Business Plan

Proposal to set up a 480,000 MT BIO-DIESEL plant

project
management abu dhabi, astana, athens, brno, como, dnepropetrovsk, jakutsk, kuala
lumpur, lugano, moscow, prishtina, sarajevo, tashkent, tehran, tirana, vienna
 CONFIDENTIALITY STATEMENT

This Confidential Information Memorandum (Memorandum) is prepared by Hans-jib

Project Management Sdn Bhd solely for information purposes to be reviewed by
prospective investors interest in investing in the venture.

The information contained herein has been prepared to assist interested parties in
making their own evaluation of the Business Plan and does not purport to be all-
inclusive or to contain all of the information that a prospective investor may desire.

This Memorandum includes statements, estimates and projections which reflects the
anticipated future performance of the business. While Hans-jib Project Management
Sdn Bhd has endeavored to provide absolute accuracy and completeness of the
information contained herein as a result of our prudence in-depth analysis, we
expressly disclaim any and all liability for any assumption which may or may not prove
to be correct with regard to anticipated results.

By accepting this Memorandum, the recipient acknowledges and agrees that all
information contained herein is of confidential nature and is for limited circulation
only, and the recipient agrees not disclose it without the express written permission of
Hans-jib Project Management Sdn Bhd. Without limiting the generality of the
foregoing, the recipient will not reproduce this Memorandum, in whole or in part, and
will use this Memorandum solely for the purpose of evaluating the recipient’s interest
in the venture, and , if the recipient dose not wish to pursue this matter, this
Memorandum will be returned to Hans-jib Project Management Sdn Bhd. Any
proposed actions by the recipient, which are inconsistent with the foregoing
agreement will require the prior, written consent of Hans-jib Project Management Sdn
Bhd.

Hans-jib Project Management Sdn Bhd reserves the right to negotiate with one or
more investors at any time and to enter into a definitive agreement with any party
without prior notice to the recipient or other prospective investors. Hans-jib Project
Management Sdn Bhd reserves the right to terminate, at any time, the further
participation in the analysis, evaluation and proposal process by any party and to
modify, at any time, any procedure relating to such process without disclosing any
reason whatsoever.

The recipient is encouraged to conduct his own investigation, appraisal and exercises
of due diligence. Hans-jib Project Management Sdn Bhd undertakes to assist the
recipient in the course of the recipient’s evaluation of the Business Plan.

Upon request, this Memorandum shall be returned to:

Hans-jib Project Management Sdn Bhd

Technical Department

E-mail mohdhanifhassan@yahoo.com
SUMMARY

Preamble

Hans-Jib Project Management has signed a Memorandum of Understanding with

PERTAMA Biofuel to undertake the setting up of a Bio-Diesel Plant in Malaysia capable
of producing up to 480,000 ton per annum of finished product. The proposed plant
would utilize Crude Palm Oil (CPO) from Malaysia as its raw material feedstock and
the finished product bio-diesel would cater for the Japanese market. The other co-
products viz glycerin and fatty acids would be sold in the domestic markets on
account of better price realization.

Hans-Jib-PERTAMA Consortium is to build and manage the operation of the Bio-Diesel

Plant. Hans-Jib Project Management Sdn Bhd, having been appointed consultant for
the venture, has carried out an in-depth feasibility study of current trends and the
eminent global opportunities in the bio-diesel industry.

The prevailing reasons to venture into bio-diesel are

i. The abundance and continuous supply of raw material (crude palm oil)
ii. The provision of guaranteed market for finished products (bio-diesel B-100)
iii. The availability of potential buyers for co-product (glycerol and fatty
acids)
iv. The consortium undertakes to play a minor role in promoting the bio-diesel
industry in Malaysia
v. The consortium could provide a very minor contribution in reducing global
carbon emission

The total development cost is estimated to be in the region of USD 55 million. The
project shall be divided into 5 phases with the initial phase targeted at 60,000 MT of
bio-diesel with an initial outlay of USD 21.2 million.

Overview

Bio-diesel is a safe, non-toxic, bio-degradable and renewable fuel that can be used
even in unmodified diesel engine. With the ever escalating price of fossil fuel, the
market segments that can benefit from bio-diesel include bus and trucks, heavy
equipment, diesel car, and electric generators among others.

