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

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

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Designing Biorefinery Strategies for Phased Implementation and Risk Mitigation Virginie Chambost, Frdric Clerc and Paul Stuart May 27, 2015 O BJECTIVES To present some key factors for success (KFS) for winning business model(s) To present

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Designing Biorefinery Strategies for Phased Implementation and Risk Mitigation

Virginie Chambost, Frédéric Clerc and Paul Stuart

May 27, 2015

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OBJECTIVES

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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.

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OUTLINE

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Context Approach Case Study Key messages

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DECISION-MAKING FOR THE BIOREFINERY: DIFFERENT FROM THE CORE BUSINESS

 The identification of biorefinery strategies implies transformation

and revenues diversification; decision-making should consider a set

  • f risks to assess whether strategies are robust and sustainable.

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Companies tend to identify biorefinery opportunities on a ad-hoc basis

 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

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TRANSFORMATION IS ESSENTIAL FOR THE FORESTRY INDUSTRY IN ORDER TO

MAINTAIN OR RESTORE ITS COMPETITIVENESS Strategic Planning for Successful Transformation Innovative Business Models addressing product portfolio diversification Technology Plan Business Plan

Emerging technologies Techno-economic feasibility Risk analysis Value chain identification Supply chain strategies Competitive position

Current Business End-State Transformation

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STRATEGIC PHASED APPROACH

Phase I Lower Operating Costs

Replace fossil fuels at mill (natural gas, Bunker C), and/or Produce “building block” chemicals Lower risk technologies

Phase II Increase Revenues

Manufacture of derivatives Market development for new products Higher process complexity and technology risk Partners essential

Phase III Improve Margins

Knowledge-based manufacturing and production flexibility Business flow transformation Product development culture Off-shoring, Outsourcing, etc…

Strategic Vision _ Phases II and III should determine Phase I Implementation _ Compete with all capital spending

Short term actions for long term value

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OUTLINE

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Context Approach Case Study Key messages

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OVERALL APPROACH

8 Part 1 – Biorefinery Options Generation & Strategies Setting Part 2 – Early-Stage Assessment

  • f Biorefinery Strategies

Part 3 – Decision-Making Generic Strategies Biorefinery Options Specific Phased Strategies Early-stage Triage

(incl. Prel. Risk Identification)

Refined Set of Specific Biorefinery Strategies Preliminary Biorefinery Strategies Design on a Comparable Basis Preferred Strategies for further Assessment and/or Investment Decision- Making Large Block Analysis / Integration Assessment Preliminary Techno- Economics Systematic Risk Analysis Criteria Definition and Evaluation Multi-Criteria Decision- Making (MCDM) Panel Rapid Market Analysis > 200 Process/Products Options Case Study: 5 Specific, Competitive Biorefinery Strategies Inspired by a Case Study

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OUTLINE

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Context Approach Case Study Key messages

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IDENTIFYING GENERIC STRATEGIES AS A FIRST DRIVER FOR TRIAGE

10 Generic Biorefinery Strategies

Forest products company context Product strategy focus Available conversion technologies Phased approach for implementation, in order to mitigate technology and market risks Long-term transformation goals

Triage of Generic Strategies Refined Set of Generic Strategies

Fundamental corporate drivers for transformation Specific site drivers and barriers for biorefinery implementation (e.g. considerations at the mill level)

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Phase 1 Phase 2 Phase 3

0 – 2 years 2 – 5 years > 5 years Time

Example of a Generic Strategy: Fractionation for Sugar-Based Strategies

Goals Sugars:

  • Sell C5/C6 on the market
  • Work in partnership to

treat “dirty sugars” and target added-value applications

Lignin:

  • Burn lignin
  • Assess lignin quality and

market potential for lignin application

Assess sugar conversion technologies for added-value bio-chemicals Explore potential for lignin market. Explore partnerships  Consolidate the business strategy for added-value sugar derivatives

  • Develop market and

mitigate technology and market risks

  • Increase production capacity

/ invest in derivative process

  • Become leader in targeted

market segments

  • Increase margins
  • Increase manufacture of

added-value derivatives Expression

  • f Generic

Strategy 11

Fractionation (comm. scale) Fractionation (demo scale)

C6, C5 or C5/C6

Added- value

Conversion

C5/C6 to sugar sink Lignin Lignin

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APPROACH USED TO TRIAGE BIOREFINERY OPTIONS

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EnVertis Database Forestry Company Biorefinery Preferences

Over 200 technology companies developing biomass conversion technologies and/or bio- products options  Biomass availability  Technology Maturity  Market Conditions  Business Model

Primary Technologies

  • Phase

1 Product Base Case Competing Case Cellulosic Sugars Beta Renewables Renmatix Extracted hemicellulose sugars Andritz None Organosolv Lignin Lignol CIMV Bio-oil Ensyn N/A Bio-gas Paques None Bio-composites Generic N/A Cellulose Crystals CelluForce None Cellulose Fibrils GL&V None Dissolving Pulp AVAP None

