biodiesel BUSINESS PLAN

 

 

Table of content

 

 

 

1. Executive summary

3

1.1. Mission  and objectives

3

Company description

3

3. Product Description

4

3.1 Key Advantages and Performance of Biodiesel

5

3.2. Sourcing

5

3.2.1. Used cooking oil

6

3.2.2 Jatropha

6

3.2.3. Rape oil.

9

3.2.4. Palm oil

9

3.2.5. Soybean oil

9

3.3. Biodiesel production costs

11

3.4. Future Products and Services

11

3.5. Technology

12

4. Market analysis

13

4.1. Market for biodiesel in

15

4.2. Market prices

15

4.3. Competitors

16

4.4. Sales and marketing strategy

16

5.  Project competitive advantages

17

5.1. Process advantages

17

5.2. Product advantages

17

5.3. Company advantages

 

6. Management and personnel

 

6.1.Key members of management team

 

7. Sales forecast

 

8. Financial Planning

 

8.1. Project Financing

 

8.2 Break-even Analysis

 

8.3. Projected Profit and Loss Report

 

8.4. Projected cash flow

 

8.5. Sensitivity analysis.

 

9. Risk Management:

 

10. Future Plans.

 

11. Exit Strategy

 

 


  1. Executive summary

 

_______________________________ manufactures biodiesel, renewable fuel from vegetable oils, in _________________________. Purpose of the business plan is to attract financing into creation of biodiesel production plant.

    We offer fuel with the same performance as that of conventional diesel, at competitive price and ecologically safe. Our markets expand rapidly all over the world due to growing ecological concerns and limited energy supply. Our target customers located in _____________________.

      Our team’s skills cover all aspects of creating and managing the biodiesel production project: organizing, financing, auditing, marketing, promoting business, solving technical and organizational problems.

   The capacity of the plant is ________________ gallons per year, the full capacity is intended to be reached by the end of the fifth operational year. By that time we plan _____________ $ turnover, producing                             ___________ $ net profit and positive cash flow of _________________ $. To reach these goals, we need                      _______________________ $ investment to buy land, processing equipment, and finance working capital. 

 

 

1.1. Mission and objectives.

 

   Core competence of ____________________________ is production of renewable and environment friendly fuel, biodiesel. We intend to satisfy constantly growing demand for biofuels worldwide and to generate fair return for investors and financing continuing growth and development.

       We plan to start production of biodiesel in ________________________, to reach full plant capacity in 1 year and to double it at the year 3.

 

2. Company description

 

    __________________________ is a start-up focused on renewable energy production from agriculture-based feedstock.   The Company owning the production unit will be formed under ____________________ law as an  ___________.    

 

3. Product Description

 

    The company is planning the production of Biodiesel as a primary product with Glycerin as a by-product.  Glycerine will initially be sold to the soap and cosmetics industries.  Subsequently, the company will consider an approach with more added-value.

 

     Biodiesel is the name for the methanol-ester-based biofuel made from vegetable oils or animal fats. In this business plan biodiesel will be produced from ___________________.   

                

3.1. Key Advantages and Performance of Biodiesel

 

     Biodiesel is a clear liquid, without unpleasant odor or handling characteristics, of virtually the same viscosity as mineral fossil diesel oil. For this reason, it may be used in a standard diesel engine without additional modifications. It may also be blended with petrodiesel to improve quality of latter.  There are even examples of usage crude vegetable oil (not processed into biodiesel) in specially designed diesel engines, or blended (50/50) with petrodiesel oil in ordinary diesel engines.

   1. Biodiesel is the only alternative fuel that runs in any conventional, unmodified diesel engine. It can be stored exactly like petroleum diesel. Biodiesel shows similar fuel consumption, horsepower, torque, and haulage rates as conventional diesel fuel.

   2. Biodiesel can be used alone or mixed in any ratio with petroleum diesel. The use of biodiesel can extend the life of diesel engines because it is more lubricating than petroleum diesel fuel, while fuel consumption, auto ignition, power output, and engine torque are relatively unaffected. Lubricity results of biodiesel and petroleum diesel using industry test methods indicate that there is a marked improvement in lubricity when biodiesel is added to conventional diesel fuel. Even biodiesel levels below 1 percent can provide up to a 30 percent increase in lubricity.

   3. Biodiesel is safe to handle and transport because it is as biodegradable as sugar (pure biodiesel degrades 85 to 88% in water within 28 days), 10 times less toxic than table salt (lethal dose is greater than 17.4 g/Kg body weight, while for salt (NaCL) it is 1.8 g/Kg), and has a high flashpoint of about 200°C compared to petroleum diesel fuel, which has a flash point of 70°C.