Bio-diesel is produced by chemically re-acting an alcohol usually methanol

(occasionally ethanol) with vegetable based oil, waste cooking oil, or animal fats
using either sodium or potassium hydroxide as catalyst. The most common process for
producing bio-diesel is the trans-esterification of fatty acid glycerol esters to methyl
esters. The conversion process will result in the production of approximately 100% bio-
diesel and 10% glycerin and a smaller percentage of fatty acids as co-products.

The finished product - B-100 is a very clean burning, non-toxic fuel, thus offering
significant advantages over fossil fuel. Bio-diesel can also be splashed blended with
any percentage of petro-diesel to cater for a variety of purposes. A B-20 (20% B-100
bio-diesel + 80% petro-diesel blend) is the most commonly used in North America
whereas in Europe, it is commonly mixed in 2-5% (B2-B5) ratio. B2 is also used as a
lubricant due to bio-diesel’s high lubricity rating.

From a technical performance standpoint, bio-diesel blends and usage does not
impede its economic potentials. Vehicle performance, storage, and maintenance
requirements are all comparable to petro-diesel. To a certain extend, bio-diesel is
superior to fossil fuel due to its relatively ‘green’ environmentally friendly quality by
virtue of minimizing air toxins, greenhouse gases, particulate matter, carbon
monoxide, hydrocarbons and black smoke emission. It also contains no sulphur
dioxide (acid rain) or aromatics.

THE PROJECT

Project Phases & Monetary Requirements

Duration 7 months 7 months 12 months 7 months

Phase Phase 1 Phase 2a Phase 2b Phase 3 Phase 4
Capacity 60,000 MT 60,000 MT 100,000 MT 100,000 MT 160,000 MT
Cost (USD)) 16.35 mil 5.25 mil 16.9 mil 16.25 mil
Investment (USD) 21.2 mil 11.5 mil 10.0 mil nil

Plant Location & Facilities

Inter Construction Project Management Sdn Bhd is in the process of identifying a

suitable land to set up the plant. The minimum land requirement is 20 acres with good
infrastructure.

The main components of the bio-diesel plant are:

i. Crude Oil Treatment Plant

ii. Trans-esterification Plant
iii. Pharma Glycerin Plant
iv. Methylester Fractionation Plant

The processing plant’s specification is as follows:

Plant capacity to produce 160 Ton per Day (60,000 MT per year) for the initial
phase.
Concept of various feedstock – the plant can produce bio-diesel from a
variety of such raw materials as crude palm oil (CPO), crude palm kernel oil
(CPKO), animal fats and used oil
The plant will predominantly process CPO with up to 5% FFA content
Finished products are bio-diesel EN14214 grade which conform to the low
pour point, anti-freeze blending requirements for European and Japanese
standards; distilled fatty acid; and pharmaceutical quality glycerin of 99.96%
purity
Multi-purpose and fully-automatic continuous process
Operation at atmospheric pressure and low temperature (approximately
60ºC)
Low catalyst consumption
High efficient process – 1kg of raw material produces 1kg of bio-diesel
Environmentally-friendly process with zero effluents
Open steel structure & clear phase separation by gravity flow process (no
centrifuges required)
Low operating and maintenance cost
Main utilities required are power, water, LDO and steam
Power requirement is 106 KWH per MT of bio-diesel. The whole facilities require
about 25 KWH per MT of production with provision of generator set for
emergency.
 Total water requirement is 300 KL per day
Steam requirement is 1.60 MT of bio-diesel
LDO is used for thermic fluid heating. Fuel requirement is 0.033 MT per MT of
bio-diesel
Work force requirement

Administration (incl. supervisors) 12

Plant operators 48
Total 60

Raw Materials BLOCK DIAGRAM

Oil & Fats
BIO-DIESEL PRODUCTION

CPO Pre-treatment
Chemicals

Methanol
+ Transesterification Glycerin Treatment
Catalyst

Bio-Diesel Crude Glycerin

Washing & Drying > 80% concentrated

Bio-Diesel Glycerin Distillation

Ready for Use & Bleaching

Glycerin in
Pharmaceutical quality
> 99.5% concentrated
PRODUCTS – TECHNICAL DETAIL

Product Description

Bio-diesel is a product manufactured from any vegetable oil by reacting it with

methanol in the presence of a catalyst. The products are:

1. Bio-diesel
2. Glycerol
3. Fatty acids

Vegetable Oils Technical Detail

Vegetable oil is the main raw material used in the manufacture of bio-diesel. Tri-
glycerides, the main constituents of vegetable oils and animal fats, are either solid or
liquid at normal room temperatures. In solid form, tri-glycerides are called fats or
butters and in liquid form, they are called oils. In the fat or oil from plant or animal
origin, the fatty acids occur in the form of Glyceride. Chemical analysis of all oils and
fats reveal that they are mixtures of glyceryl esters of fatty acids. Tri-glycerides are
formed from one molecule of glycerol and three molecules of fatty acids.

