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“Industrial Wood Pellets – the European Market Opportunity”

“Industrial Wood Pellets – the European Market Opportunity”. Biomass Power Association Annual Meeting March 22, 2013 San Diego, California M. Seth Ginther, Esq. Executive Director, U.S. Industrial Pellet Association Co-Managing Partner, Renewable Energy Group, Hirschler Fleischer.

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“Industrial Wood Pellets – the European Market Opportunity”

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  1. “Industrial Wood Pellets – the European Market Opportunity” Biomass Power Association Annual Meeting March 22, 2013 San Diego, California M. Seth Ginther, Esq. Executive Director, U.S. Industrial Pellet Association Co-Managing Partner, Renewable Energy Group, Hirschler Fleischer

  2. The U.S. Industrial Pellet Association (“USIPA”) • Organized February 2011 by Green Circle, Fram Renewable Fuels, Enviva Biomass, and the Westervelt Company • Organized to address issues currently being debated by industrial pellet buyers and the EU relating to certification standards of industrial wood pellets, sustainability, and uniformity of contracts • Organized to address U.S. domestic policy concerns related to supply • Organized to address safety and logistics issues in operations • Organized to “professionalize” the U.S. industrial pellet industry

  3. WOOD PELLETS TO EUROPE – THE BASICS • Energy-dense, uniform, fuel made from high-quality wood products (sawdust, pulpwood) • Efficient, reliable and round-the-clock • Key parameter: particle size • Calorific value is typically ~17MJ/kg • Low moisture content (7% vs. 47% for undensified wood) • Low ash (1-2% vs. 5% for undensified wood) • Lower emission level than fossil fuels and unprocessed woody materials • Pellet’s geometric uniform shape makes for easy and economic transportation

  4. PROJECTIONS FOR FUTURE GROWTH OF EUROPEAN PELLET MARKETS (IN MILLION MT)

  5. WHERE DO PELLETS COME FROM TODAY AND WHERE WILL SUPPLY COME FROM IN THE FUTURE? • North America will be key exporter to Europe and increasingly to Korea and Japan • Russia, South America and the Baltics will be competitors in exports to Europe • Current competitors will be limited in growth (Portugal, Baltics) or ship to different destinations such as Korea and Japan (West Coast) • Sustainability and Chain of custody will be the key differentiation factor compared to many sources of biomass we compete against • North American biomass sources typically avoid ILUC issues.

  6. SHIPPING COST FROM THE SOUTHEAST ARE COMPETITIVE COMPARED TO MOST REGIONS DK/SW €20-€25 Bel/UK €30-€35 (Winter shipping challenge) Source: Poyry

  7. WOOD PELLETS ARE A PREFERRED PRODUCT TO EXPORT Source: Poyry

  8. OTHER KEY COMPETITIVE ADVANTAGES Feedstock certainty and availability Electricity prices Regional labor costs Permitting requirements Ability to sustainably procure biomass Legal and contractual certainty Political stability Wood basket is close to export ports Safety standards conducive to customer expectations

  9. SIGNIFICANT CHALLENGES AND SIGNIFICANT POTENTIAL Biomass has been burned for years, but the biomass renewable energy industry is young Because biomass is an intensely local business and the energy generation business is point-based, the market is tremendously fragmented Few industry scalable specification standards exist (moisture content, size, ash content, etc.) Uneven playing field vs. other “renewables” with regard to government regulation and incentives But the potential is tremendous, even 1% coal displacement in the US would be approximately 17 million metric tons per year; Europe is already more than 40 million metric tons annually.

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