S Venkatraman, Rabo India Finance Ltd Delhi, 1 February 2008

1. Time to reflect Biodiesel: Indian opportunity? S Venkatraman, Rabo India Finance Ltd Delhi, 1 February 2008

2. Section 1: Section 2: Section 3: Rabobank in short Biodiesel: global highlights India: will a large biodiesel industry emerge? Contents

3. Rabobank in short

4. Rabobank Group – an international bank with Food & Agri Focus 9 million clients Including 1,641,000 members A Snapshot 188 co-operative Rabobanks • 108 yr. old Cooperative Bank • 2200 offices; 600 international • Largest banking group in Holland • Food & Agri are core sectors • Invests in knowledge – USP • An Allfinanz Group • Total Assets >US$675 bn • In top-25 banks by Tier 1 capital • One of the world’s safest banks Rabobank Nederland Cooperative Centrale Raiffeisen-Boerenleenbank BA Rabobank Nederland Support to local member banks Group Treasury Interpolis Insurance, pensions Rabobank International Rabo securities, corporate Investment banking De Lage Landen Leasing/trade & Vendor Finance Robeco Groep Asset management & Investment funds Gilde Investment Management Venture Capital Schretlen & Co Asset Management Effectenbank Stroeve Asset Management/ Advice Rabo Vastgoed Real Estate Project Development/Finance AAA Private Sector Bank

5. Rabobank’s biofuel expertise Dedicated Research & Advisory Agribusiness/Feedstock/Clean Tech research and advisory => in-depth sector knowledge Global agribusiness client network Leading Food & Agribusiness bank => networks and contacts Long-term experience in ethanol from Brazil and the U.S. Finance & (co) investment solutions (non) recourse loans, working capital, trade finance mezzanine & equity participations (Agri) commodity price risk solutions Feedstock & biofuel price hedging Investor products

6. Biodiesel: global highlights

7. Great variety of motives and support measures for the sector Drivers and motives Support measures • Reducing energy dependence: • Oil reserves declining • Diversification of energy sources • Instability • Environment: • Kyoto protocol • CO2 emissions • Social aspects: • rural and agriculture support • Political/ Legislation • Indicative/mandatory targets • Reduction in excise duties • Quotas • Quality standards for fuel • Requirements/restrictions for feedstock use • Direct subsidies • Import/export tariffs • Agriculture support • Car industry • Warranty for car engines at various blends

8. Growing political certainty and increased support across the world… • The EU: • Largest producer; strong ambitions • Huge capacity; largest plants in the world • Rapeseed-based, but increasingly multi-feedstock • Canada: • 5% renewable energy target by 2010 • Canola, waste oils • China: • Mandatory blend targets expected shortly • Massive potential, but not realised • South Korea, Japan, Thailand, Philippines: • Various targets and initiatives • Small industries or imports • USA: • Mandatory biofuel use of 7.5 billion gallons by 2012; primarily ethanol • Biodiesel potential huge due to only 1% diesel car penetration • Soybean oil - canola upcoming • India: • Infant industry; policies under preparation • Jatropha-based • Brazil: • B2 (2008) and B5 (2013) targets introduced • Aim: rural support (palm, castor oils) • Reality: primarily soybean oil; large-scale projects • Malaysia & Indonesia: • Aim to set-aside 40% of palm oil production for biodiesel (aimed for exports – specifically to EU) • MAL: 5% blend (voluntary) of palm and diesel • IND: B2 mandatory target by 2009 • Argentina: • Legislation passed in 2006 • Focus on soybean oil • Australia: • Non-mandatory target by 2010 • Canola, waste oils, animal fats

9. ....attracts non-agri players to the sector Traditional players Agribusiness Producers, co-ops, traders, oilseeds processors Financial/ private equity Automotive/ Machinery Energy & biomass Oil companies, energy producers, Fuel and energy traders Source: Rabobank analysis 2007

10. Global biodiesel production could reach >21 million tonnes by 2010 2010 biodiesel scenario: Asia and North America potentially large producers Much uncertainty! Still high dependence on policies and actual implementation 21.6mill t EU 45% 3.5mill t EU 75% Source: Rabobank analysis, April 2007

11. 18 127 13 96 Considerable potential impact on global vegetable oil demand….. • Biodiesel feedstock: • Rapeseed: 40-45% • Soybean: 20-25% • Palm oil: 25-30% • Other: 5-10% Biodiesel’s share of total vegetable oil demand (major oils): 2005: 3%-5% 2010: potentially up to 15% Source: Rabobank analysis 2007 based on FAPRI and own research

12. Global demand for biofuels Source – Rabobank analysis

13. ….and on the trade flows of primarily oils and meals (by-product) Soy meal Rapeseed oil Rapeseed meal Palmoil Soybean oil Source: Rabobank analysis based on Oil World, 2006

14. Biodiesel increasingly affects the entire food supply chain • Seed companies: R&D into more efficient varieties (yields, oil content….) • Farmers (plantations): acreage decisions, more opportunities, potential income increase • Food: more competition for commodities, prices could increase (temporarily); more volatility in supply and prices => food versus fuel debate • Feed and Meat : challenges and opportunities for ingredients (more by-products available but less grains and oilseeds), prices? • Oleochemicals: glycerine price plummeted in line with biodiesel expansion

15. India: will a large biodiesel industry emerge?

16. What do the global developments mean for India? • Availability of vegetable oils is under pressure • More competition for vegetable oils for food plus biodiesel use • Potentially higher prices; certainly more volatility • India is already dependant on oil imports for food (priority), so most likely a biodiesel sector would not be based on imported oils • Learning points from countries with similar issues; e.g. Brazil • Brazil’s policy is closest to India’s intentions; however, even though the Brazilian government aimed at supporting the rural population with their policies by promoting the use of niche crops like palm and castor oil, in reality most projects are large scale, based on soybean oil • The most important learning point is that without a concerted effort between the government, agriculture, and industry, such a policy is not likely to benefit smallholders directly

17. Tackling the barriers in India • Legislation and policies: necessary, but still not well-defined • Learning points from all other countries show that a biodiesel sector need a long-term, consistent, policy to develop large scale • Most successful policies include mandatory blending and tax credits • Subsidies required in the initial years • Supply chain and infrastructure need to be developed • There is no established world commodity market for jatropha (like e.g rapeseed) so a ‘new’ supply chain from farmer to consumer should be set up • Guaranteed off-take is needed to a large extent if farmers should be convinced to grow the plant • Education of the parties in the chain, particularly of farmers is needed • Extraction plants close to catchment area – participation of cooperatives • Soft loans for developing storage infrastructure • Local energy production in small scale power generators

18. Tackling the barriers ...(2) • R&D thrust • defining benckmarks and best practices • developing high oil-content varieties for different climate zones; • identification and control of different pests and diseases; • facilitating intercropping, • minimising water whilst maintaining yields; • developing other uses for jatropha oil; • detoxification of the waste products of the jatropha seeds • new applications of glycerine as well as other chemicals • biodiesel from high FFA oil • GM technologies • Second generation biofuels • PPP model

19. Tackling the barriers … (3) • Commercially viable option? • Profitability open for debate due to large variation in estimates • biodiesel is generally not profitable except with government support (or very high oil prices)! • seed price to be completely market linked / linked to final biodiesel price in the long run • there is a strong case for subsidising jatropha seed production, and also biodiesel production, for the initial period. • Financing is a challenge • Pre-financing needed for 4 years • costs of high-quality planting material and other material inputs, labour costs, irrigation and other expenses incurred in the initial years • considerable obstacle for small-holders • Banks and financial institutes hesitant to lend money unless projects are economically viable and/or there is ‘certain’ policy support

20. “The financial link in the global food chain”™ S Venkatraman Director – Strategic Advisory and Research Food and Agribusiness Rabo India Finance Ltd Mumbai (INDIA) Tel – 91-22-22034567 Email – s.venkatraman@rabobank.com