3 fatty Acids + glycerol Tri-glyceride + 3 water

If the three fatty acids are identical, then the product is a simple tri-glyceride.
However, if the three fatty acids are different, then mixed tri-glyceride is produced. In
each mixed tri-glyceride, wherein the origin of three different fatty acids is present,
isomeric forms can be seen. As the molecule of glycerol possesses three hydroxyl
groups, it is capable of combining with one, two or three molecules of an acid,
forming mono or tri-glycerides. Vegetable oils contain about 10-15 percent glycerol
by weight.

O HO ─ CH2
H H
CH3(C H2)7 ─ C = C ─ (CH2)7 ─ C ─ OH HO ─ CH2

HO ─ CH2

Oleic Acid Glycerol or Glycerin

Glycerol is a trihydric alcohol (containing three –OH hydroxyl groups) that can
combine with up to three molecules of fatty acids to form monoglycerides,
diglycerides, and triglycerides. Fatty acids may combine with any of the three
hydroxyl groups to create a wide diversity of compounds. Monoglycerides,
diglycerides, and triglycerides are classified as esters, which are compounds, created
by the reaction between acids and alcohols that releases water (H2O) as a by-
product. An ester is a compound formed from the reaction between an acid and an
alcohol. In esters of carboxylic acids, the –COOH group of the acid and the –OH
group of the alcohol lose a molecule of water and become a –COO– linkage.

Bio-diesel Technical Detail

Bio-diesel refers to the ethyl and methyl esters of vegetable oils. It can be used as a
100% replacement of diesel or as a blend of up to 20% without any modification to
engines. 100% bio-diesel can also be used with minor modifications to the fuel lines
and oil seals of intended engines. Diesel and bio-diesel can be mixed in any
proportion. Bio-diesels are typically made from oils such as soybeans, rapeseeds,
sunflowers, Canola, palm, Jathropha, Honge, waste vegetable oils, micro algae oils,
animal tallow and etc. Bio-diesel can also be made from hydrocarbons derived from
agricultural products such as rice hulls.

Standard Specifications of Bio-Diesel

Item Fuel Property Value

1. Fuel Standard ASTM PS 121
2. Fuel Composition C12 - C22 FAME
3. Lowering Heating Value, btu/lb 120.91
4. Kinetic Viscosity at 40°C 1.9 – 6.0
5. Specific Gravity, kg/L at 60°F 88 %
6. Density, lb/gal at 15°C 7.328
7. Water, ppm by wt 0.05% max.
8. Carbon, wt % 7700 %
9. Hydrogen, wt % 1200 %
10. Oxygen by difference wt % 1100 %
11. Sulphur, wt % 0
12. Boiling Point, °C 182 – 338
13. Flash Point, °C 100 – 170
14. Cloud Point, °C -3 to 12
15. Pour Point, °C -15 to 16
16. Cetane Number 48 - 60
17 Stoichiometric air/fuel ratio, wt/wt 13.8

Glycerol Technical Detail

Glycerol is the main by-product in the manufacture of bio-diesel. During trans-

esterification process, 8 – 10% of the bio-diesel produced is glycerin. When vegetable
oils treated with ethanol or methanol, crude glycerol is produced. Glycerol has the
chemical formula of C3H5(OH)3. It is a trihydric alcohol, possessing two primary and
one secondary hydroxyl groups.

HO ─ CH2

HO ─ CH2

HO ─ CH2

These primary hydroxyl groups are its potential reaction sites and the basis for
glycerin’s versatility as a chemical raw material. For example, glycerol esters, the
reaction products of glycerin with various fatty acids form an important class of
derivatives that are extensively used in the food industry. Glycerin is one of the most
versatile and valuable chemical substances known to man. It possesses a unique
combination of physical and chemical properties that are utilized in many products.
Glycerol is clear, odorless, viscous liquid with a sweet taste and is derived from both
natural and petrochemical feed stocks. It occurs in combined form (triglycerides) in
all animal fats and vegetable oils.

