Bioenergy Advancing grain-based ethanol

Transcription

1 Bioenergy Advancing grain-based ethanol Peter Halling, Head of Bioenergy marketing, Novozymes Claus Crone Fuglsang, Vice President R&D, Novozymes Martin Parrish, Vice President, Alternative Fuels, Valero

2 Forward-Looking Statements This presentation and its related comments contain forward-looking statements, including statements about future events, future financial performance, plans, strategies and expectations. Forward-looking statements are associated with words such as, but not limited to, "believe," "anticipate," "expect," "estimate," "intend," "plan," "project," "could," "may," "might" and other words of similar meaning. Forward-looking statements are by their very nature associated with risks and uncertainties that may cause actual results to differ materially from expectations, both positively and negatively. The risks and uncertainties may, among other things, include unexpected developments in i) the ability to develop and market new products; ii) the demand for Novozymes products, market-driven price decreases, industry consolidation, and launches of competing products or disruptive technologies in Novozymes core areas; iii) the ability to protect and enforce the company s intellectual property rights; iv) significant litigation or breaches of contract; v) the materialization of the company s growth platforms, notably the opportunity for marketing biomass conversion technologies or the development of microbial solutions for broad-acre crops; vi) the political conditions, such as acceptance of enzymes produced by genetically modified organisms; vii) the global economic and capital market conditions, including, but not limited to, currency exchange rates (USD/DKK and EUR/DKK in particular, but not exclusively), interest rates and inflation; viii) significant price decreases on input and materials that compete with Novozymes biological solutions. The company undertakes no obligation to update any forward-looking statements as a result of future developments or new information. 2

3 Session outline State of the U.S. ethanol market Innovation; key for performance Valero: Views from 3rd largest U.S. ethanol producer Innovation priorities 3

4 Million Gallons Index Billion Gallons Ethanol production and outlook in the U.S. Production has stabilized at 10% of U.S. gasoline consumption + exports 20 U.S. ethanol production volumes have stabilized U.S. Ethanol blend: ~10% of gasoline consumption CAGR +0.3% % 10% 8% 6% 4% 2% 0% ,400 1,200 1, U.S. ethanol exports have increased since Gasoline volumes are stable today outlook is for lower volumes driven by mileage standards Sources: US Energy Information Agency; annual energy outlook, April 2015, US Department of Agriculture, F.O Licht, Renewable Fuel Association and Houston Biofuel Consultants LLC 4 Strategy Sustainability Innovation Household Care Bioenergy Food & Beverages

5 Ethanol yield per bushel of corn Grain-based ethanol market in the U.S. Novozymes serves a fragmented industry with overcapacity Enzyme market players and share DuPont + Others Industry capacity split by technology (15bn gallons/ 213 facilities) Dry-grind POET Wet milling Novozymes innovation drives efficiency & growth 3.00 gal/bu 2.85 gal/bu 2.70 gal/bu Avantec, Spirizyme Achieve & Olexa New Innovation Industry capacity split by producer POET ADM Valero Green Plains Flint Hills Cargill Abengoa Others Source: RFA ethanol and Novozymes estaimates 5 Strategy Sustainability Innovation Household Care Bioenergy Food & Beverages

6 Innovation can grow the enzyme market, even in a flat production volume market U.S. quarterly ethanol volume growth rates and Novozymes organic growth (quarter over last year quarter) 40% NZ org. Bioenergy growth Eth.vol. growth 30% 20% 10% Spirizyme Achieve and Olexa launched 0% Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15-10% -20% Avantec launched Source: EIA and Novozymes 6 Strategy Sustainability Innovation Household Care Bioenergy Food & Beverages

7 From bioethanol plant to biorefinery Every process step has been improved and optimized over last decade From just ethanol and wet distiller s grains, to also producing corn oil and highervalue feeds Achieving higher ethanol yields, while using less corn and energy More innovation is coming to improve sustainbility of earnings and footprint EVAPORATORS 7 Strategy Sustainability Innovation Household Care Bioenergy Food & Beverages

8 Novozymes Capital Markets Days May 2015

9 Who We Are World s Largest Independent Refiner 15 refineries, 2.9 million barrels per day (BPD) of high-complexity throughput capacity Greater than 70% of refining capacity located in U.S. Gulf Coast and Mid-Continent Approximately 10,000 employees Large Logistics Infrastructure with Focus on Growth General partner and majority owner of Valero Energy Partners LP (NYSE: VLP), a growth-oriented, fee-based master limited partnership (MLP) Significant inventory of logistics assets within Valero Wholesale Fuels Marketer Approximately 7,400 marketing sites in U.S., Canada, United Kingdom, and Ireland Brands include Valero, Ultramar, Texaco, Shamrock, Diamond Shamrock, and Beacon One of North America s Largest Renewable Fuels Producers 11 corn ethanol plants, 1.3 billion gallons per year (85,000 BPD) production capacity Operator and 50% owner of Diamond Green Diesel joint venture 10,500 BPD renewable diesel production capacity 9

