Energy and Infrastructure Investment Banking and Business Development

Breakthrough Technology makes MSW A Superior Renewable Energy Feedstock

An improved autoclave technology has made MSW an economically, environmentally and socially viable feedstock for production of renewable energy and bio-based chemicals. Major oil exporters may profit rather than lose, in a carbon-constrained world

Source: Energy Policy, Department of Physical Resource Theory, Chalmers University of Technology, Göteborg, Sweden
Advantages of using municipal solid waste (MSW) as a feedstock for production of renewable energy (both liquid fuels and electricity) are well established. These advantages include a consistent supply that is related to the geographical distribution of population, one which is not dependent on weather and climate as are agricultural feedstocks, a collection and delivery infrastructure that is mature and already in place, substantial reduction of waste being disposed of in landfills, many of which are approaching full capacity in large metropolitan areas, and tipping fees that can offset some of the cost of separating MSW into ‘biogenic’ material of organic origin (such as food waste, paper and cardboard which are essentially primary and secondary biomass), plastics and metal. In addition, when the biogenic fraction is used to replace fossil feedstocks including oil and coal, there will be an associated beneficial decrease in the release of greenhouse gases.

Then why is the biogenic portion of MSW not being used more widely to produce renewable energy? Unfortunately, the challenges often outweigh the advantages.  The cost of traditional separating and pre-processing MSW are often not adequately offset by tipping fees, and there is often concern about possible unknown contaminants and associated environmental implications. In most cases where MSW is currently being separated for recycling or further use, this inefficient process is being done manually in facilities known as materials recovery facilities, or MRFs, where poorly paid laborers are constantly
exposed to an unpleasant work environment, including many potentially dangerous pathogens. Indeed, it is surprising that in the 21st century, society and industry has failed to come up with more advanced, hygienic and economically viable process to accomplish this task, but now it appears that a revolutionary technology may be poised for commercialization.

Autoclave Technology

An autoclave is a vessel used to treat and sterilize items or materials with heat, steam and pressure. Small autoclaves are often used to treat and sterilize glassware, medical instruments, etc. in laboratories, and for numerous other uses. Industrial autoclaves have been used to process MSW, thus eliminating the need for hand separation by means of manual labor, while continuing to provide jobs needed to run the equipment.  However, high capital and operating costs, and inefficient separation of mixed waste streams due to melting of plastics at high temperature, have typically resulted in this approach not being economically and practically viable.

CleanTech Biofuels Inc. (www.cleantechbiofuels.net), a company in St. Louis, Missouri, is the exclusive licensee of an improved autoclave technology that uses lower temperature and pressure in a unique biomass recovery process for MSW. These improvements are incorporated in a patented process that is owned by a British company and licensed to CleanTech Biofuels for use in North America. These recently patented improvements result in lower capital and operating costs, and a more efficient mechanical separation of the renewable biogenic material consisting mostly of plant-based materials, plastics and metals, into separate clean and sanitized streams. The resultant biogenic material is a remarkably uniform cellulosic or biogenic feedstock that is well suited to conversion to renewable energy, as well as for a wide range of other commercial applications that may include bio-based chemical production.

CleanTech Process

The process first involves delivery of unsorted household MSW on to a tipping floor where oversized bulky items such as appliances and furniture are removed by hand.  The remaining material is conveyed into a sealed and pressurized vessel where low-pressure steam is introduced.  The contents are batch-processed in vessel for 45 minutes. Following this sterilization, the contents of the autoclave are emptied onto a mechanical screening system or trommel that separates the biogenic material from the plastic and metal fractions.  Eddy currents and magnets are utilized to separate the ferrous and non-ferrous metals, and mixed plastics are hand sorted from the remaining stream in the absence of optical sorting equipment.

The biogenic material can be used as a feedstock for production of renewable liquid biofuels, electricity, and bio-products.  Plastics and metals are sold into recycling markets.  Typically 50 to 55% of the processed MSW is organic biomass.  Further processing of the biomass can ensure ash content for the biogenic material of approximately 10% and a moisture content to match requirements of the end user. The material can also be sized as needed, from a compost-like consistency, into pellets, cubes or briquettes.

Commercialization

The first commercial facility to utilize the improved autoclave biomass recovery process was built in Coff’s Harbour, Australia.  The Coffs Harbour plant has been operating successfully for over two years. The plant takes residuals from a material recycling facility and, via the biomass recovery process, recovers the remaining organic material that has made it through the MRF.

CleanTech Biofuels, Inc. intends to build a commercial-scale demonstration plant in the United States.  This facility will be used to demonstrate economic viability of the process at a commercial scale while providing commercial scale samples of biomass feedstock for potential end users for evaluation in their own pilot and small commercial conversion facilities. CleanTech Biofuels has been contacted by over 25 technology companies that have requested commercial size quantities of their biomass for testing and evaluation.

The CleanTech feedstock is highly competitive from an economic standpoint compared to many other alternatives.  In the United States, current delivered costs of woody biomass and agricultural energy crops such as switchgrass are approximately US$75 and US$100/dry ton, respectively, while the CleanTech biomass is less than $US55/dry ton.  Additionally, the potential exists for CleanTech to blend its biomass with other forestry or agricultural feedstocks, thus utilizing their material to offset their higher prices of these other feedstocks while providing a reliable supply chain solution for the bio-based energy and chemical industries.

Conversion efficiency of the CleanTech cellulosic biomass is typically better than other feedstocks utilized for biochemical conversion processes. This is a result of lignin being removed from wood during the pulping process prior to use as pulp to produce paper and cardboard.  These materials constitute a large proportion (65-75%) of the CleanTech biomass.  CleanTech biomass is also well suited for thermochemical conversion to renewable liquid biofuels, electricity and other bio-products. However, since thermochemical conversion technologies are typically less sensitive to feedstock composition, the price advantage of CleanTech biomass would presumably be the preferred economic driver in these instances.

Co-locating at Transfer Stations 

Waste transfer stations are facilities where municipal solid waste is unloaded from collection vehicles and briefly held while it is reloaded onto larger long-distance transport vehicles for shipment to landfills or other treatment or disposal facilities. By combining the loads of several individual waste collection trucks into a single shipment, communities can save money on the labor and operating costs of transporting the waste to a distant disposal site. They can also reduce the total number of vehicular trips traveling to and from the disposal site. Co-locating the biomass installations at the waste transfer stations will reduce the impacts and costs of trucks traveling to and from the main disposal site, and when properly sited, designed and operated they can eliminate problems for residents living near them.

 

Projected Benefits

The United States generates approximately 225 million tonnes of MSW per year, and approximately 50% of this is biogenic material. If only half of this material were recovered and converted to liquid biofuels at an efficiency of approximately 300 litres/dry tonne of feedstock (an efficiency that numerous emerging biofuel companies are projecting), this would lead to production of 33.75 billion litres of fuel annually. In addition, the CleanTech biomass recovery process results in over an 80% reduction in material being delivered to landfills, thus providing the opportunity to substantially extend their useful life, delay the need to expand or create new landfills, while reducing the negative environmental impacts associated with such facilities. These examples demonstrate the enormous economic, environmental, social and energy security benefits offered by the Biomass Worldwide/CleanTech Biofuels improved autoclave technology.

The Garbage Anomaly

Contributed by David Bransby, Director fo Cleantech Biofuels and Professor, Energy Crops and Bioenergy, Auburn University, USA

MSW is an obvious kick-off feedstock for the emerging bioenergy industry, but its numerous advantages remain largely overlooked.

info@cleantechbiofuels.net

There is widespread disappointment in the rate of progress towards commercialization of cellulosic biofuels, and industry is lagging substantially behind RFS2 annual targets. Feedstock limitations are often cited as one of the reasons for this: in particular, a reliable and adequate supply of low-cost, acceptable quality feedstock is required to launch the fledgling industry.