Glycerin is obtained from fats and oils during soap and fatty acid production and by
trans-esterification. It is subsequently concentrated and purified prior to commercial
sale. Synthetic glycerin is produced from petrochemical building blocks via several
processing steps designed to achieve the desired concentration and high product
quality. Glycerin, whether recovered from triglycerides or synthesized, is principally
used as a highly refined and purified product, with a very high concentration of
glycerol. Most of the glycerin marketed today is manufactured to meet the
pharmaceutical requirements.

Fatty Acids Technical Detail

There are many methods to separate fatty acids from the vegetable oils. Fatty acid
manufacturing units have splitting, distillation, as well as high-pressure fatty acid
hydrogenation plants. The diversification of processes is intrinsic in overcoming the
inherent problems of odor, color, and superfluous content in oils. Patented process
are developed to convert various non-edible oils into pale colored completely
deodorized distilled fatty acid which is suitable for use in high quality toilet soap.

The hydrolysis of fatty triglycerides by the use of water, will results in the production of
the constituent fatty acids and dilute glycerin which is also called fat splitting. As fats
are mixed triglycerides, mixtures of different fatty acids are obtained. Certain
catalysts greatly reduce the time taken to split the fats. The process requires relatively
simple equipments and operates at atmospheric pressure. Ammonium hydroxide,
potassium, sodium, lithium, calcium, magnesium, and zinc oxide are the useful
catalysts in the order of increasing effectiveness.

The main products are stearic acid, oleic acid, fatty acids for making soap, grease
and glycerin. The complete range of products including distilled and fractionated
fatty acids such as caprylic, capric, lauric, myristic, palmitic, oleic, stearic and atc are
widely manufactured. Cosmetic grade of stearic acid (eutectic of palmitic and
stearic acids) are widely used. While non-soapy detergents have virtually replaced
laundry soaps, toilet soaps continue to be based on fatty oils.

Since fatty acids are a key raw material for a wide range of industries, future
demands for fatty acids, fatty acid fractions, stearic acids, distilled fatty acids,
polyunsaturated fatty acid, conjugated fatty acid products, castor oil derivatives,
and glycerin continue to grow in-line with economic development.

PRODUCTS – APPLICATIONS

Bio-Diesel Applications

Bio-diesel has very similar combustion properties to petroleum diesel. It can be used in
its pure form or it can be mixed with petroleum-based diesel and is miscible from 0 –
100%. 100% bio-diesel is called Net Bio-diesel or B-100. Diesel with 20% bio-diesel and
80% petroleum diesel is called B-20. Bio-diesel blends operate in diesel engines, from
light to heavy-duty, just like petroleum diesel fuel.

No engine conversions are required at all, unless an engine has old fuel lines. B-100
can be safely used in new diesel engines with minor modifications to the valve timing.
Except for a small drop in caloric value and mileage, there is no difference between
petro-diesel and bio-diesel. In B-20, the drop in mileage is so small that it is very
difficult to detect.
Glycerin Applications

Glycerin has over 1,500 known end uses. Glycerin is used extensively as an ingredient
or processing aid in food and beverage products, lubricants, electronics, rubber,
cosmetics, toiletries, personal care products, drugs and explosives. The physical
properties and characteristics of glycerin are as significant as its chemical properties
for many applications. These qualities enable glycerin to be used as a humectants,
plasticizer, emollient, thickener, solvent, dispersing medium, lubricant, sweetener,
bodying agent, antifreeze and processing aid. Sometimes glycerin contributes to two
or more features or attributes in a product or application. In all application (as a
reactant or as an additive) the virtual non-toxicity and overall safety of glycerin is
always of significant benefit. Glycerin applications appear to be limited only by the
imagination and creativity of the scientific and technical communities.

Fatty Acids Applications

Fatty acid is one of the basic organic chemical materials. Based on its different
structure, fatty acids can be classified into three groups, i.e. saturated fatty acid,
unsaturated fatty acid and fatty acid derivatives. Saturated fatty acid is mainly used
as rubber additives and in the field of latex polymerization. In the plastic industry,
saturated fatty acid can be used as stability dose, lubricant dose and adding plastic
dose. Unsaturated fatty acid mainly includes tall fatty acid and oleic acid and used
mainly as flotation dose. Oleic acid is used principally for making lubricants, inks and
chemical specialties. Other fatty acid such stearic acid is used in rubber, grease,
cosmetics, textile, metallic stearate, paints and metal polish.

