This guidebook is intended to provide general information, and educate our clients and network partners.

A GUIDEBOOK TO ETHANOL

1"

Disclaimer To the best of our knowledge, all information contained herein, based on inputs from Cavendish commercial team and publicly available sources, is accurate and reliable as of the date of publication; however, we do not assume any liability whatsoever for the accuracy and completeness. Any information given in this guidebook does not constitute any warranty of merchantability or fitness for a particular use. It is the customers' responsibility to inspect our product specifications in order to satisfy themselves as to the suitability of the products to their particular purpose before any execution of an order. Any unauthorized review, reproduction, disclosure or distribution of this document is prohibited without prior permission from Cavendish Limited. © 2015 Cavendish Limited. All rights reserved.

At a glance…!

•  Ethanol, Ethyl Alcohol, Extra Neutral Alcohol, Neutral Spirit or Pure Alcohol is a volatile, flammable, colorless liquid with a slight odour, having alcoholic content ranging from 80% - 99.9%, and the molecular formula C2H5OH. Pure Alcohol is also commonly referred to as Undenatured Ethanol from a terminology perspective.

•  Since alcohol consumption as beverage is heavily regulated and taxed, additives are mixed with Ethanol to make it undrinkable and in order to circumvent the taxation, transport, and several regulatory measures. Such Ethanol is referred to as Denatured Ethanol which has many industrial applications and usage as fuel.

•  Bittering agents such as methanol, isopropyl alcohol, acetone, methyl ethyl ketone, methyl isobutyl ketone and denatonium are common additives used to denature Ethanol. The process does not chemically alter the ethanol molecule.

•  Ethanol is azeotropic composition of water and alcohol, dependent on temperature and pressure. Hydrous (or wet) ethanol is the most concentrated grade of ethanol that can be produced by simple distillation, without the further dehydration step necessary to produce anhydrous (or dry) ethanol. Hydrous ethanol typically ranges from 186 proof (93% ethanol, 7% water) to 192 proof (96% ethanol, 4% water). Anhydrous ethanol means an ethyl alcohol that has a purity of at least 99%, exclusive of added denaturants.

•  Ethanol industry has rapidly expanded with estimated global production of 88 billion liters in 2014, a 3-6% annual growth over past 15 years, creating a new dynamics of supply, demand, price and sustainability mechanism.

•  Though so far unmatched with the rate of production expansion, demand is likely to grow in all areas of its applications. A transition from anhydrous to hydrous ethanol for gasoline blending is also expected to make a significant contribution to ethanol’s cost-competitiveness.

© Cavendish 2015 2

Simplified schematic of ethanol production !

Extraction of Sugar

Fermentation Distillation Dehydration Ethanol

Diffusion Evaporation

Mashing & Liquefaction

Pretreatment & Enzymatic hydrolysis

Crystallization Sugar

BranDDGs

(Dry Distillers Grains with solubles)

diffusion juices

low purity syrup (EP2)

C5/C6 sugar

Starchy materials like wheat, rice, corn etc

Sucrose materials like sugarcane, sugar beat, sorghum etc

Lignocellulosic biomass

© Cavendish 2015 3

Ethanol is produced, via biological processes, by fermenting sugars with yeast, with the goal to maximise the alcohol strength and minimise the impurities through dehydration and distillation processes. * Production of synthetic ethanol through the hydration of ethylene using a phosphoric acid catalyst is outside the scope of this document.

Production processes and Ethanol applications !

Processes •  Ethanol is produced from sugar containing materials or starchy materials by two major processes - dry milling and wet

milling. Dry milling the dominant and more efficient ethanol production process than wet milling. Yeast is added for fermentation, which also produces by-products.

•  At purification stage, major by-products are removed through distillation, adsorption, ozonation and gas stripping techniques. Distillation is the most dominant and recognized industrial purification technique of ethanol.

•  Dehydration is performed at the next stage to strengthen alcohol content in Ethanol. Azeotropic distillation with cyclohexane, Extractive distillation with ethyleneglycol, and Adsorption with molecular sieves are common techniques in dehydration.

•  Ethanol is analysed for its physical, chemical and sensory profiles against standard parameters. Gas chromatography, High performance liquid chromatography, Infrared spectroscopy, and Olfactometry are major analytical techniques.

Applications •  Beverages, potable liquors – Agricultural Ethanol •  Fuel (transportation, heating, propulsion) - Agricultural Ethanol •  Industrial applications - Agricultural and Synthetic Ethanol

–  Pharmaceutical manufacturing –  Cosmetics, perfumeries, toiletries –  Detergents and cleaning products –  Printing inks, paints, coatings, solvents –  Green chemicals –  Screenwash and deicers for the automotive industry –  Biocides and other medical uses –  Production of chemical intermediates, such as for polymers and plastics

© Cavendish 2015 4

Ethanol trade summary!

Country 2014 (million litres) United States 54,248 Brazil 21,751 European Union 4,681 China 2,165 Thailand 1,730 Canada 1,802 India 358 Colombia 325 Australia 340 Other 965

© Cavendish 2015 5

•  97% of world Ethanol is used for fuel; remaining 3% is used for beverages and other industrial applications.

•  USA and Brazil are producers of 85% of world ethanol production. However, USA exports less than 6% of its production as of Dec 2014.

•  Brazil, Thailand, India, Colombia, Australia and Vietnam are major exporters of their Ethanol production.

•  USA, Canada, UAE, Philippines, India, South Korea, Mexico and European Union are major importers.

•  Import of Ethanol into European Union has reduced due primarily to the EU’s imposition in 2013 of a punitive tariff and stiff regulations. Import of Ethanol into USA has reduced by 80% due to excessive domestic inventory.

•  Excessive production has led to inventory buildup and 55% decline in the price of denatured ethanol since Apr 2014. Similar trend is noticed with other grades, however this quantum of severe price decline does not apply.

•  Analysts are expecting inventory to deplete soon and prices to gradually rise over subsequent months and years

Top Producers of Ethanol

Denatured Ethanol Price/US gallon

Source: Cavendish, USDA

Source: CBOT

Cavendish capabilities (1/3) !

•  Cavendish supplies all major grades of Ethanol to the specifications of its clients –  Extra Neutral Alcohol (Grain based; food grade) – 96%v/v minimum –  Extra Neutral Alcohol (Molasses based; food grade) - 96%v/v minimum –  Absolute Alcohol (food grade) - 96%v/v to 99.99%v/v –  Denatured Alcohol / Denatured Ethanol (industrial grade)

•  Cavendish has capacity to supply 20 million liters of Ethanol per month through its facilities and exclusive network partners. More quantities can be sourced and supplied from its strong relationships with manufacturers on need basis.

•  Cavendish Ethanol origin is primarily India and Pakistan. However, it has strong relationships with manufacturers in Eastern Europe and USA.

•  Cavendish provides quality and quantity certificate with each Ethanol order, and encourages optional inspection and sealing of containers at source by internationally reputable third party institutions.

•  Cavendish primary market is North Africa, Middle East and Europe; secondary market is Singapore, USA and Canada.

•  Cavendish clients include some of the most prominent companies.

•  Cavendish is a financially sound and robust organisation, with excellent credit history, with its head office in Dubai, UAE. Cavendish is backed by Blackswan International – a financial institution with interests in securities trading, investment structuring and private equity.

© Cavendish 2015 6

Cavendish capabilities (2/3) !

© Cavendish 2015 7

Sample analytical profile of Cavendish Extra Neutral Alcohol (Grain based)

PARAMETERS UNIT STANDARD AVERAGE TEST RESULTS ALCOHOL CONTENT AT 20° C % v/v min 96 96.2 DENSITY or SPECIFIC GRAVITY @ 20° C g/cm3 min 0.8075 0.80763

MISCIBILITY Miscible with water Miscible with water and organic solvents APPEARANCE Colorless / Clear Colorless / Clear

Residue levels TOTAL ACIDITY AS ACETIC ACID, max. mg / 100 ml max 1.5 0.3 DRY EXTRACT TOTAL, max. mg / 100 ml max 1.5 1 ALDEHYDE AS ACETALDEHYDE, max. mg / 100 ml max 0.5 0.2 ETHYL ESTERS AS ETHYL ACETATE, max. mg / 100 ml max 1.3 0.5 METHANOL, max. mg / 100 ml max 30 1 HIGHER ALCOHOLS (as methyl-2-propanol-1), max. mg / 100 ml max 0.5 0.4 ETHYL METHYL KETONE mg / 100 ml Not Detectable not detected GC Profiles no extraneous peaks BITREX mg / 100 ml Not Detectable not detected TOLUENE mg / 100 ml Not Detectable not detected DIETHYL PTHALATE mg / 100 ml Not Detectable not detected ACETAL, max. mg / 100 ml 1 DI-ACETAL, max. mg / 100 ml 0.2 FURFURAL Not Detectable not detected ETHYL BUTYRATE, max. mg / 100 ml 0.01 TOTAL VOLATILES, max. mg / 100 ml max 0.1 0.06 ETHYL CARBAMATE, max. mg / 100 ml 0.01 COPPER AS Cu, max. mg / 100 ml trace 0.2 LEAD AS Pb, max. mg / 100 ml trace nil POTASSIUM PERMANGNATE REACTION TIME minutes min 20 45

Cavendish capabilities (3/3) !

•  Cavendish caters to wide range of packaging needs of clients, each having their own benefits, costs, risks. Clients are reminded of contamination risks with bulk vessel, and cost inefficiencies with Kegs. –  25 liters food grade Kegs –  250 liters food grade HDPE Drums –  24,700 liters ISO Tank Containers –  Bulk Vessel

•  Cavendish works with reputable carrier with excellent service records. Cavendish can deliver to all destinations around the globe, with comprehensive marine insurance policy.

•  Cavendish maintains banking facilities with major banks in the UK, Dubai and Singapore, who have professional and service oriented attitude towards trade facilitation.

•  Cavendish implements policy to listen to and advise clients where necessary, and continue meaningful and authentic conversation with clients after successful delivery of goods.

© Cavendish 2015 8

Buyers criteria!

•  Identify Ethanol grade, alcohol strength, and any preference for product origin.

•  Work out target price and Incoterms (FOB/CIF/CFR). Price scale usually varies with Denatured Alcohol being the cheapest and Absolute Alcohol 96.99% v/v being the most expensive.

•  Inspect latest product specification available from Cavendish sales team.

•  Identify packaging needs. Cavendish provides free consultation after considering your handling and storage requirements, risks, and cost sensitivities.

•  Work out delivery terms including delivery schedule, port of unloading and any specific requirements.

•  Consider payment terms. TT payment mode is cheaper and have shorter lead time to delivery. Letter of Credit (LC) is expensive due to documentation and intermediary costs, and have longer lead time to delivery. Cavendish offer free advice to its customers on all forms of LC without any obligations on client’s part.

•  Ask for a price quote before proforma invoice generation, payment and order execution. Cavendish ships Ethanol within 7 working days after execution of agreed payment terms.

© Cavendish 2015 9

Absolute Alcohol - 96%v/v to 99.99%v/v Extra Neutral Alcohol (Grain based) – 96%v/v minimum Extra Neutral Alcohol (Molasses based) - 96%v/v minimum Denatured Alcohol / Ethanol

Expensive

Cheapest

10"