Use of agricultural crops or forest-based materials as bioenergy feedstocks involves production and/or harvesting, storage, and delivery of this biomass to processing plants, which are all costly. In addition, the necessary infrastructure is mostly not yet available, system optimization is still needed, and contracting hundreds of growers is a major challenge, especially with the future of the Biomass Crop Assistance Program (BCAP) in the balance. All this further increases costs and risk.

In contrast, infrastructure for collection of municipal solid waste (MSW) is already in place and paid for, and those who collect and dispose of it get paid for their services. This results in very low cost and low risk, making MSW a no-brainer feedstock for launching the cellulosic biofuels industry.
This being the case, it is difficult to understand why MSW continues to be mostly overlooked as a cellulosic feedstock: the original Billion-Ton Report (http://feedstockreview.ornl.gov/pdf/billion_ton_vision.pdf), its very recent update (http://www1.eere.energy.gov/biomass/pdfs/billion_ton_update.pdf) and a report commissioned by Congress and just published on the status of the cellulosic biofuels industry (http://www.nap.edu/catalog.php?record_id=13105), all totally ignore MSW as a potential feedstock, and relatively few start-up companies plan to use it in their first commercial plants.

MSW as a feedstock

Household garbage forms a large proportion of MSW. In the US some of this material is recycled, but most of it ends up in landfills, or is incinerated. Europe does a better job with recycling, but there is still room for improvement. Landfills and incineration are costly, and involve environmental risk.

Biogenic material (material of biological origin), such as paper, food scraps and yard waste, typically

constitutes a little over 50% of MSW. And according to EPA regulations, it is classified as renewable and qualifies for RINs. In addition, because it contains a large proportion of paper and cardboard, the content of lignin is relatively low, resulting in better conversion efficiency for biochemical conversion technologies than is the case for agricultural and forest-based biomass.

On average, Americans generate about 4.3 pounds of MSW per person per day, or 260 million tons per year nationwide, of which a little over 130 million tons is biogenic. If only half of this were used to generate biofuels at an efficiency of 70 gallons per ton, we could produce 4.5 billion gallons of cellulosic biofuels from it every year.

True, relative to our total fuel consumption, or even to the amount of oil we import from OPEC, this is not much. However, we are not trying to build the entire industry on MSW, we are just trying to launch one - quickly. What we need to do that is a reliable supply of feedstock of adequate volume and quality for the first commercial plants, and at the lowest possible price.

Half the biogenic fraction of MSW could supply ninety 50-million gallon per year plants, which could well meet the volume side of the equation: this would provide all the cellulosic biofuels needed to meet the RFS2 target for 2016, or 28% of that needed to meet the 2022 target. But what about the quality and cost requirements?

Sterilizing/removing contaminants and separation into biogenic, plastic, metal, glass and other fractions is often considered too expensive to make MSW economically viable. Materials recovery facilities (MRFs, often referred to as “dirty murfs”) in which manual labor is employed to sort filthy garbage by hand in an unhygienic work environment, currently constitute the most common method employed.

Indeed, for developed countries to even contemplate such facilities in the 21st century is hard to understand, especially with the availability of much cleaner autoclave technology to perform the same function at a lower cost and more efficiently.

Autoclave process

The autoclave process involves treatment of equipment or materials with heat, pressure and steam in an autoclave vessel. It is commonly used to sterilize laboratory equipment in small lab-scale autoclave vessels, but it can also be used to treat MSW in much larger vessels.

The process sterilizes mixed garbage without the need for prior sorting, eliminates the unpleasant odor, and facilitates mechanical separation of the biogenic, plastic and metal fractions without direct use of manual labor. Furthermore, the biogenic fraction is homogenized by rotation of the autoclave vessel, leading to a very uniform feedstock. Therefore, the autoclave process essentially makes curbside separation and dirty MRFs obsolete, and solves the heterogeneity problem related to MSW as a feedstock.

There are several versions of the autoclave technology for processing MSW. Most of these involve high capital and operating costs. However,  a company in St. Louis, Missouri, CleanTech Biofuels (www.cleantechbiofuels.net) has optimized their version of the process to a point where its cost is more than offset by tipping fees, in many cases by a lot ( in the US, tipping fees range from about $25/ton of MSW, to over $100/ton, with an average of about $40/ton).

CleanTech projects that it can customize its cellulosic feedstock product to suit its clients, including formatting into pellets, meeting moisture specs (up or down from the average 25% when it exits the autoclave vessel), and minimizing ash. And, in most cases, they expect to be able to do this at a price well below any other cellulosic feedstock.

 
It’s already commercial

The CleanTech autoclave technology is already in commercial use at Coffs Harbour in Australia (see www.cleantechbiofuels.net), where it has been in operation for three years. Isn’t it sad that a technology invented in the United States is first commercialized down under?

Regardless of this, what is of particular interest is that the cellulosic material generated by the Coffs Harbour autoclave plant is not used to produce energy; it is disposed of as compost, the main objective being to avoid landfill in this beautiful resort environment (http://www.google.com/search?q=coffs+harbour&hl=en&rls=com.microsoft:en-us&rlz=1I7RNTN_en&prmd=imvns&tbm=isch&tbo=u&source=univ&sa=X&ei=6JDATsDyA86atwf6j5XSBg&ved=0CDsQsAQ&biw=1600&bih=703&sei=7ZDATuyEIsnMtgfJs-yxDQ). And it still pays!

What about jobs? Yes, the facility employs about the same number of people as a dirty MRF, but under much cleaner and more hygienic conditions.

But will MSW not put other feedstocks out of business? No, to the contrary; for several reasons it will be synergistic with agricultural and forestry feedstocks. First, there is not nearly enough MSW for it to put other feedstocks out of business, there is just enough to launch the industry quickly. Secondly, its low cost and low risk can facilitate quicker commercialization of the industry, thus developing markets for other biomass sooner than would otherwise be the case.

Thirdly, and perhaps most important, some thermochemical conversion processes can use a mixture of feedstocks, in which case MSW could be mixed with agricultural and/or forest-based feedstocks to optimize cost and supply for projects that might otherwise not be viable.

So why are more conversion companies not planning to use MSW as the feedstock for their first commercial plants, when some of those that have are well on their way to commercialization? It’s an anomaly.  

Structured Finance for Energy, Renewables and Cleantech After the Credit Crunch. Does it still Exist?

In early 2007, the structured finance markets had started to crumble—big time, and not just for standard securities but even more so for those related to Renewables and Cleantech for whose success these instruments are critical especially those in early stage of development.

 

With feed in tariffs disappearing and regulatory insecurities the outlook was grim. Nevertheless, we continued working on bringing funding to projects and companies in new models and creative ways. Despite there being little new public issuance and virtually closed secondary structured finance markets, we still felt it right to continue in this field that has and will provide financial instruments and structures very beneficial to a sector that the world is forced to embrace.

The expected transformation of the market has been galvanized by the shift in power away from issuers and towards investors. Clearly, if the investors are in charge, they are going to be a lot more discriminating about what they actually buy.
 
However, the collapse of Lehman Brothers and its impact on global financial markets forced many to take a step back and give thought to some fundamental questions: given that the structured finance markets had since November 2007 dried up, with very limited public issuance and non-existent secondary-market trading, we wondered whether it would ever return and, if so, when. Seasoned market participants’ view on this issue was clearly divided: some said “yes” (with some reservations), others said “no way” and decided on—or in many cases were forced into having—a career change, where anything other than structured finance would do.

If the market was not going to come back, then continuing this work would be a waste of time and resources, and of course our clients time and money because there would be no reason for anyone to hope for success. On the other hand, if it was going to return when would it be, what would it look like and why?
 