Fatty acids are important chemicals, which are widely used in many chemical fields
in the world. The products are used in a wide variety of applications including
detergents, soaps, cleaners, stabilizers, food additives, industrial surfactants, coating,
pharmaceuticals, personal care, rubber products and alkyd resins.

ADVATAGES AND LIMITATIONS OF BIO-DIESEL

1. Bio-diesel is a potential alternative fuel for clean-air transport vehicles

2. Bio-diesel does not contain any sulfur, heavy metals, or crude oil residues. This
reduces the formation of acid rain and corrosion of the vehicle parts.
3. Bio-diesel is free from toxic and carcinogenic aromatics like benzene, toluene
and xylene and poly-aromatic hydrocarbons. It also reduces such emissions
when blended with regular diesel. An engine running on 100% bio-diesel would
have no aromatic emissions.l
4. Biodiesel with high cetane number 49 to 62 has higher combustion efficiency.
Bio-diesel improves the combustion of petroleum diesel in blends.
5. The ozone (smog) forming potential of bio-diesel is less than 50% of diesel fuel.
6. Nitrous Oxide (NOx) emissions are slightly more with 100% bio-diesel and blends.
However, NOx control technologies that cannot be used with conventional
diesel can be used with bio-diesel, creating the possibility of effective NOx
emissions.
7. Bio-diesel does not add net carbon dioxide to the atmosphere. Supplementing
fossil fuel with bio-diesel helps to reduce the accumulation of CO2.
8. Bio-diesel production has positive energy balance ratios ranging from 2:5:1 up to
7:4:1.
9. Bio-diesel is much less toxic to larvae of crustacean and other marine life than
petroleum oil and crude oil. Bio-diesel will have less impact to aquatic and
marine organisms than petroleum diesel if accidentally spilled or inadvertently
 discharged. Water pollution will be reduced by using bio-diesel in ship/boat
engines.
10. Bio-diesel biodegrades about twice as fast as petroleum diesel and enhances
the biodegradation rate for diesel fuel blends.
11. Bio-diesel is handled like any other fuel to avoid contamination of seawater and
waterways.
12. Bio-diesel improves the lubrication properties of the diesel fuel blend and
reduces engine way.
13. Bio-diesel has a slightly lower heat of combustion, but is compensated by net
combustion efficiency for the blended fuel. With B-20, there is no noticeable
difference in power output.
14. Good performance in fuel combustion with bio-diesel and its blends resulted in a
smooth running engine. Engine with bio-diesel is also quieter and smoother at
idle.
15. Engine operating on the B-20 blend attained 98.5% of the power of a regular
diesel engine. At 100% bio-diesel, the engine generated only 92% of the power.
16. There is a net decline of about 15% in the mileage obtained using Neat Bio-
Diesel. With B-20, the fuel consumption difference is barely noticeable.
17. Old rubber fuel lines and some seals or gaskets on fuel tanks may slowly
deteriorate in the presence of higher concentrations of bio-diesel. With B-20,
however, the effects are not as significant. Nevertheless, new synthetic rubbers
like Viton are known to be resistant to bio-diesel.
18. For B-20, all engine manufacturers are accepting the warranties.
19. Bio-diesel has no noxious odors and is considered as harmless to handle but
safety precautionary measures are to be observed.
20. Bio-diesel would be much safer to handle and store. Since it has no volatile
components, the product poses no risk of explosion caused by accumulated
fumes.
21. Bio-diesel can be stored for long periods in closed containers with little
headspace. The containers should be protected from weather, direct sunlight
and low temperatures.
22. Low temperatures can cause bio-diesel to gel, but it will quickly liquefy as it
warms up. In cold weather (near or below freezing), additives can be used to
prevent coagulation.
23. Both petroleum diesel and bio-diesel are susceptible to growing microbes when
water is present in the fuel. It is very important to monitor the filters on a diesel
engine that has been switched over to bio-diesel, particularly if the tank is old
and has not been cleaned.

Bio-Diesel Emissions Compared to Conventional Diesel

Item Emission Type B-100 B-20

Regulated
1. Total Unburned Hydrocarbons -67% -20%
2. Carbon Monoxide -48% -12%
3. Particulate Matter -47% -12%
4. Nitrous Oxide (NOx) +10% +2%
Non-regulated
5. Sulfates -100% -20%
6. PAH (Polycyclic Aromatic Hydrocarbons) -80% -13%
7. nPAH (nitrated PAH) -90% -50%
8. Ozone potential of selected Hydrocarbons -50% -10%
MARKET ANALYSIS AND POTENTIAL

Market for Bio-Diesel

Bio-diesel is now established as an alternate fuel that can be mixed with mineral
diesel in any proportion without any engine modification. Europe, in particular
Germany, has led the way in promoting this fuel as all EU countries are signatories to
the Kyoto Protocol which mandates reduction of carbon emissions contributing to
global warming. Bio-diesel is currently produced in at least 21 countries, mainly
European Union, East Europe and in the USA.

Europe

Since bio-diesel has been established as a fuel helping the cause, the EU has set
themselves a target of at least 5.75% blending by 2010. Germany, France and a few
other countries have already started using 1-2% mix of bio-diesel in their cars and
other diesel engines and are willing to increase this blending percentage if more bio-
diesel is available.

Bio-diesel was first produced as a fuel on a commercial scale in Germany in 1991. In

2003, Europe’s total production is at 2 billion liters, and in 2004, Germany’s production
alone exceeded 1.1 billion liters. There are now over 1700 filling stations in Germany
and Austria. Many European car manufactures, including VW and Mercedes Benz,
have approved bio-diesel for their engines.

In France, all diesels sold for vehicle fuel in the entire country ranges from 1% to 5%
bio-diesel mainly from rapeseed. 0 – 100% bio-diesel are used in Europe to operate
diesel engines in transport vehicles. However, due to limited supply, bio-diesel is used
at ratios not exceeding 20%. In Germany alone, where the price of bio-diesel (tax
exempt) is similar to petroleum diesel (with taxes), over 350 fuel stations offer bio-
diesel for sale to motorists. In Germany and France, 5% of the petroleum diesel is
replaced by bio-diesel.
In Europe, where fuel prices favor diesel-powered vehicles, more than 40% of
passenger cars run on fuel-efficient diesel engines. European governments are
facilitating the integration of bio-diesel into their industry’s fuel mix. They are offering
incentives for its production. Germany currently has zero excise duty on bio-diesel
compared with Euro 0.474/liter duty on petroleum diesel and the UK has a duty
reduction of ₤0.20/liter compared with ₤0.20/liter of duty on petroleum diesel. The
estimated bio-diesel capacity of EU countries by end 2006 is between 3.3 to 4.1 million
tones. [Source: FEDIOL – EU Vegetable Oil Industry Federation]

15

10

5
Production

0 Demand
2004 2005 2006 2007 2008 2009 2010

Bio-Diesel Production vs. Demand for EU Countries (million ton)

USA

Bio-diesel is catching on in the USA. US Environmental Protection Agency (EPA) and

the Department of Energy now designate the B-20 blends as an official “alternative
fuel” in the Alternative Fuel Transportation Program regulations. Current bio-diesel
production capacity in the US is estimated at about 523,000 metric ton a year, with a
possible doubling within 12 to 18 months depending on demands. There is a huge
potential market in the US as about 95 percent of all freight, through trucking,
railroads and shipping, are running on diesel engines. However, only three percent or
about 4 million out of 135 million registered passenger cars run on diesel.

Asia and the Rest of the World

Major produces of crude palm oil - Malaysia, Indonesia and Thailand, have started to
show interest in bio-diesel. A number of factories are already in operations producing
bio-diesel mainly for the European market as bio-diesel usage is still in its infancy in
these countries. The Philippines intends to use overcapacity in coconut oil to produce
bio-diesel. In Australia, four oil mills are built with the government providing Aus$50
million subsidy for their construction. The raw materials used are rapeseed and animal
fat.

Bio-diesel is also emerging in Japan as the authority imposes ever stringent emission
standards. India has taken a step forward with a plant producing bio-diesel from
castor oil residue, along with a few other small experimental plants in operation. Steps
are also being taken to cultivate waste lands with non-edible vegetable oil seeds.
Brazil has introduced an admixture of 2% bio-diesel extracted from soybeans since
late 2004 and the reception has been very encouraging.

In view of these positive global trends coupled with the continuous surge in crude oil
prices, bio-diesel production and consumption is expected to grow, not just in Europe
but also worldwide.

Market for Glycerin

The market for glycerin is divided into seven major areas. They are in descending
order of consumption - USA, Europe, China, the South-East Asia, Japan, India and
Southern Africa. The total production output is around 1.0 million metric ton in the
world and as of today, there is evidence of over supply. This condition is not going to
get better with the proliferation of bio-diesel plants all over the world producing
glycerin as a co-product, unless the technical and scientific communities can conjure
up more ways to utilize glycerin, adding to an already impressive list of applications.

World Glycerin Demand

Item Year Demand Growth

MT/Annum %
1. 1992 638,000
2. 1995 730,000 4.8
3. 1998 800,000 3.2
4. 2001 861,500 2.5
 World Glycerin Production – 2000

Source Proportion
Fatty Acid 40%
Soap 25%
Esters/Alcohol 15%
Bio-diesel 10%
Synthetic 10%
Source – National Renderers Association, The Bulletin, Issue No. 829, Jan-Mar 2002

Market for Fatty Acids

Together with glycerin, fatty acid is a co-product and both are targeted for domestic
market only. There should be enough requirements from local manufacturers based
on continuity and growth in related manufacturing concerns especially for soap and
personal hygiene products, which are dominated by major players such as Lam Soon,
Colgate Palmolive, Unilever etc.

MARKETING ARRANGEMENTS

Bio-diesel is targeted for export to Japan while glycerol and fatty acids are for
domestic sales. The export of bio-diesel is handled by PERTAMA Biofuel, a partner in
this venture, who has managed to secure a 5 year contract supplying 120,000 MT to
Japan at a price which is linked with petro-diesel prices. In this backdrop, marketing is
not a major issue, thus the company can manage with a small marketing team to
handle local sales of glycerin and fatty acids.

Once the factory is fully operational, 360,000 MT of bio-diesel will be exported to

Europe. The company will reach out to potential European customers through the
following channels:
i. Petroleum Refineries (78 nos. of refineries in Europe as of 2005)
ii. Petroleum Distributors
iii. Fleet Owners
iv. Niche Market Segments (Tour Operators and others who buy bio-diesel at
a premium)

FUTURE SCALABILITY

The proposed plant layout design caters for upward scalability in a short period of
time. All 5 phases of development is to be completed within 3 years from
commencement.

PRICING POLICY

There is no definitive price for bio-diesel. Being a Renewable Energy source,

Governments the world over is supporting bio-diesel in various ways. In Germany, for
example, bio-diesel is not taxed but subject to value added tax of up to 16%. France,
UK and Italy are levying on lowering bio-diesel tax. Japan has no clear policy. Current
practice by other producers is to use Normal Diesel price as a benchmark while
incorporating other factors such as CIF cost, import duty, excise duty, fuel tax, VAT,
marketing margins etc to reach the final figure. For cash-flow purposes, the sales
prices used are the current market prices of USD 550.00 per MT FOB for export to
Japan and USD 600.00 per MT FOB for export to Europe.

SWOT Analysis

Strengths
Guaranteed sales of main product (B-100
bio-diesel)
Good potential market for co-products
(glycerol & fatty acids)
Factory setup in a major CPO producing
country.
Could benefit from government policies
and aid
Availability of well proven technology
Weaknesses
Small size company undertaking a major
venture
Heavy capital investment relative to size of
current business
Bio-diesel is extremely sensitive and can be
affected by many factors: raw material
price, export price, exchange rate
Malaysian banks and investors are not
receptive to the bio-diesel industry

Opportunities
Early bird advantage and could benefit
from present and future world-wide
demand for bio-diesel especially the less
tapped Asia-Pacific market
Processing cost is lower than that of
European countries
Threats
Possible large scale set-up by new players or
mushrooming that may result in dilution of the
market and unhealthy competition
Competitive pricing by other exporters to
Japan

PROPOSED STRUCTURE

Hans-Jib- Investor
PERTAMA
Consortium
- Secured Customer - Capital Investment
- Technology & Expertise

30% 70%
Manufacturing Arm
(New Company)

120,000 MT Bio-diesel for 360,000 MT Bio-diesel for

Japan Market Europen Market
Pharma-Glycerin & Fatty
5 year Contract
Acids for Malaysian
Market