     4. Combustion of biodiesel provide over a 75- 90% reduction in environmental pollution and a 90% reduction in cancer risks.

     5. Biodiesel is the only alternative fuel to meet all environmental and human health requirements for energy sources.

     6.  Biodiesel is the only biofuel, which received approval from most car manufacturers; it is a proven fuel with over 20 years of use in Europe and 30 million successful US road miles.

      7.  Biodiesel has the highest energy yield in comparison to other fuels, including conventional one: ethanol, distilled from cellulose.

      8.Biodiesel is nontoxic and poses little or no health risk to humans. Vehicles that run on biodiesel emit less sulfur dioxide (SO2), particulate matter (soot), carbon-dioxide (CO2), with fewer heavy Hydrocarbons (HC) and Polycyclic Aromatic Hydrocarbons (PAH). Biodiesel does not contain sulfur so it will not contribute to sulfur dioxide emissions that result in acid rain. Tests have shown that the cancer-causing potential of particulate matter from pure biodiesel is about 94% less than that of regular diesel.

 

 3.2. Sourcing

 

      One of the most important problems for biodiesel manufacturers is high cost of feedstock. The major source of raw materials for biodiesel production in Europe is rape (canola); for US and South American manufacturers it’s soy bean; for many other countries it’s also palm oil. Due to constantly growing demand for biodiesel, vegetable oil prices on the world market are following an upward trend. For this reason, the company will start operations with   The Company is also considering the import of  .

 

3.2.1. Used cooking oil

 

      Here’s description of your local or overseas supplier

 

3.2.2 Jatropha

  

     Jatropha is believed to originate from Mexico and later been introduced to Africa and Asia. This highly drought-resistant species is adapted to arid and semi-arid conditions. It has few conditions with respect to its environment: it can grow in areas that are unsuitable for other plants, because of soil depletion. It’s a labor intensive plan, which, however, requires minimum investments after maturity (in 2 years) with regular and stable harvests for min. 50 years The reason is that Jatropha is not needed to be replanted every season like other oil crops which saves labor and other cost. Jatropha yield per hectare per year is up to 8.0 tons of seed, which contain over 37% oil[1]; Jatropha seeds do not require special conditions for storage; Jatropha shell after pressing makes a valuable fertilizer.  Jatropha is a natural pest and bug killer requiring no additional pesticides; it is possible to intercrop Jatropha with other plants to increase productivity of land or to create a living fence around.

 

 

   

 

    Many national governments are interested in effective use of wasted lands, creation of stable income in local communities, and developing production of alternative fuels.  For example, in India alone there are about 552,692.26 sq km of wastelands, out of which 62.87% amounting to 347,490.15 sq km are suitable for cultivation of Jatropha. 

       

Summary: Benefits of Jatropha

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·       It is a perennial crop, i.e. a tree, and thus requires far less fertilizer and chemicals than annuals and qualifies for CERs

·       It can provide additional income to rural communities in the tropics

·       It can be used as a support for climbing plants such as vanilla, etc., which augmenting its income potential

 

3.2.3. Rape oil.

 

    Rapeseed oil now makes up between 80%–85% of the EU biodiesel. Prices for Rape have been falling for the last 2 years, because of record harvests, see the graph below. But it is unlikely that these records would be repeated, and increase of demand worldwide will keep prices higher. We expect average market price for Rape in 2006 – $250 per tone, and average price for Rape oil – $670 per tone, depending on season (fall prices are usually lower than spring ones.

  

3.2.4. Palm oil.

 

    The world largest suppliers of Palm oil are Malaysia, which produces 45% of the world’s supply and Indonesia (39%) These countries would supply up to 20% of the European Union’s biodiesel needs by 2010.[2]

    The strong growth in Palm oil consumption over the last six years has resulted in Palm oil being the dominant oil in the global market. As Soybean oil prices began to rise in 2001-02, the spread between Palm oil and Soybean oil began to widen, increasing the competitiveness of Palm oil in the world market. Since 2001-02, Palm oil consumption has increased 13.2 million metric tone, compared to an 8.7 MMT increase in Soybean oil consumption. This lower price, compared to other major oils, primarily Soybean oil, has given Palm oil a competitive advantage in both these large oil consuming countries. The rising trend is attributed also to making Trans Fatty Acid (TFA) label effective in the United States in January, 2006. The association of Palm oil companies (Gapki) predicted the prices of crude Palm oil (CPO) will hover around US$600 per ton this year and will not dive lower than US$550 per ton[3].