Instead of working at a subject we feel we know very well, we found ourselves researching and solving many unknowns and uncertainties. For instance, what would the regulatory environment look like? Bad press, negative publicity, and increasing political global pressure seemed to be heavily focused on this particular market, and “securitization” was being likened to “subprime” by many people at that time. All of which was doing few favors for the majority of otherwise largely unaffected asset classes.
 
As a consequence of all this work and research, we concluded that the structured finance market would come back eventually, but it would not bear much resemblance to what it used to look like before mid-2007. In fact, fundamental changes would be necessary to get it back; otherwise, it would not return at all. The key areas we mostly expected to change were standardization, transparency, and simplicity.
 
Definition

There is no universal definition of structure finance. It is apparent from the way that structured finance teams are organized in banks that the term covers a wide range of financial market activity. We believe a good working definition for structured finance is the following:

... techniques employed whenever the requirements of the originator or owner of an asset, be they concerned with funding, liquidity, risk transfer, or other need, cannot be met by an existing, off-the-shelf product or instrument. Hence, to meet this requirement, existing products and techniques must be engineered into a tailor-made product or process. Thus, structured finance is a flexible financial engineering tool.

 

Power Purchase Agreements and Other Collateralization

These financing tools can be used wherever there is a reliable cash flow stream that should continue to exist over the maturity of the loan, which the owner wants to utilize to obtain a sizable cash payment from the financing proceeds, in a situation where the owner would like to retain ownership of, and manage, that cash stream. This can be done when utilized in connection with a variety of cash streams such as proceeds from power purchase agreements, rents from tipping fees, by product sales, toll revenues, payments in lieu of taxes, patent revenues, and the like.

According to Credit Sights “Despite the evident shortcomings of many of the structures that are currently inflicting losses on balance sheets across the globe, the tailoring of, and the dispersion of, risk that securitization offers is so key to the credit creation process that we believe its resurgence, in a different form, is guaranteed.”

Standardization
 
We expect everything to be much more standardized in terms of asset classes, pre-issuance and post-issuance information, deal reporting, and analytical approaches and models.
 
Transparency
 
Another area that we would expect to fundamentally change is the provision of transaction-specific information. This will include information on bond performance (e.g., details on such credit enhancement draws as monoline insurance wraps), such as underlying collateral information like loan-by-loan information.

For the first time in this market, investors are now in the powerful position to demand performance-related information from issuers as a condition for them to return to the market and start investing again. What is more, issuers find themselves obliged to listen to investors’ demands for this kind of information, or else they would be faced with a situation in which the majority of investors would be clearly reluctant to invest in issuers’ products. Furthermore, many global initiatives by trade bodies such as AFME/ESF, SFIMA and many more—with input from Bloomberg and other third-party vendors—will help to set new standards and provide templates and best practice models for standardized deal information.
 
Simplicity
 
One of the key features of some asset classes was the complex nature of the structures. Deal structures had become overly complex for various reasons pre credit crisis, but going forward there will be no place in the market (or investor appetite) for deals that have been structured in such an opaque fashion. Some of these deals were structured intentionally to achieve artificial asymmetry of information, either by using structures that were so complicated that no one could really understand and follow them or by using “black-box” models that were nigh on impossible for investors to grasp—no matter how sophisticated they considered themselves. This may also be called “arbitrage on information”— far from sound practice principles.

The year of regulation: 2010
 
2010 turned out to be the year of regulation: the only things that remained static in the structured finance market were the constant regulatory proposals, impact assessments, the setting up of many working groups around the globe by various trade bodies, regulators, central banks, and the like, and the hundreds of working group meetings—all aimed at getting the market back on its feet.

We have a great technology, have built pilots and are ready to go commercial but how do we do it? How do we get funded?

The company has a great technology, lab tests have been done, a pilot plant has been constructed and the results are the best in the market. Clients are lining up outside. There is just one problem, they all want to see a commercial size plant in operation and some performance metrics for a period of time and then the orders will come rolling in. The company however has spent its seed money on getting to where it is now and needs more to get that first commercial installation and become “bankable”. How can this be done without giving the company away?

The process is laid out below but normally starts with dipping your toe in the water.

Step 1: Test the Waters

Companies considering a sale generally hire a “sell side” investment bank to oversee the process of the company in a timely and efficient manner. Investment bankers charge a fee, typically, around 2 percent to 7 percent of the transaction amount (depending on the size of the deal), along with a retainership.

At this stage, a company would invite investment bankers to propose terms and timelines and to demonstrate their industry awareness and connections. While these discussions ensue, the ineffective bankers will be eager to take the assignment and, after collecting substantial retainer fees, fail to deliver value. The low-level tactics include proposing significantly higher valuations to snag the assignment, and later, point to the buyer universe for poor outcomes. On the other hand, the best of the breed may not be willing to engage or sell something unless they believe the opportunity is meaningfully attractive to the universe of acquirers—and if they do, may propose a lower number to get the transaction completed fast. The company should seek the right balance between investment banker industry expertise, fee structures, target valuation range, and target time lines of transaction.

Company boards identify the investment bankers who have relevant knowledge of the challenges and opportunities of a particular sector and market conditions. Investment bankers are able to gauge the field, identify potential investors, and know the potential hurdles and buyer objections. In determining the company's selling price, investment banks can provide fair assessments of value by analyzing the company's long-term prospects and current financials. Beyond providing these financial advisory services, investment banks identify potential investors, solicit bids and review proposals, help companies select the most attractive candidates, and participate in the negotiations with interested parties.

At times, the value and visibility of the company may be such that an investment banker may be unnecessary. Or consider the approach of Heitzmann, who sold StubHub to eBay: “We deliberately built a board with tentacles in the potential buyer's market. You generally know someone—first-time entrepreneurs do not have much of a network—and that's where we come in. One of our board members knew people at eBay, and that's how it started,”
he says.

Step 2: Formalize the Process by Hiring an Investment Banker

At this stage, the board would hire an investment banker who will proceed within the following framework:

Process metrics and time lines: Establish valuation guidelines, universe of potential acquirers, and steps/timelines for the process.

Presentation materials: A teaser sheet, a set of slides, and relevant information memorandum.

First contact: At this point, the I-banker blasts e-mails to the universe of investors, using teasers, which provide high-level information to acquirers. Teasers are typically a page or two long, with key highlights of the technology, revenues, and growth potential. Teasers do not disclose the name of the company and offer only some key points that get the investors to the door to sign a nondisclosure agreement.

Screening the parties interested in the company: Once the interested parties have been identified, and have signed nondisclosure agreements, these would be prescreened. This can be a nebulous step, as the goal of prescreening is to eliminate those who are merely seeking information without providing any insights into their process, motivations, or criteria. And beware of tire kickers. You should be cautious that expressions of interest occur many times along the way. It could well be corporate development guys from large companies just sucking info from entrepreneurs, or staying busy, doing their job.

They may have no money but are wasting an entrepreneur's time. The I-banker avoids this for the entrepreneur. I-bankers see many tire kickers and can help our entrepreneurs to cut through the noise—we know a lot of natural acquirers and we don't hesitate to call them when the time comes. Also, after the prescreening stage, companies choose to negotiate the terms themselves, without any substantial involvement from the I-bankers and this is very dangerous. Many intermediaries prefer to offer advice on the various potential outcomes based on negotiation parameters— mature Ibankers will seldom prescribe one path over another. The ultimate decision lies with the company. After a suitable investor has been zeroed in on, the parties proceed to stage two of the process.

Execute a letter of intent: A letter of intent (LOI) establishes a level of commitment on both sides to proceed in a diligent and a timely fashion to finish what has been initiated. A LOI would include:

Exclusivity: The seller is engaging with only one party. This clause tilts the axis in favor of the buyer.

Confidentiality: This clause protects the seller's information. A must-have clause that does not impact the economic terms.

Broad parameters of transaction terms.

Due diligence
Conditions to closing
Employee matters
Suggested timelines

Investors may choose to offer a nonbinding LOI which is a two-edged sword. Further, a weak yet binding LOI does not accomplish much for the seller.

Once the LOI has been executed, the buyer is aware of the negotiating advantage that starts therein. Other suitors usually step back at this point and the dance frenzy intensifies. A seller needs to ensure that the LOI has enough teeth in it to protect valuation and ensure that the
diligence is completed with a sense of urgency.

Step 3: Conduct Due Diligence

Larger companies, and the buyer's counsel will engage in deep due diligence. Sellers establish a data room with relevant documents, which include:

Corporate records: Certificate of incorporation, bylaws, board minutes, shareholders list.

Business records: All material contracts of purchase, sale and supply agreements, research agreements, licensing and distribution agreements and government contracts, list of all assets and intellectual property.

Financial records: All financial statements, receivables, loan and equity agreements, tax records. Copies of all placement memorandums, capitalization schedules, and equity amounts.

Employee records: All employee agreements, consultant agreements, details of option plans and benefits (pension, health care) offered.

Legal: Details of any litigations, pending or foreseen.

Step 4: Negotiate/Structure the Transaction

Typical elements of negotiation which the I-banker has previously designed in conjunction with the entrepreneur during the investment  process include, besides valuation, the following:

Asset purchase versus stock purchase:

Most acquisitions occur as asset purchases. This eliminates any unknown or contingent liabilities that a seller may assume as a result of stock purchase. Assets can be chosen (“You keep those desks and phone systems, we keep the IP and the customers”) and allow for depreciation—a tax advantage.

In a stock purchase, the buyer can assume net operating losses (NOL) that the seller may have accrued, which may reduce the buyer's tax liabilities and augment the value. On the flip side, the buyer also assumes all liabilities, known or unknown. And yes, those old desks and archaic phone systems are a part of the deal.

Cash offering, part cash and part stock, or all-stock transaction:

All-cash transaction is preferred by sellers and venture investors. Investors can finance such transactions via external financings. Stock transactions allow the seller to gain long-term economic advantages, and to be a shareholder to enjoy any advantages.

Earn -outs and escrows: A buyer may believe that the value of the company lies in executing certain orders that generate revenues and cash flows or profits. Further, a buyer may establish certain targets and milestones for such an earn-out. Jack Ahrens of TGap Ventures tries to minimize any earn-outs: “The company is going to be controlled largely by the acquirer and so are the resources—people as well as cash.

Things can get sticky pretty quickly when motivations change,” he says. Depending on the sector, practitioners advise that approximately 15 percent of the value in earn-outs is acceptable. In the pharmaceutical sector, these percentages vary significantly and depend on the stage of drug development. Escrow percentages range from 5 percent to 15 percent and periods (12 to 24 months) are negotiated as buyer attempts to protect from any surprises and contingencies.

Other terms:

Representations and warranties made by the target company.

Employees: Who stays, who goes.
Employee options: Vesting schedule and acceleration.
Indemnities offered by the target company.

Step 5: Approvals and Closing

The board and shareholders approve the transaction. The closing, a process during which the attorneys and key stakeholders execute final agreements, occurs on a set date. While these would historically happen in person, typically at an attorney's office, many of these are done virtually nowadays. After all, if signatures can be scanned and money can be wired, you do not need the general assembly.

Integrated mining waste management and recycling, a veritable gold mine

Contributed by: Jonas Svensson, Bauhaus Capital Partners, CIO

Today more than 5.000 companies operate within the mining industry, and with the growing demand for valuable substances the number of mines which they operate is ever growing, but the operations are under mounting pressure by environmentalist to reduce the impact on the land and shareholders to produce ever higher efficiency on increasingly scarce deposits and larger demand.

Both surface and underground mining produces vast amounts of waste and change the ecological balance in the surrounding area, and in most cases the production company has to return the land to its original condition once the material or mineral has been extracted.

As for any industrial construction, the area has to be cleared and excessive materials removed so to

reach the valuable deposit on or in the ground.  In many cases the valuable deposits are found in ecological sensitive areas or in remote places , which not only impact the nature by the mining itself but also because to extract the substances infrastructure such as roads, power supply etc are needed. This also changes the balance in and around the area of mining. Even areas protected as nature reserves are being prospected and in some cases the protection is lifted to allow excavation.

History shows that even a small change can affect not only the surrounding s but also represent a health problems for communities situated away from the mining area. In some cases due to minerals and toxic waste reaching the water systems and hence polluting these in others the toxic compounds enters the eco system through animals and plants and in the end humans who eat the crops or meat.

To ensure the public safety and wildlife many countries have strict rules and regulations in place EU: Directive 2006/21/EC USA:  54 FR 36592,55 FR 2322 just to show a couple.  Here is a transcript from the 1st article of EUR LEX.32009D0335

Article 1

1. Member States and competent authorities shall base the calculation of the financial guarantee referred to in Article 14 of Directive 2006/21/EC on the following

(a) the likely impacts on the environment and on human health of the waste facility;

(b) the definition of the rehabilitation including the after use of the waste facility;

(c) applicable environmental standards and objectives, including physical stability of the waste facility, minimum quality standards for the soil and water resources and maximum release rates of contaminants;

(d) the technical measures needed to achieve environmental objectives, in particular measures aiming at ensuring the stability of the waste facility and limit environmental damages;

(e) the measures required to achieve objectives during and after closure, including land rehabilitation, after closure treatment and monitoring if required, and, if relevant, measures to reinstate biodiversity;

(f) the estimated time scale of impacts and required mitigation measures;

(g) an assessment of the costs necessary to ensure land rehabilitation, closure and after closure including possible after closure monitoring or treatment of contaminants.

However these regulations are being broken time and time again. Mining scandals has been in India with illegal excavation of iron ore, USA with the mountaintop removal to take out coal, EU funded a huge project which not only had elements of corruption but also illegal environmental aspects.

Even when removed and stored the mining waste ( tailings) can cause huge problems, this has happened on several occasions  such as the Buffalo Creek flooding, the year 2000 Baia Mare cyanide spill and the Ajka alumina plant accident all of which ended with catastrophe.  As a result several studies are conducted regarding how and what to use to secure the mining waste around the world.

Why the size of the waste was named one of the fastest growing wastes of Europe and worldwide is shown in this old graph from 1996. For each kilo of ore or substance being excavated several kilos of waste are being produced.

In many cases part of the mining waste contains hazardous toxics and heavy metals. Since water is a part of most mining processes large amounts of contaminated water is produced. Some common minerals and chemical compounds include: Arsenic, Radioactive materials, Fluor, Mercury, Cyanide, Activated carbon and so on.

If the toxics leaks into the ground water systems the damage is enormous. Also rest tailings, mud and rock holds substances which represent a problem.

These stacks look like two mountains however this is mining waste produced by coal mines.
Today the mining waste problem is mostly handled by using expensive technologies in one of the following measures.

1.    Removal

The waste is transported away and “stored” at a location with lower environmental impact.
Methods used today are continuum, were the waste storage company separate and stores waste depending on water content.  Pond Storage were the tailings are dumped into a artificial lake to prevent spread of air born particles. Dry stacking were the waste is dried and stored above water hence preventing spread into ecosystems and ground water.

2.    Cleaning and restoration

The waste gets treated and returned to location hence leaving smaller trace of the production. In for example Quebec any mining endeavor have to set aside funds equal to the cost of restoring the land on which the mining is taking place.

