Risk Mitigation Virginie Chambost, Frdric Clerc and Paul Stuart May - PowerPoint PPT Presentation

Designing Biorefinery Strategies for Phased Implementation and Risk Mitigation Virginie Chambost, Frédéric Clerc and Paul Stuart May 27, 2015

O BJECTIVES To present some key factors for success (KFS) for winning business model(s) To present a risk-based approach leading to the identification of a refined set of biorefineries strategies, in the context of a forest products company. 2

O UTLINE Context Approach Case Study Key messages 3

D ECISION -M AKING FOR THE B IOREFINERY : D IFFERENT F ROM THE C ORE B USINESS  The identification of biorefinery strategies implies transformation and revenues diversification ; decision-making should consider a set of risks to assess whether strategies are robust and sustainable .  This is not obvious and many factors can complicate decision-making, e.g.:  High number of process/product/partner options  Dynamic environment (New technologies, new products, dynamic markets)  Technology and business risks and uncertainties Companies tend to identify biorefinery opportunities on a ad-hoc basis 4

Current Strategic Planning End-State Business Transformation for Successful Transformation Innovative Business Models addressing product portfolio diversification Technology Business Plan Plan Value chain identification Emerging technologies Supply chain strategies Techno-economic feasibility Competitive position Risk analysis T RANSFORMATION IS ESSENTIAL FOR THE FORESTRY INDUSTRY IN ORDER TO 5 MAINTAIN OR RESTORE ITS COMPETITIVENESS

S TRATEGIC P HASED A PPROACH Implementation _ Compete with all capital spending Phase III Phase II Phase I Improve Margins Increase Revenues Lower Operating Costs Knowledge-based Manufacture of derivatives Replace fossil fuels at manufacturing and Market development for mill (natural gas, production flexibility new products Bunker C), and/or Business flow Higher process complexity Produce “ building block ” transformation and technology risk chemicals Product development Partners essential Lower risk technologies culture Off-shoring, Outsourcing, etc… Strategic Vision _ Phases II and III should determine Phase I Short term actions for long term value 6

O UTLINE Context Approach Case Study Key messages 7

O VERALL A PPROACH Inspired by a Case Study Part 1 – Biorefinery Options Part 2 – Early-Stage Assessment Part 3 – Decision-Making Generation & Strategies Setting of Biorefinery Strategies > 200 Process/Products Options Large Block Analysis / Integration Assessment Generic Biorefinery Criteria Definition and Strategies Options Evaluation Preliminary Rapid Market Techno- Analysis Economics Specific Phased Strategies Multi-Criteria Decision- Making (MCDM) Panel Early-stage Triage Systematic Risk Analysis (incl. Prel. Risk Identification) Preferred Strategies for Preliminary Biorefinery Case Study: 5 Specific, further Assessment and/or Refined Set of Specific Strategies Design on a Competitive Biorefinery Investment Decision- Biorefinery Strategies Comparable Basis Strategies Making 8

O UTLINE Context Approach Case Study Key messages 9

I DENTIFYING G ENERIC S TRATEGIES AS A F IRST D RIVER FOR T RIAGE  Forest products company context  Product strategy focus  Available conversion technologies Generic Biorefinery Strategies  Phased approach for implementation, in order to mitigate technology and market risks  Long-term transformation goals  Fundamental corporate drivers for transformation Triage of Generic  Specific site drivers and barriers for biorefinery Strategies implementation (e.g. considerations at the mill level) Refined Set of Generic Strategies 10

Example of a Generic Strategy: Fractionation for Sugar-Based Strategies Phase 1 Phase 2 Phase 3 0 – 2 years 2 – 5 years Time > 5 years  Increase production capacity   Develop market and Increase margins / invest in derivative process  Goals mitigate technology Increase manufacture of  Become leader in targeted and market risks added-value derivatives market segments C6, C5 or Fractionation C5/C6 Added- Fractionation C5/C6 to Conversion (demo scale) value (comm. scale) sugar sink Lignin Lignin  Sugars: Expression  Assess sugar conversion • Sell C5/C6 on the market of Generic • Work in partnership to technologies for added-value Strategy treat “ dirty sugars ” and bio-chemicals  Consolidate the business target added-value applications strategy for added-value  Explore potential for lignin  Lignin: sugar derivatives market. • Burn lignin • Assess lignin quality and  Explore partnerships market potential for lignin application 11