  

3.2.5. Soybean oil.

  Soybean oil shipments are estimated to remain unchanged, thus accounting for a lower share of total trade of oil seeds than usual[4], with current trend of gradual price increase for soybean oil futures[5]:

 Date
Price , cents per lb.
March
30.22
May
30.59
July
31.1
 

 

Conclusion: we proved in the plan the following purchasing prices of raw materials:

-          Used cooking oil –   

-          Jatropha oil-  

 

3.3. Biodiesel production costs 

     Other important costs are costs of raw materials, chemicals and energy: 1 ton of oil plus 0.12 ton of methanol plus 0.01 ton of KOH. Please refer to Table 4 for summary. Energy requirements were estimated under assumption that with technologically advanced plant we need approx. 20 liter of biodiesel as energy to produce 1 ton of biodiesel.  For other costs please see Profit and loss statement.

Table 4. Costs per ton calculation, USD.

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3.4. Future Products and Services

 

     Glycerol is a by-product of our technological process, but it needs further cleaning. The company is looking into the installation of glycerol processing equipment.  As the equipment requires an additional investment and the Company wants to remain focused on the production of quality Biodiesel as a flagship product, this investment might be forgone in the immediate future.    

 

3.5. Technology

 

 The process of converting vegetable oil into biodiesel fuel is called transesterification or neutralizing the free fatty acids in oil, removing the glycerol, and creating an alcohol ester. This is accomplished by mixing methanol (wood alcohol) with lye (sodium hydroxide) or potassium Hydroxide, to make sodium (or potassium) methoxide. This liquid is then mixed into vegetable oil. The entire mixture then settles. Glycerol is left on the bottom and methyl esters, or biodiesel, is left on top. Finally, the methyl esters is washed, filtered and refined.

 

 Schematically, it can be described as follows (see also Exhibit 2 Technology process):

 

100 kg of  oil + 15 kg methanol + 1 kg KOH (or NaOH)

=

    100 kg biodiesel (methyl esters) + 10 kg (impure) glycerol

 

In case you use hydrodynamic cavitation

    To carry out this chemical reaction, we use innovative 2 stage hydrodynamic cavitation technology, which lead to more effective biodiesel production process. Please refer to chapter Process advantages for more detailed explanation of this effectiveness.     

    Chemical reaction in this manufacturing process carries out on a molecular level.  All components inside of reactor are subjected to high pressure impulses and advanced controlled hydrodynamic cavitation. While processing vegetable oils with necessary components in reactor the molecules of fatty acids are broken apart with micro explosions; it results in viscosity decrease, cetane number increase,  power parameters of produced fuel improve and reaction takes shorter time (seconds versus one to two hours in conventional technologies).

     The final stage of the reaction is performed in the cavitation pump HD. Intensive cavitation processes in the hydrodynamic mixer and the cavitation pump lead to breakdown of fatty acid molecules, which also significantly increases reaction speed and improves quality of the fuel.

 

Fig.1. Biodiesel fuel production system

Process description:

     Vegetable oil from the vessel 1 via mesh filter F1, flow heater PPĚ is fed to the hydrodynamic mixer ŃGD with H1 pump.  

      Oil flow is controlled with the flowmeter P1. A pre-mixed solution of the catalyzer in methanol is fed from vessel 3 to the vacuum chamber of the hydrodynamic mixer through the BP regulator valve and the flowmeter P2. The solution mixing is performed by the H2 pump. The solution is taken from vessels 3 in turn. The first stage of the peretherification reaction is performed in the hydrodynamic mixer.

         The final stage of the reaction is performed in the cavitation pump HK. Intensive cavitation processes in the hydrodynamic mixer and the cavitation pump lead to breakdown of fatty acid molecules, which significantly increases reaction speed and improves quality of the fuel.

         After the cavitation pump, the mixture goes to the settling columns 4, where it separates into biodiesel and water-glycerin mixture. The fuel is discharged via FÂÎ moisture separator filter by the pump H3.

 

4. Market analysis.

   

    World consumption of biofuels nowadays is under 10 million tons annually, or approximately 2% of total fuel consumption.
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every diesel pump.    

 

 

4.1. Market for biodiesel in __________.

 

     

 

4.2. Market prices.

 

   Current price difference between diesel and biodiesel is about 11 euro cents per liter: price of diesel on gas-station  is 1.11 Euro (1.44 USD)  per liter incl. petroleum tax, compared with 1  Euro (1.3 USD)  / liter for biodiesel.  We do not expect significant price changes (see graphs below) in the future and plan selling price in this project $852 / ton.    

 

 

Graph 2. Biodiesel prices trends. (Source: UFOP)

 

4.3. Competitors.

 

Here are your local competitors

    

 

4.4. Sales and marketing strategy.

 

 

   The Company will target operators of fleet and transportation companies.  