The cost involved to handle the waste is enormous just in the USA 12billion USD was spent in 2005 to clean and store Mining waste.  However this does not solve the problem since its mostly all about storing the waste. Another issue is that the same toxics and contents with in this waste also is a resource which if it could be extracted would represent an asset.

There are companies in several countries today experimenting with possible solutions which would help solve the problem , some aimed at disarming the waste in ongoing mining operations others even extract the toxics and valuable substances from the waste which would leave only gravel which could be used as construction materials.

One thing is for sure that if nothing is done to change our view of these wastes, it will continue to be a growing problem as our demand for products containing these substances is ever increasing.

Waste to Energy from MSU, is it just a bunch of rubbish?

Historically, all around the world, urban waste has just been dumped into a big hole in the ground that has been prepared to maintain a certain level of health and safety standards (sometimes not even that). This has gotten to the point however, in both developed countries as well as emerging countries, that it is causing major problems

Sao Paulo, Brazil landfill

ranging from a lack of further sites available, to the use of expensive real estate with accompanying serious health andconstruction hazards.

The different conditions in each country, created by a variety of energy costs, fuel prices, lack of real estate available or just plain very expensive, requires innovative and different technology solutions and sometimes even a mix of them to create profitable and sustainable waste to energy plants.

Waste in Brazil

The country of Brazil currently has a prosperous economy based on a wide variety of exports in the
areas of minerals, oil, beef, coffee, and other commodities. Most recently, Brazil was chosen from a finalist list of the most leading countries in the world to be the host nation for the upcoming World Cup Soccer Finals in 2014 and the Summer Olympics to be held in 2016. In light of these upcoming events, The National Policy on Solid Waste (PNR) was promulgated on August 2, 2010, in order to promote changes in the waste scenarios for the many municipalities of Brazil. Federal Law No. 12.305/10 in force for less than a year already encourages the structuring of a new and important  economic sector in the country - only 25% of all waste is recovered or recycled, according to the recent report of the United Nations Environment Program (UNEP), "Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication”. This solid waste law paves the way for implementation of new technologies that treat this waste and benefit the many municipalities of Brazil and the rest of the world by further reduction in greenhouse gases.

With the entry into force of the national solid waste law, enacted in late 2010, new technologies to solve the problem of urban waste will begin to arrive in Brazil. By 2014, the country must eliminate landfills and improve the conditions of landfills that do not always treat the leachate and gases from the decomposition of garbage. Today, 63% of the waste collected in Brazil is not properly disposed of resulting in a large waste problem but also a great opportunity for companies that can solve these waste problems.

Among the technologies that are becoming competitive are the transformation of waste into fuels and electric power. The report warns that the world is expected to generate 13 billion tons of municipal waste by 2050. In Brazil, currently recycling generates $ 2 billion a year, or 0.3% of GDP, while preventing the emission of 10 million tons of greenhouse gases. Brazil has a very low cost of energy (currently 7₵/kWh) but has a large deficit of diesel the biggest opportunity therefore lies in transforming waste into biodiesel as the government has regulated a system by which Petrobras is obligated to buy the fuel at an actual 1,00€/liter.

Waste in India

Rapid economic growth is leading to urbanization and industrialization generating waste which is
adversely effecting the environment. To address the problem of waste management in the country the Ministry of Environment and forests, Government of India constituted a committee under a chairmanship to evolve a road map for the management of waste in India and to suggest a policy and strategy for achieving the same.

The Municipal Solid Wastes (Management and Handling) Rules, 2000 was notified by the Ministry of Environment and Forests for management of Municipal Solid Wastes (MSW). Except a few large cities, by-and-large, local bodies of medium and smaller towns have not undertaken regular exercise on quantification and characterization of municipal solid wastes. The Ministry of Urban Development (MoUD) assessed MSW generation in the country to be 1,00,000 Metric Tons or 0.1 million metric tons per day (MMT/d) in the year 2001-02. The Central Pollution Control Board (CPCB) made a survey of 59 cities in India during the year 2004-05 to assess the existing status of MSW management which included 35 metro cities and 24 State capitals. Based on this study and on census data of 2008, the MSW generation in the country has been estimated to be 0.573 (MMT/d) in the year 2008.

Municipalities have been mandated to implement the Municipal Solid Waste (Management & Handling) Rules, 2000 in all towns/cities of India to cover 100% collection, segregation and transportation of waste. However, hardly a few municipalities have taken initiatives for implementation of the Municipal Solid Waste (Management & Handling) Rules, 2000 to set up waste processing and waste disposal facilities.

Electricity although cheap (9¢/kWh), it is very scarce as India has an energy deficit of 200,000 MW according to the Ministry of Power of India. The waste in the country is mostly made up of organic material as scavengers have already taken all the metal, plastics and other sellable material to specific recycling plants. Also, due to the heavy rainfall in the country the waste has a 30% humidity content making it unsuitable for gasification or pyrolysis technologies. The solution, and therefore the business opportunity lies in producing a mix of electricity and biodiesel due to the low cost of energy and high demand for fuels. This requires a combination of technologies that are effective in producing electricity through biodigestion and syngas production on one hand and catalytic depolymerization for biofuels on the other.            Source: {R}evolution report, Greenpeace

Other scenarios and regions



In Southeast Asia for example, there two different scenarios. In some countries the price of electricity is very high reaching levels of up to 30¢/kWh making incineration and pyrolysis the choice as the direct production of electrical energy justifies the expense and gets high returns on a proven technology. In other countries or regions such as Hong King, Singapore and Macao the real estate occupied by the landfills justify the cost and implicit returns, albeit with a more sophisticated revenue model and capital structure. In other region where the cost of electricity is more reasonable innovative technology is required to produce bio fuels, fertilizers and chemicals to get over a proper IRR hurdle, the problem here though stems from the fact that many of these technologies are nascent and not bankable for the quantities of over a thousand tons per day which is required.

What are the best practices to fund a cleantech company or developer’s pipeline?

The cleantech revolution has many similarities with other high-tech revolutions such as the IT and telecommunications markets and many lessons can be learned by the experiences gained here. Getting from the pilot plant or first few permitted projects into the mainstream can be just as fast changing, painful and risky as it was for hard disk drive technology, the quest of the “Holy Grail” in the internet killer application (which ended up being the web browsers and search engines and not a traditional application at all) or ADSL emerging technologies over other telecommunication access technologies like broadband coax or two way satellite were.

Time and time again we have seen that not always does the best technology in a given field become the market leader such as VHS over Betamax in video recording tapes, Thin Film over Ferrite/Oxide technologies in disk drives, and even others managed to leap frog over much larger and established industry players for example like Google over Yahoo. The world keeps changing at an ever increasing rate and the life cycle of cleantech businesses and technologies are no exception.

So what are the lessons learned by these industries where the, all too common it seems, Black Swan shows up (personal computers, IT and internet just to name a few) and what are the proven methods that we can take to practice in the cleantech markets? First we have to understand what the two basic principles that make success possible in the war to market entry:

1.    Speed to market
2.    Proper and timely funding

Being one of the first to successfully make the jump from an early adopter stage to the high growth mainstream market almost guarantees success in cleantech just as much as any other technology driven business. Early entry drives high market share and therefore high margins and market leadership. You don’t really even need the best technology and it doesn’t even need to work to perfection – you just need to get in there. How to get in there requires not only talent, hard work etc., it is fueled by proper and timely funding. You must raise only the amount of funds of the size and maturity of your business and market, learn how to keep lean and mean and avoid unnecessary dilution. How to achieve this is developed further below with some concrete examples but also very important is to keep your eyes peeled for the dreaded Black Swan because there are ways to roast this bird.

Speed to market

Leadership in disruptive technologies creates enormous value. In contrast to the evidence that leadership in sustaining technologies has historically conferred little advantage on emerging markets such as the pioneering disk drive firms, there is strong evidence that leadership in disruptive technology has been very important. The companies that entered the new value networks enabled by disruptive generations of disk drives within the first two years after those drives appeared were six times more likely to succeed than those that entered later.

Eighty-three companies entered the U.S. disk drive industry between 1976 and 1993. Thirty-five of these were diversified concerns, such as Memorex, Ampex, 3M, and Xerox, that made other computer peripheral equipment or other magnetic recording products. Forty-eight were independent startup companies, many being financed by venture capital and headed by people who previously had worked for other firms in the industry. These numbers represent the complete census of all firms that ever were incorporated and/or were known to have announced the design of a hard drive, whether or not they actually sold any. It is not a statistical sample of firms that might be biased in favor or against any type of firm.

The numbers beneath the matrix show that only three of the fifty-one firms (6 percent) that entered established markets ever reached the $100 million revenue benchmark. In contrast, 37 percent of the firms that led in disruptive technological innovation-those entering markets that were less than two years old-surpassed the $100 million level, as shown on the right side of the Table. Whether a firm was a start-up or a diversified firm had little impact on its success ratio. What mattered appears not to have been its organizational form, but whether it was a leader in introducing disruptive products and creating the markets in which they were sold. Only 13 percent of the firms that entered attempting to lead in sustaining component technologies (the top half of the matrix) succeeded, while 20 percent of the firms that followed were successful. Clearly, the lower-right quadrant offered the most fertile ground for success.

It is clear that early entry into a new technology or project development strategy is key for the cleantech industry just as it has been for others in the past.

Proper and timely funding

We have addressed in previous posts the need to understand the current financial and strategic position of the company, the business plan, the risks involved and their management, valuation, industry comparable performance, the forecast and a go-forward strategy and finally a clear exit or hold strategy for the incoming investors. Without a clear strategic vision (especially in such a fast changing technological, political and economic environment that surrounds cleantech) and a disciplined business plan, companies seeking capital will be very disadvantaged in their search for capital, operating in a reactive rather than pro active mode.

In addition, you need explore and develop the basic concepts used to establish the business valuation, and it cannot be over emphasized that the importance of securing buy-in among the stakeholders with respect to realistic valuations is paramount. Without a realistic sense of valuation, current owners or shareholders may cause management to expend significant time and organizational resources hunting for capital only to have a potential transaction fall apart in midstream due to unrealistic expectations.

There are some other observations and practical suggestions about startups, particularly ones that are
bootstrapped or ones that do not have institutional investors who tend to impose certain disciplines.

For example, there is an overall allure when investors are invited to participate in ventures where the business legal structure represents that the moneys at risk are limited to the amounts invested in the C or S corporations or the limited partnerships. It happens frequently with successful professionals and with groups of friends, family members or even local grants from innovation funds investing in a start-up venture. The common denominator is that these investors have large disposable income from their professional practices or trades, sums of inherited money, or easy access to family loans or innovation funds. The feeling of the small risk involved is particularly present when the investing group is composed of several individuals. The cash amount to be invested by each one is small in relation to their personal net worth or funds under management.

Regardless of the source of initial funding, the investors do not actively participate in the day-to-day running of operations. They believe it is only a matter of investing some money in a deal that a promoter indicates is a potential big winner. In many instances management is assigned to the venture's promoter. In other cases management is assigned to a rather inexperienced manager who is hired as an employee at a low pay scale. It is hands-off from the beginning.

Most of these investors do not have business experience and fail to request an evaluation of cash flow projections beforehand. They read some documents and charts with business plans ranging from short and rather flimsy narratives to various degrees of sophisticated presentations.

The allure of the limited monetary risk becomes a fallacy once the investors put their personal or their company’s assets as collateral in support of the venture's bank loans and equipment leases. And, without fully realizing it, the limited risk situation becomes an open-ended risk where homes, bank accounts, and investments in the investors' names are in jeopardy if the business venture goes sideways.

A better alternative for hands-off investors in start-ups is to obtain reliable cash flow projections and a reasonable determination of the capital required to fund at least the working capital for the entire start-up phase, including the payroll expenses of an experienced manager. It is much easier to confront the need in advance and make the investment with a complete understanding of the risk.

In renewable projects and cleantech companies, is it worth it to pay an investment banker?

Many renewable energy project developers seeking investors for their projects or cleantech companies looking for early or growth stage funding hesitate in hiring a specialized investment banking firm to lead the process. How? They wonder, can the RE specialized IB help raise funds and what exactly can they bring to the table? Here are some of the answers.

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First and most importantly, the two words “Investment Bank” send shudders of fear down the spine of most cleantech company owners or developers. Thoughts of huge bills, endless meetings and 20 kilogram reports immediately rush through their heads. “We already put together a business plan”, “we have everything ready” and “our financial guy has put together some great spreadsheets” are the some of the usual, but short sighted replies and are a long shot away from getting close to successfully closing the funding objective.

Specialized boutique investment banks do not carry huge bills and are mostly success oriented although

you should expect some payments for reasonable work done for cleaning up and preparing the road to funding. Below are just some of the advantages in taking this path, they lead to success instead of failure and almost more importantly to a higher valuation or project returns and lower cost of capital.

Is Funding Possible? Why and How do I go about it?

In spite of the current economic turbulence, the author of this article and the firm represented continue to share an enthusiasm and positive outlook for the growth and vitality of the global emerging middle market cleantech companies and projects. And we collectively believe that those companies that are proactive and well positioned and advised, there is likely capital to be found. For those that need help getting their house in order and need to strengthen their position and focus, we hope this article will help and strongly recommend the assistance of a specialized boutique investment bank.

Planning

The figure below depicts the key elements of the planning process. We provide some  background here and then transition to the process in the following paragraphs. This treatment of the planning process presumes senior leadership has already established a compelling vision and mission to ensure a solid linkage to the intent or aim of the business. Revisiting these foundational concepts is important with each planning cycle.

In its original sense, strategy (from the Greek word strategos) is a military term that describes the art of the general. It refers to the general's plans for arraying and maneuvering his forces with the goal of defeating an enemy army. Not surprisingly, businesses have embraced this notion of strategy, defining it as a plan for leading, controlling, and utilizing resources for the purpose of promoting and securing the vital interests of the business. Ideally, one seeks (per Michael Porter of Harvard) a broad formula for achieving a competitive edge, "... deliberately choosing a different set of competitive activities which creates a unique and sustainable mix of value .... ". We call this redefining the race, as can be seen later in this article.

With the company vision, mission, and values serving as its foundation, the strategic plan strives to provide the three- to five-year strategic (competitive) initiatives in broad stokes along with the expected value-creation (financial and nonfinancial) outcomes. In contrast, the business plan (or one-year operating plan and budget) links to the strategic plan by outlining the detailed actions underlying the broadly stated strategic initiatives that must take place over the year in order to achieve Year 1 objectives. The key elements of the business plan are mainly functional improvement plans coupled with resource assignments, project milestones, final due dates, and expected benefits against projected costs (capital and expense).

 

Preparing for the funding process

Typically a startup or developer seeking funding must complete a questionnaire and submit an executive summary or a full business plan. A pro active company will understand the private equity or venture capital investing process. Some groups require that a member meet with the target management and determine if the plan is viable before allowing presenting to the group. Other groups allow the administrative staff and managing director to review the plan and invite the entrepreneur to present without a champion. The questionnaire will typically include the following:

• Name of company.
• Year founded and legal structure (C corporation, S corporation, limited liability company (LLC), etc.].
• Who referred you to this investment  group and who is your professional advisor, accountant, lawyer and other consultants?
• Summary of business (in three sentences or less).
• What problem is your product or service solving?
• What is the size of the market, how much has it grown in the past few years, and what is its projected growth?
• Describe the competition (companies as well as substitute products).
• What are your company's competitive advantages?
• Why will your company succeed in the long run?
• Does the company or its founders have any relevant patents or proprietary technologies?
• What is the relevant experience of each member of the management team? Please enclose a one-page resume of each of the key management team members plus an organizational chart.
• What is the company's sales and marketing strategy?
• What are the major short-, medium-, and long-range operational milestones you intend to achieve?
• Complete financial information, historical, 5 year projections or lifetime proforma if it is for a standalone asset based project
• Are 50 percent or more of revenues generated from one or two customers?
• What are the three greatest risks of this venture? How are they eliminated or managed?
• What are the liabilities outstanding other than operational payables and accruals-especially off-balance-sheet items?
• What is your capitalization structure? (How many shares are currently owned by founders and investors? How much capital has been invested so far, and by whom?)
• How much capital are you seeking, and how will this capital be used?
• How many rounds of investment and what amounts do you expect to need in total?
• What is your exit strategy?

The private Equity and Venture Capital Business Model

Understanding the business model and economics behind the venture or private equity fund may help you better understand the motives and actions of the VCs you partner with. We highlight some of the key facets of the VC model:

Young VCs and PEs tend to look at markets and data, experienced VCs tend to look at people.
A typical fund:

• Invests in 10 to 15 companies.
• Expects one company to return the fund or generate enol'gh gains to repay the entire amount of the fund back to the limited p;..Ltners.
• Expects one to four companies to fail.
• Expects the rest of the companies to have minimal to reasonable returns.
• Has a life of 10 years.
• Leverages expertise in certain areas by investing in a portfolio of companies in an industry.
• Invests in stages, based on milestone completion.

 

Investment banks are financial intermediaries (not investors) that act as an underwriter or agent for corporations raising capital or seeking strategic transactions. Many maintain broker-dealer operations, maintain markets for previously issued securities, provide market analysis, and offer advisory services to investors. Investment banks generally provide advisory services relating to mergers and acquisitions, private equity placements, and corporate restructuring. Some investment banks offer a subset of the services mentioned, particularly the small and niche boutiques. In 2008, many top investment banks added commercial lending services as a response to the tremendous upheaval on Wall Street.

There are several tiers, or levels, of investment banks. The largest are global and often referred to as the , bulge bracket firms. Prior to 2008, these included the likes of Lehman Brothers, Credit Suisse, Merrill Lynch, Citigroup, Morgan Stanley, JPMorgan Chase, Bear Stearns & Co., and Goldman Sachs, as well as the less recognized firms UBS, Barclays Capital (UK), and Deutsche Bank AG. During the credit and subprime mortgage crisis of 2008, Merrill Lynch was purchased by Bank of America; Bear Stearns & Co. was purchased by JPMorgan Chase; Lehman Brothers went bankrupt and its investment banking group became part of Barclays; and Goldman Sachs and Morgan Stanley became bank holding companies.

The second-tier firms are usually regional but sometimes international in nature and have focused operations in a geographic area or in an area of specialty like renewable energy or cleantech. These firms are referred to as boutique firms which specialize in a particular market niches or technologies. Keep in mind that the tier in which an investment bank resides is not necessarily a reflection of the quality of the services offered. A key factor in selecting an investment bank is matching the needs of your company or projects with the focus of the investment bank’s ca abilities and the experience of the team dedicated to your project. There are high quality, strongly performing firms in each tier.

Bio jet fuels…"The only way to fly."

Bio jet fuels, which in essence come from the same biodiesel producing value chain, are hitting it big with investors and developers as they scramble to capture a chunk of this huge high growth market. The growth is sparked by two major forces, government regulations that are setting objectives for replacing fossil fuel based kerosene and major airlines that are anxious to look green to their customers.

Commercial flight pollution

Aviation and the environment are on a collision course. The number of airline flights worldwide is growing and expected to skyrocket over the coming decades. Aircraft emissions pollute the air and threaten by 2050 to become one of the largest contributors to global warming, British scientists have concluded.

The aviation sector is a major source of the world’s carbon pollution – accounting for more emissions than the entire United Kingdom.  And left unregulated, aviation emissions are on pace to quadruple by 2050 (see figure).  The EU program requires a 3% emissions reduction (compared to a 2004-2006 baseline) by 2013, and a 5% reduction by 2020.  Aviation's growing contribution to climate change if left uncheckedGiven the needed pollution reductions to address global warming this is a very modest cut in pollution.  It also provides airlines with several avenues to meet their targets.

Much remains unknown about climate change and the role aviation plays, though climate scientists express particular concern about jet emissions in the upper atmosphere, where the warming effect from some pollutants is amplified.

According to a recent USA Today article “With the projected explosion in worldwide travel, air pollution from aviation is a growing concern among scientists, and it's drawing increased scrutiny from governments, particularly in Europe. ‘It's an issue that has to be addressed,’ says Brenda Ekwurzel, a climate scientist for the Union of Concerned Scientists, an environmental advocacy group.”

David Travis, a climate science professor at the University of Wisconsin-Whitewater, says aircraft emissions "are currently one of the fastest-growing contributors to global warming."

Private initiatives

Biodiesel

The report 'Global Bio fuel Market Analysis' by RNCOS estimates that Brazil and the US accounted for 87% of global bio fuel production in 2008, driven by government support.

The RNCOS report forecasts that biodiesel production will grow at a Compound Annual Growth Rate (CAGR) of 6% from 2009 to 2018, with bio ethanol production increasing at 5% CAGR over the same period. The report also predicts significant growth potential for bio fuels in India and China.

This prediction is reinforced by the OECD (Organization for Economic Co-operation and Development) and UN FAO food agency, which projected that global ethanol production would double between 2007-2017 reaching 125 billion liters. Biodiesel is predicted to increase from 11 billion liters to 24 billion liters over the same period (these forecasts assumed that there would not be major changes in US or EU policies supporting the production and use of bio fuels through tax incentives and blending targets).

Bio Jet Fuel

Both the European Union and the United States have enacted strict objectives and compliances to be met by 2020 on the amount of bio jet fuels that each commercial airliner needs to be burning. In fact the percentage of bio fuels being used in commercial aviation increases with the passage of years. This pressure is driven by two major factors; the reduction of emissions and the dependence on foreign supplies of fossil oils.

Sustainable Aviation Fuels Northwest (SAFN) is the USA’s first regional stakeholder effort to explore the opportunities and challenges surrounding the production of sustainable aviation fuels.

The initiative was launched in July 2010 by Boeing, Alaska Airlines, the operators of the region’s three largest airports – Port of Seattle, Port of Portland and Spokane International Airport – and Washington State University, a center for advanced bio fuels research. Climate Solutions, a Northwest clean-energy nonprofit, was retained to manage a stakeholder process that included more than 40 organizations ranging across aviation, bio fuels production, environmental advocacy, agriculture, forestry, federal and state government agencies, academic research and technical consultancies.

While the development of alternative jet fuels is a global challenge, SAFN focuses on sustainable biomass grown in the US Northwest. The findings were conclusive.

Technologies and opportunities

Hydroprocessing

The long established oil refinery technology of hydroprocessing has now been demonstrated for jet fuel production from lipids, which are natural oils produced from crops and animals. A regional hydroprocessing facility could become the center of a supply chain that first employs oilseed crops such as bamboo, camelina and canola, along with animal fats, and then incorporates algal oils as algae cultivation matures.

Using catalysts and heat, hydroprocessing removes oxygen, adds hydrogen and rearranges carbon molecules to create a drop-in petroleum substitute that requires no engine modifications in a 50 percent blend. Hydroprocessing produces renewable diesel, and can produce 50-70 percent jet fuel with an additional cracking step.62 The remaining product would be mostly renewable diesel, with fractions as propane and Naphtha, a feedstock for plastics and chemicals.

