Fieldfare International Ecological Development plc Account No: Account Type: Current Bank: Barclays, PO Box 5515, Newbury, Berks, RG14 5YF Bank Code: