5 – McCabe 2014 Corn Stalks As A Revenue Source

Report
Corn Stalks As A Revenue
Source
Why and How?
Don McCabe
Ontario Federation of Agriculture
Blue Water Corridor Conference
A Bi-National Approach to Innovation and Collaboration
Bi-National Clusters: Focus on Bio-industrial Innovation
June 11, 2014
Sarnia
Definition of a Farmer
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Cash crop
Corn, soybeans, wheat farmer
Beef farmer
Fruit and vegetable producer
Egg producer
Pineapple plantation
Or……..
Definition of a Farmer
• Manager of carbon and nitrogen cycles with input
from the water cycle to produce starch, oil,
protein, fuel, fiber and energy for world wide
consumers at the highest quality.
The Canadian Biosphere
What Saved Mankind?
Introduction of
Technology
Everything in this
slide has a price
point to market
Combine and
Head (AGCO)
Corn (CBOT)
Stalks and Cobs (Value
chain cooperative or
commodity pricing?)
http://www.biobasedsociety.eu/2013/02/respe
ctful-treatment-of-thecomplexity-of-biomass/
Biomass can be integrated sustainably into the existing
fossil-based Chemistry Value Chain
Bio-based Feedstocks
- can be blended
into current
refinery products
as biofuels (eg.
ethanol)
- can replace
existing primary
chemicals for the
production of
polymers and
higher value added
chemicals
Processed Biomass
- can be used in
finished products
that are used in
manufacturing and
assembly
Fossil-based
Feedstock
Refiner
End
User
Primary
Chemicals
Polymers &
Chemicals Finished
Products
Bio-based
Feedstock
Processed
Biomass
Manufacturing
& Assembly
Amount of Sustainably Harvestable
Ag Residue in 4 County Area
Amount of Sustainably Harvestable
Corn Stover (dry tonnes)
Amount of Sustainably Harvestable
Wheat Straw(dry tonnes)
800,000
500,000
700,000
450,000
400,000
350,000
500,000
tonnes
tonnes
600,000
400,000
300,000
300,000
250,000
200,000
150,000
200,000
100,000
100,000
50,000
0
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Chatham-Kent
Lambton
Middlesex
Huron
2003 2004 2005 2006 2007 2008 2009 2010 2011* 2012*
*Preliminary
Chatham-Kent
Lambton
Middlesex
Huron
Assumptions For the Cellulosic
Sugar Plant
• 250,000 tonnes/yr of corn stover
• 115,000 tonnes of sugar produced with
90,000 tonnes/yr of lignin
• Capital cost of the plant = $70 Million (1/2
financed over 10 years)
Supply Co-op: Direct Sale Pricing Option
Corn Stover Cost Estimates ($/dry tonne)
Grain corn yield
Stover moisture
Stover removal rate
Stover removed
8x4x3 foot bale weight
Harvest costs
Discbine/stalk chop
Rake
Large square baling
Stack end of field
Storage end of field
Nutrient replacement
Production management issues (15%)
Transportation 75 km
Administration
Stover cost sub-total
165 bu/ac
30%
30%
0.88 dry tonnes/ac
371 kg
$/dry tonne
20.45
9.09
43.14
5.39
8.00
11.57
14.65
15.97
1.00
129.27
Stover sold at FULL cost to the sugar company
Financial Model for Corn Stover Supply Co-op
General Parameters
Plant biomass capacity (tonnes/year)
Unit capacity cost ($/tonne/year)
Debt to equity ratio
Interest rate (%)
Loan repayment period (years)
Price of cellulosic sugar ($/tonne)
Price of lignin co-products ($/tonne)
Cost of corn stover ($/dry tonne)
Production and Revenue
Cellulosic sugar production (tonnes/year)
Lignin production (tonnes/year)
Cellulosic sugar revenue (M $/yr)
Lignin revenue (M $/yr)
Total revenue (M $/yr)
Cost Items
Operating costs
Corn stover cost (M $/yr)
Operating costs (M $/yr)
Financing costs
Total capital cost (M $)
Initial loan (M $)
Initial equity (M $)
Interest (M $/yr)
Loan repayment (M $/yr)
Sub-total financing costs (M $/yr)
Net income (M $/yr)
Income tax (M $/yr)
Return on equity (%)
Value
250,000
$280.00
1.00
5.00%
10.00
$400.00
$40.00
$129.27
Value
115,000
90,000
$46.00
$3.60
$49.60
Value
$32.32
$10.00
$70.00
$35.00
$35.00
$1.03
$3.50
$4.53
$2.75
$1.25
4.29%
Effect of Grain Corn Yield on ROE and
Cost of Stover in a Supply Co-op
Sensitivity Analysis: Corn Stover Supply
Chain Costs (From Glenn Farris AGCO)
Top 4 highest supply chain
cost influencer related to
baling operation
10 out of 15 top supply chain cost influencers related to
feedstock supply operations
(i.e., Production-specific parameters)
decrease by
~$22/std. Mg
increase by
~$29/std. Mg
Bale density
alone can
decrease
supply chain
cost by
~$8/std. Mg
Bale density
alone can
increase
supply chain
cost by
~$9/std. Mg
Effect of Harvest Activities on ROE
and Cost of Stover in a Supply Co-op
Stover Supply Compared to a
Bioprocessing Co-op
• The Bioprocessing Co-op now sets the ROI at
15%
• Calculations are done now to maintain
producer/investor ROI
• The price paid for stover is now calculated out
to meet the ROI
Financial Model for Bioprocessing Co-op
General Parameters
Plant biomass capacity (tonnes/year)
Unit capacity cost ($/tonne/year)
Debt to equity ratio
Interest rate (%)
Loan repayment period (years)
Price of cellulosic sugar ($/tonne)
Price of lignin coproductsproducts ($/tonne)
Cost of corn stover ($/tonne)
Production and Revenue
Cellulosic sugar production (tonnes/year)
Lignin coproduct production (tonnes/year)
Cellulosic sugar revenue ($ million/year)
Lingin revenue ($ million/year)
Total revenue ($ million/year)
Cost Items
Operating costs
Corn stover cost (M $/yr)
Operating costs (M $/yr)
Financing costs
Total capital cost (M $)
Initial loan (M $)
Initial equity (M $)
Interest (M $/year)
Loan repayment (M $/yr)
Sub-total financing costs (M $/yr)
Net income (M $/yr)
Income tax (M $/yr)
Return on equity (%)
Value
250,000
$280.00
1.00
5.00%
10.00
$400.00
$40.00
$110.52
Value
115,000
90,000
$46.00
$3.60
$49.60
Value
$27.63
$10.00
$70.00
$35.00
$35.00
$1.03
$3.50
$4.53
$7.44
$2.19
15.00%
Effect of Sugar Price on Cost of Stover
in a Bioprocessing Co-op
Effect of Sugar Yield on Cost of Stover
in a Bioprocessing Co-op
Fossil Based
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Can we do it?
Sarnia BioHybrid Cluster
Air Products
BP Energy
CF Industries
DuPont
Ethyl Corporation
Exxon-Mobil
LANXESS
NOVA Chemicals
Ontario Power
Generation
Pembina
Praxair
Royal Dutch Shell
Styrolution
Suncor Energy
TransAlta Energy
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"Based on the first term of funding it is evident that
BIC is becoming an organization that will create a
legacy for Canada in the bioindustrial and
bioinnovation sectors."
Mayor Mike Bradley
Sarnia, Ontario
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Bio/Renewable Based
Sandy Marshall
BioAmber
Cargill
Enbridge
Greenfield Ethanol
Methes Energy
KmX
Solutions4CO2
Suncor Ethanol
Woodland Biofuels
•80% of
Ontario
soybeans
and corn
within
200km
24
Development of a Business Case for a
Cornstalks to Bioprocessing Venture
• Agronomic benefits possible with corn stover
removal
• Model of bioprocessing co-op helps to derisk
project
• Need for a cellulosic sugar mill
http://www.ofa.on.ca/uploads/userfiles/
files/cornstalkreport-final.pdf
Summary
• The opportunity is here
• Companies are looking at Ontario
• Sugar from biomass is a new commodity and
investment opportunity
• Supply to logistics means numerous regional
locations will be needed with local economic
impact
http://www.ofa.on.ca/uploads/userfiles
/files/cornstalkreport-final.pdf
When Will We Reach Our Potential?

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