Lignocellulosic Biomass Processing

Lignocellulosic biomass is composed of three materials – cellulose, hemicellulose and lignin. The latter two bind and protect the cellulose. Technologies must break down the material in order to process biomass into bioenergy and bioproducts. These technologies have long been available but the fundamental challenge is to make the processes economical. The two major biomass processing technologies employed are separation of biomass into chemical components, which are then separately converted to fuels and products (example: biomass to sugar to fuel) and conversion of whole biomass to fuels or chemicals through thermal and chemical routes. They are extensively detailed in other literature, so this article provides only a brief summary.

• Catalytic – A combination of heat and catalysts rebuild molecules into longer chains required for
  fuels. The Fisher-Tropsch (FT) process provides a prominent example, as it was developed by the Germans in the 1920s and used to a limited extent in World War II, and by the South Africans for the last 20-plus years to make jet fuel. Today a number of companies seek to commercialize FT for biomass-based fuels but capital costs present a challenge. Other catalytic technologies are in development.
• Biological – Syngas is fed to microbes that ferment into alcohols and acetic acid, which can then be upgraded to other fuels and chemicals.

A large number of startups are developing innovative technologies and are poised for commercial deployment with highly efficient and high return applications but are lacking the proper funding to go to market, even with good projects shovel ready and substantial well developed pipelines. Large ventures are relying on the more tried true technologies although they are finding that meeting IATA specifications are harder and less cost effective with older technologies.

Interested developers with funding requirements click here

Interested investors in technologies or project opportunities click here

Energy – renewable and traditional, infrastructure, retail, minerals, commodities, aviation...Brazil sets record on the record of mergers.

There can only be one leader

Energy – renewable and traditional, retail, minerals, commodities, aviation...Brazil sets record on the record of mergers. These are companies with the Highlander syndrome, wanting to cut off competitors’ heads or gobble them up. No sector is safe and this includes new and emerging areas in this emerging giant, including renewable, cleantech and it, as everyone scrambles for scale to become the leader and get the higher margins and security that come with it.

THERE CAN ONLY BE ONE! "Cries the warrior Victor Kruger (Clancy Brown) to attack Connor Macleod  (Christopher Lambert), the film Highlander, the warrior immortal, 1986. The two form part of a race of immortals, which for some mysterious reason feel an irrepressible desire to seek, attack and destroy each other. The only way is decapitating the opponent. And the game (and movie) is only over when there was only one left.

The merger and acquisitions fervor in Brazil and some of the latest friendly and hostile takeover attempts paint a very similar scenario.

Companies also do not die of natural causes. In the Brazil of today, it seems that in the majority of occasions, when a rival approaches and after an uphill battle, strikes a blow to rival separating the head from the body. Like in the movie, the winner of the battle comes out stronger, more able and willing for the next fight. The only difference is that the Highlander corporation goes around with one head but commanding two, three, sometimes several bodies. Ah, yes, and the severed head usually survives richer than before, no longer having to meet the needs of that foreign body. (In some cases, however, a double body remains with two heads for some time.)

The sun that the Spanish want to bring

The board of Isolux, a Spanish company in the area of infrastructure and concessions, has decided to invest R$ 6 billion in Brazil later this year, much of which will be through joint ventures and acquisitions. The amount represents 40% of all that the company intends to spend in the world. This investment will be applied to the construction and development transmission lines and photovoltaic power plants. The company generated revenues of € 3.2 billion and is present in 30 countries.

Infrastructure, minerals, IT and other sectors.

The retail market has recently had several struggles. The warrior Ricardo Eletro cut the head off of Insinuante, forming a body called Sales Machine. The warrior Magazine Luiza seized in June Lojas de Baú – and came out stronger than Ricardo, getting ready for the battle with the duo-Casas Bahia – Ponto Frio (under the command of another merger guerilla, the Pao de Açucar). But behold, Ricardo beheaded Shopping Eletro in July, and returned to leap frog the warrior Luiza.

 
In the aviation market, TAM and Gol emulate Kruger and the likes of Macleod. TAM battles (amicably) with Trip, and Gol in turn beheads Webjet this past month. In food sector, Perdigao digested Sadia, JBS wormed into Bertin. These are only some of the examples of a phenomenon that affects numerous companies in countless industries in Brazil. Everyone thinks he is Highlander.

To understand why there are so many battles taking place now, we must go back to another war. It was In the middle of the 1940’s, in the first moments after the Second World War when television began to work again, after years of interruption due to the conflict. It was the trigger for a period of expansion of communications, which culminated in the advent of the Internet in the 1980’s, and its constant development to today’s current omnipresence.

This is a time characterized by the flow of information with almost no barriers. "In these years, there was a dramatic fall costs of information, "says Claudio Felisoni of Angelo, economist, chairman of the Provar, the core of a group specializing in retail distribution founded by professors of the prestigious USP, and Ibevar, the institute of executives of same market. With so much information circulating free, products and services were very easier to be copied. That is why many have no competitive differences and are now so alike. This means that one cannot charge too much for any given product or service. Increase the price a little, and then comes someone willing to sell at your old price. Keep your old price, and soon someone will come by selling less.


Innovate or Acquire, Grow or Die

There are only two exits to seek higher profits: the first is to innovate. Create something that no one else knows or can do, or improve the process to have more efficiency. The problem is that innovations are also quickly copied. And that is why so many businesses are calling for second way out – acquire, gain scale, get the biggest market share quickly, a position where margins are higher. Nobody is safe from this phenomenon and even new sectors like renewable energies and cleantech are not safe. In the first semester of the year, the number of mergers and acquisitions reached 379 in Brazil, a record, according to KPMG. And the report only counted only businesses of large size, which were recorded in the media.

Brazil has an extra reason for this galloping of mergers: the proliferation of the Internet has coincided with the effects of the Real Plan. Accounting for inflation, it was possible to "see the real value" of the products as Felisoni says, "and establish relative prices." The increased consumption and helps you understand the need for higher turnover, which feeds the wheel of mergers and acquisitions.

In trade, the phenomenon is even more radical. The e-commerce brings instantly price of anything for the consumer. Therefore, the profit margin in retail is the lowest of the economic activities. According to The Valor 1000, the net margin (profit Net on net) of retail was 2.3 in 2009 - the lowest among 26 activities analyzed, except for the sugar industry and alcohol, which that year had an unusual period large losses.

Civil aviation has also margins especially low. Likewise, access to information gave visibility to certain practices. Gol, for example, the tropicalized model low cost successful in other countries and TAM led to review the strategy, as recalled by André Castellini consultant, Bain & Company. In aviation, and this model, you need volume to negotiate the price of fuel, aircraft and Spare parts, especially with few suppliers, although the advent of bio-jet fuels threatens to fragment the market in the short term. Aside from historical and structural factors, there those term to explain the large number purchase of companies in Brazil. "The country offers less risk, more predictable and allows for long-term vision, "said Luis Augusto Dead, KPMG partner in charge of mergers and acquisitions. The force of the business in 2011 becomes discounted even more significant if the effects of international crisis in the comparison with 2010 and the rest of the global economy.

"In 2009, business plummeted by cause of the crisis, "says Dead. In 2010, many operations were shelved. Already, the numbers of 2011 do not carry this compensation on businesses, he said, reflecting the confidence in the economy Brazil. Both the participation of foreigners was decisive in purchases to get the record the first half. The number of operations acquisition of Brazilian companies by foreign grew 23% in relation to the same period 2010. On the other hand, fell 16% the number of Foreign purchases by Brazil. And to Brazilian purchases by Brazil increased 9%. A sign that life in Brazil is better, of course, assuming no one gets a shot at our heads.