10 Financial Snapshot Ticker VLO on New York Stock Exchange Market Cap. $29.7 billion ($57.77/share on Mar 10, 2015) Revenues $131 billion (Full Year 2014) EBITDA $7.6 billion (Full year 2014) Earnings $3.6 billion (Full year 2014) Total Assets $46 billion (as of Dec 31, 2014) Cash $3.7 billion (as of Dec 31, 2014) Total Debt $5.8 billion (as of Dec 31, 2014) Total Equity $21 billion (as of Dec 31, 2014) Credit Rating Investment grade: S&P BBB, Moody s Baa2, Fitch BBB Valero ranked No. 10 on the 2014 Fortune 500 list 10

11 Assets Concentrated in Advantaged Locations Capacities (MBPD) Nelson Refinery Throughput Crude Oil Index Corpus Christi Houston Meraux Port Arthur St. Charles Texas City Three Rivers Gulf Coast 1,660 1, Ardmore McKee Memphis Mid-Con Pembroke Quebec City North Atlantic Benicia Wilmington West Coast Total or Avg. 2,935 2,

12 Valero s Business Segments Oil Refining and Marketing As an independent, we don t produce or own reserves of oil Ethanol Production Assets as of 12/31/2014 Refining 88% Operating Income Full Year 12/31/2014 Refining 88% Corp. 10% Ethanol 2% Ethanol 12% 12

13 Ethanol Investments Have Performed Well Excellent Acquisitions 11 plants acquired between 2Q09 and 1Q14 for $794MM, less than 35% of replacement value 1.3 billion gallons total annual production Cumulative Capex and EBITDA millions $2,229 Outstanding Cash Generation $2.2 billion cumulative EBITDA generated since acquisitions $161 million cumulative capex excluding acquisition costs EBITDA Capex Scale and location in corn belt Competitive Advantages Operational best practices transferred from refining $161 Low capital investment Note: See Appendix for reconciliation of EBITDA to GAAP results. 13

14 Importance of Technology in Biofuels General Biofuels is a relatively new industry and the technology is changing rapidly We constantly evaluate the economics of new technologies to stay competitive Rate New enzymes allow thicker and faster fermentations Allows for increased plant capacity without adding equipment Yield New enzymes increase ethanol yield by unlocking bound up starches Also increase corn oil yield by unlocking bound up oil Cost The enzymes must by attractively priced relative to alternate technologies (whether capital or expense) Fine grind technology Additional fermentation capacity, etc. Trials Trials are manpower intensive and burdensome Must be mindful of unwanted side effects (fouling, etc.) In the end, new enzymes typically win

15 What is Important in a Supplier? Product Performance Passionate about the success of both the Customer and Supplier Continuous Improvement Total Cost of Ownership Technical Support 15

16 What s in a corn kernel? Refining for multiple revenue streams and lowest cost position Endosperm (starch) Germ (high in oils) Pericarp (gluten, high in protein) Bound oil Oleosin protein Starch 34.7 lbs Sugars 1.0 lbs Water 8.5 lbs Protein 4.8 lbs Hull (fiber) 1 bushel 56 lbs Cellulose 1.6 lbs Hemicellulose 3.2 lbs Oil 1.8 lbs 16 Strategy Sustainability Innovation Household Care Bioenergy Food & Beverages

17 Ethanol yield per bushel of corn, gal/bu Starch & Sugar Fiber Further innovation targeted, along different paths Novozymes to launch new innovation in Innovation direction Starch Fiber Avantec, Olexa & Spirizyme Achieve Increasing ethanol yield Increasing throughput Reducing other costs Converting fiber into ethanol New enzyme and yeast-based innovation New processes and biological solutions convert corn fiber into ethanol Remaining fiber pool potentially converted into ethanol ? Strategy Sustainability Innovation Household Care Bioenergy Food & Beverages

18 Our ambition cellulase protease glucoamylase alphaamylase Creating Unique Innovation for the Biofuel Industry Using a Broad Biotechnology Toolbox phytases yeast? Learn in partnership and through a strong presence at plants: Higher ethanol yield and throughput Low residual starch and ability to access beyond starch Co-product yield increase (corn oil) Co-product value increase (high-protein DDGS) Process low-value corn components to high value outputs (e.g. corn fiber cellulose to ethanol Reduction of low value by-products (e.g. glycerol, lactic acid, etc.) 18 Strategy Sustainability Innovation Household Care Bioenergy Food & Beverages

19 Conclusion U.S. ethanol industry constantly becoming more efficient and cost-effective U.S. ethanol production tracks gasoline consumption and exports today. Uncertainties remain around future volume growth Biological solutions are a CAPEX-light means of improving plant profitability and sustainability Continuing innovation opportunities exist to add more value over the coming years 19 Strategy Sustainability Innovation Household Care Bioenergy Food & Beverages

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