A PPROACH U SED TO T RIAGE B IOREFINERY O PTIONS Exhaustive and updated through: Forestry Company  Site visits and project experiences EnVertis Database Biorefinery Preferences  Bioenergy Deployment Consortium member  Multiple public sources compilation Over 200 technology companies developing biomass conversion technologies and/or bio- products options  Biomass availability  Technology Maturity  Market Conditions  Business Model Primary� Technologies� � Sugar� Conversion� Options� Lignin� Applications� Phase� 1� Product� Base� Case� Competing� Type� of� sugar� Product� Base� Case� Market� Timeline� Applications� Case� C5/C6� n-Butanol� Lignin� Sink� Cobalt� Fuel� in� boiler/lime� kiln � Cellulosic� Sugars� Beta� Renmatix� Phenolic� Resin� DuPont- Short-term� C5� Xylitol� Renewables� Wood� panel� wax� products� Danisco� Extracted� Succinic� Acid� Activated� carbon � Andritz� None� BioAmber� 11 Primary Biomass 5 Sugar Derivative 11 Lignin hemicellulose� Thermoplastics� C6� Lactic� Acid� Purac� sugars� Phenol� Conversion Technologies Options Derivative Options BTX� Adipic� Acid� Rennovia� Medium-Long� Term� UF� resins� Organosolv� Lignin� Lignol� CIMV� Carbon� Fibre � Bio-oil� Ensyn� N/A� PU� foams� Epoxy� resin � Bio-gas� Paques� None� Bio-composites� Generic� N/A� Case Study Result: 27 Technology Options Retained Cellulose� Crystals� CelluForce� None� 12 Cellulose� Fibrils� GL&V� None� Dissolving� Pulp� AVAP� None�

D ESIGNING S PECIFIC S TRATEGIES Part 1 – Biorefinery Options  Biorefinery “ strategies ” are defined considering: Generation & Strategy Setting Specific technologies, partners, products and  targeted markets >200 8 Phased approach  Generic Biorefinery Throughput/design capacity  Strategies Options 5 27  Design rules are used to constrain the number of specific strategies to a manageable set for panel Specific Phased Strategies evaluation: 12 Heuristic 1 – Level of investment required  Heuristic 2 – Development of a robust product  Early-stage Triage (incl. Prel. Risk Identification) portfolio targeting added-value products Heuristic 3 – Design capacity considering  technology capacity/maturity and implied market share over the longer-term Refined Set of Biorefinery Strategies Market� Size� on� Targeted� Biomass� Availability� � Technology� Design� Capacity� � Segments� Biomass� Phase� 1� -� Primary� Phase� 2/3� -Conversion� Expected� Market� Scenarios� Technology� Yield� Technology� Yield� Share� 13

E ARLY -S TAGE S TRATEGIES E VALUATION AND T RIAGE Quantitative Criteria  Identification of quantitative criteria which can be calculated at the early- Design Capacity vs. Biomass Availability Scenarios stage design, with a limited amount of data available Overall Capex Net Revenue Increase Potential for the Site Biomass Cost/ Revenue Ratio Qualitative Criteria Technology Risk  Maturity & Scalability Phase 1, 2 &3  Major Technology Risks Market Risk  Expected Market Share vs. Growth  Local context  Preliminary risk evaluation of retained  Main product diving portfolio risk  Major Market Risks strategies in terms of market, technology and business risk (i.e. focus on special Special Considerations considerations)  Synergies with Corporate/Mill drivers  Integration potential  Business model flexibility 14

O VERVIEW OF THE A PPROACH : T OWARDS P RELIMINARY D ECISION M AKING Part 1 – Biorefinery Options Part 2 – Early-Stage Assessment Part 3 – Decision-Making Generation & Strategies Setting of Biorefinery Strategies > 200 Process/Products Options Large Block Analysis / Generic Biorefinery Strategies Options Integration Assessment Criteria Definition and Evaluation Preliminary Rapid Market Techno- Specific Phased Strategies Analysis Economics Multi-Criteria Decision- Making (MCDM) Panel Early-stage Triage (incl. Prel. Risk Identification) Systematic Risk Analysis Preferred Strategies for Preliminary Biorefinery 6 Context Specific, further Assessment and/or Refined Set of Specific Strategies Design on a Competitive Biorefinery Investment Decision- Biorefinery Strategies Comparable Basis Strategies Making 15