BFI is a start-up company consisting of senior executives with extensive experience in the energy industry, finance and business. BFI was founded to develop multiple biomass-to-liquid fuels projects using recently developed technology to convert common forms of biomass to high hydrogen content syngas and liquid fuels. A number of opportunities have been identified to produce synthetic gas fuel for electricity generation, and a “drop-in” diesel that is chemically equal to conventional diesel.
The collapse of oil prices has created significant challenges to the proposed projects. Keeping all current assumptions, unchanged, to achieve the targeted 10% IRR based on EBITDA, the wholesale price of diesel needs to be approximately $2.30/gal. Until a few months ago, diesel prices had averaged near $3.00/gal over the last several years. Currently, the wholesale price is closer to $1.90/gal. However, recent analyst reports suggest rising prices based on declining drill rigs and reduced exploration budgets. At the same time accelerating instability in the Mid-east suggests significant potential for oil price spikes that offer biomass investors significant upside potential.
A number of options exist to achieve investor goals and BFI is working on those options as follows:
- Reduce feedstock costs bone-dry feedstock costs: BFI is seeking to identify suitable waste products (in the quantities required) from existing industries.
- Increase the value of the biochar: BFI is exploring technologies that require a carbon-based feedstock to increase the value of the biochar, including graphene, activated carbon, carbon fiber, filter media, etc.
- Reduce CAPEX: BFI has already addressed a portion of the CAPEX through site selection requiring the New Markets Tax Credits. Additional work on identifying sites with existing infrastructure is underway.
- Forward Hedge the RINs Value: BFI’s current assumption of the RINs market price at$0.50/gal is very conservative to reflect the potential volatility of this revenue stream. For example, assuming the current market price of RINs over the life of the project would achievethe target IRR.
- Obtain a diesel price of $2.30/gal: BFI is exploring potential markets for green diesel, such as the military, where a premium for renewable products might be achieved.
- Switch from diesel to higher value-added products: BFI is exploring di-methyl ether (DME), anhydrous ammonia, urea and other products – all of which would achieve investor targets.