Sugar Conversion Options

Type

  • f

sugar Product Base Case C5/C6 n-Butanol Cobalt C5 Xylitol DuPont- Danisco C6 Succinic Acid BioAmber Lactic Acid Purac Adipic Acid Rennovia

Lignin Applications

Market Timeline Applications Lignin Sink Fuel in boiler/lime kiln Short-term Phenolic Resin Wood panel wax products Medium-Long Term Activated carbon Thermoplastics Phenol BTX UF resins Carbon Fibre PU foams Epoxy resin

11 Lignin Derivative Options 5 Sugar Derivative Options 11 Primary Biomass Conversion Technologies

Case Study Result: 27 Technology Options Retained

Exhaustive and updated through:  Site visits and project experiences  Bioenergy Deployment Consortium member  Multiple public sources compilation

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DESIGNING SPECIFIC STRATEGIES

13 Part 1 – Biorefinery Options Generation & Strategy Setting Generic Strategies Biorefinery Options Specific Phased Strategies Early-stage Triage (incl. Prel. Risk Identification) Refined Set of Biorefinery Strategies

 Biorefinery “strategies” are defined considering: 

Specific technologies, partners, products and targeted markets

Phased approach

Throughput/design capacity

 Design rules are used to constrain the number of

specific strategies to a manageable set for panel evaluation:

Heuristic 1 – Level of investment required

Heuristic 2 – Development of a robust product portfolio targeting added-value products

Heuristic 3 – Design capacity considering technology capacity/maturity and implied market share over the longer-term

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Technology Design Capacity

  • Market

Size

  • n

Targeted Segments Phase 2/3

  • Conversion

Technology Yield Expected Market Share Phase 1

  • Primary

Technology Yield Biomass Availability

  • Biomass

Scenarios

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EARLY-STAGE STRATEGIES EVALUATION AND TRIAGE

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Quantitative Criteria

Design Capacity vs. Biomass Availability Scenarios Overall Capex Net Revenue Increase Potential for the Site Biomass Cost/ Revenue Ratio

 Identification of quantitative criteria

which can be calculated at the early- stage design, with a limited amount of data available

Qualitative Criteria

Technology Risk

 Maturity & Scalability Phase 1, 2 &3  Major Technology Risks

Market Risk

 Expected Market Share vs. Growth  Local context  Main product diving portfolio risk  Major Market Risks

Special Considerations

 Synergies with Corporate/Mill drivers  Integration potential  Business model flexibility

 Preliminary risk evaluation of retained

strategies in terms of market, technology and business risk (i.e. focus on special considerations)

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OVERVIEW OF THE APPROACH: TOWARDS PRELIMINARY DECISION MAKING

15 Part 1 – Biorefinery Options Generation & Strategies Setting Part 2 – Early-Stage Assessment

  • f Biorefinery Strategies

Part 3 – Decision-Making Generic Strategies Biorefinery Options Specific Phased Strategies

Early-stage Triage

(incl. Prel. Risk Identification) Refined Set of Specific Biorefinery Strategies Preliminary Biorefinery Strategies Design on a Comparable Basis Preferred Strategies for further Assessment and/or Investment Decision- Making Large Block Analysis / Integration Assessment Preliminary Techno- Economics Systematic Risk Analysis Criteria Definition and Evaluation Multi-Criteria Decision- Making (MCDM) Panel Rapid Market Analysis > 200 Process/Products Options 6 Context Specific, Competitive Biorefinery Strategies

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MCDM PROCESS FOR BIOREFINERY STRATEGY EVALUATION

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Goal Risk-based Criteria Biorefinery Strategies Identify most preferred biorefinery strategies Economic Technology Market Environment

  • Strat. 1
  • Strat. 2
  • Strat. 3
  • Strat. 4
  • Strat. 5
  • IRR
  • Adjusted IRR
  • Feedstock flexibility
  • Technology Risk
  • Process integration and energy metric
  • Product and revenue diversification
  • Potential for future new products
  • Environmental impacts
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0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0

1. Fast Pyrolysis 2. Bio-composites 3. Frac ona on Overall Score

Biorefinery Op ons Ranking

C7

  • ROCE

C6

  • GHG

C5

  • PIC

C4

  • CAB

C3

  • DEP

C2

  • RPG

C1

  • SCB

0.69 0.66 0.47

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EXAMPLE OF MCDM RESULTS

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OUTLINE

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Context Approach Case Study Key messages

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TAKE-HOME MESSAGES

 A systematic approach can be employed for identifying the most

preferred biorefinery strategies for a forest products company:

 Define robust biorefinery strategies, considering risk and

uncertainties at the early stage, through a phased implementation

 Organize and manage complexity of a large number of options  Identify (a) corporate drivers and (b) mill strengths and

weaknesses, which should drive the biorefinery approach

 Captures unique competitive advantages for the company  MCDM builds alignment and consensus internally among

company stakeholders for future decision-making.

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Virginie Chambost – virginie.chambost@envertis.ca 514.891.8944 Frédéric Clerc – frederic.clerc@envertis.ca 514.979.8944 Paul Stuart – paul.stuart@polymtl.ca 514.891.3506

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Thank You !