 

 

 

   Geographically, the company will initially concentrate ________ .   

 

 

    To insure rapid growth, the company plans to sell Biodiesel distributors at a small discount compared to regular diesel. In the first 3 years, the Company's output is expected to grow in accordance with the growth of the export market (around 30% yearly). The Company plans to start producing about _________- metric tons per month in the first _______ months of operation.  This output will be increased by  . 

 

 

5.  Project competitive advantages are based on:

 

-          process advantages (see above for detailed explanation of utilized technology);

-          product advantages;

-          company advantages.

 

5.1. Process advantages.

 

There is latest invention in biodiesel production. But you may mention your supplier as a leading one or smth like that. There should be advantages, otherwise project is uncompetitive.

   Our technology employs “hydrodynamic cavitation”, an industrial phenomenon, produced by pressure variations and obtained using the geometry of the system creating velocity variation. Cavitation itself perceived as “a technology of future”[9]; use of cavitation in chemical processes reduces reaction time, increases reaction yield and decreases  consumption of energy. 

   The conventional techniques of biodiesel production typically utilize temperatures in the range of 70 to 200°C, pressures in the range of 6 to 10 atm and reaction times of up to 70 hours for achieving conversions in the range of 90 to 95%based on the type of raw material used (usually mixtures of fatty acids obtained as waste).   Use of hydrodynamic cavitation decreases reaction time and temperature to 70 min. and 30C respectively[10].  So, use of cavitation reactor for production of biodiesel allows save up to 10 times on electricity.

 

5.2. Product advantages.

 

  In ecologically sensitive segments and at equal pricing, Biodiesel will have a competitive advantage against regular Diesel. Advantages of our Biodiesel are based on it’s quality and costs. To illustrate product quality, we compare major indicators of biodiesel manufactured with our technology (column Utilized technology) and industry standards.  Obviously, manufactured product meets the highest industry standards and can be supplied at the lowest possible costs.

 

 Table  Parameters of manufactured biodiesel.  

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5.3. Company advantages.

 

     Your company advantages

 

 

 

6. Management and personnel.

 

     The starting project headcount is ___________employees with future increase to _____________, see table Personnel plan.     Our team members and their resumes listed below; all team members have required experience and qualification to start and manage the project.    

 

6.1.Key members of management team:

 

resumes

 

7. Sales forecast

 

   We expect to start sales at ____________.  Direct cost of sales includes costs of purchased vegetable oils. All other costs indicated in income statement.  All assumptions behind sales forecast were explained in chapter Sales and marketing strategy.

 

8. Financial Planning - does not make sence to present statements here, - please use this spreadsheet to make relevant calculations

 

   Financial projections are based on sales forecast. We do not expect changes in biodiesel production technology which would make our product uncompetitive, because we are already on leading position of this technology and plan developing it in future. Offered technology is also protected by patents.   

 

8.1. Project Financing

   

   Summary of start-up requirements presented in the table below.    laboratory unit 132 gal/hour) to be financed by loan.

 

Table 5. Start-up requirements, $

 

8.2 Break-even Analysis

 

Table 6. Break-even Analysis

Annual Break-even, plants to be sold

 

 

 

Assumptions:

 

 

 

Average Per Plant Revenue

 

 

 

Average Per Plant Variable Cost

 

 

 

Estimated Annual Fixed Cost

 

 

 

 

8.3. Projected Profit and Loss Report

 

   Table 7. Profit and Loss Report

 

8.4. Projected cash flow

 

    Cash collection period  is approx. 1 quarter so we do not plan outstanding bills at the end of year.

 

 

8.5. Sensitivity analysis.

 

    In this project we used assumptions proven by market analysis and research. However, we created also 2 scenarios with different assumptions. Summary of all scenarios show on the table below.   

 

 

 

9. Risk Management:

 

    The major type of business risk identified by the company is related to the continuity and cost of raw materials.   Explain in your risks

 

 

 

 

10. Future Plans.

 

   As part of its expansion plan, the company will be involved in R&D related to the field

 

 11. Exit Strategy

 

The Company's goal is to  ____________  



[1] Five tons of jatropha oil seeds can produce two tons of biodiesel.

[2]  http://asia.news.yahoo.com/050505/3/20hjl.html

[3] Asia in Focus: Crude palm oil price to hover around US$450 per ton

[4] Financial Express: India, China to drive global palm oil demand higher. 15 June 2006

[6] http://www.greencarcongress.com

[7] UFOP: http://www.ufop.de

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Please review also Updated (2008) biodiesel financial plan