Bio Refining – Biomass Value Chain

Bas Melssen Director BioRefining, Asia Pacific Novozymes

October 11, 2016

production sites globally

reinvested in R&D

Global leader in industrial enzymes

sales (million EUR)

different industries

employees

granted patents and pending patents

products

countries

When science goes big scale – Introducing nature's problem solvers

discover develop deliver

Renescience Waste treatment - Northwich UK

• For biogas production

• Easily upgraded to greengas

• Easily burned for green power

• Plastic foils and textiles

• High calorific value • Useable as

SRF/RDF

• Plastics and metals • Potential for sorting • Can be mixed with

2D SRF/RDF

Novozymes has spent >7 years to develop a complex custom enzymes cocktail to convert PKC into 3 high-value products

Palm kernel processed into PKC and palm kernel oil – plants located in 3-4 ports

Operating margin 3-5%

Kernel Crushing plant

Current scenario

Palm kernel oil Refined for use in

oleo-chemicals

U$915 per tonne

PKO PKC market today

~8M ton exported to ANZ

and EU Average plant 75kt

Cattle feed

U$80-110 per tonne

~9 mUSD

LOW VALUE

EXPORT

*100,000t PKC

>75% is imported

60,000 tonnes

Biorefinery converts PKC Potential ~19 PKC bio-

refineries in Malaysia

Poultry feed

Future scenario (Proven process with new enzymes)

Palm kernel oil Refined for use in

oleo-chemicals

Palm kernel processed into PKC and palm kernel oil – plants located in 3-4 ports

Operating margin 3-5%

Kernel Crushing plant

• SEA region has a net

import of ethanol • 18,000 tonnes

U$915 per tonne

Ethanol

U$180-220 per tonne U$750 per tonne

PKC market today ~8M ton

exported to ANZ and EU

Average plant 70kt

Cattle feed

Additional PKO

4,000 tonnes

PKO

U$915 per tonne

PKO

~29 mUSD

Hydrolysis Fermentation Distillation Drying Solid/Liquid

separation

EtOH

PKP

(palm kernel protein)

Evaporation of

thin stillage Recycled water

Milling

PKC

PKC Enzyme

cocktail

Water

Yeast +

nutrition

A tried and tested* biological technology can be applied to Palm Kernel Cake (without modifications) to produce non-food ethanol and poultry feed

PKO

(optional)

Notes: Numbers based on 2x press PKC input in a process with ~40% oil-extraction

>200 plants have been running on this technology in the US/EU for more than 15 years

PKP

Confidential and Proprietary

* ICM, an American company Involved in the build of +100 1G corn ethanol plants, have run trials in their facilities and do not foresee any significant technical challenges in scaling up the process. Are willing to guarantee the process.

The 2G journey – 15 years of continuous development and one of our largest R&D investments

2001

Launch of

Cellic® CTec for

first demo plants

World’s first

commercial 2G

plant uses our

Cellic® enzymes

Pilot plants

worldwide testing

our enzymes

One of the largest

R&D investments

in our history

5 of 7 commercial

2G plants

worldwide use

Cellic® enzymes

Exclusive

partnership with

Brazil’s largest

ethanol producer

2005 2009 2012 2013 2015

Foundation Pilot stage Demo stage Initial commercial stage Optimization stage

15X Enzyme potency improvement

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Commercial-scale 2G ethanol plants in operation or under construction by region (2016)

NZ supply

Under construction

In operation

2016

2016

2G advances – More than $2 billion of steel in ground The commercialization of cellulosic ethanol started in Crescentino, Italy

Feedstock cost is now the key differentiator in the price of Cellulosic Ethanol

Source: http://www.luxresearchinc.com/news-and-events/press-releases/read/raizen-has-lowest-price-cellulosic-ethanol-hinges-feedstock-cost February 24, 2016

Projected Major Cellulosic Ethanol Project Costs

Feedstock Costs Operating Costs Fixed Costs Capital Costs ROI

Acid/alkaline/steam Ag./forestry residues/

energy crops

CHEMICALS

LACTIC ACID

PLA

SUCCINIC

ACID

BDO

LYSINE

ETHANOL FUEL GRADE

ETHANOL

* The process to have commercially viable fermentable sugars at acceptable purity levels at scale is estimated to take another 3-5 years

ETHYL

ACETATE

ETHYLENE

ETHYLENE

GLYCOL

BUTADIENE

ACETIC ACID

ETHYLENE

OXIDE

Enzymatic biomass conversion is also the technology that enables Cellulosic chemicals

LIGNIN

Fermentation/chemical

conversion/others…

Enzymatic

BIOMASS ACCESS, AVAILABILITY + SECURITY

Feedstock security

▪ Investors in Cellulosic conversion facilities

require a long-term commitment of quality,

volume and pricing within 50-100km prior to

building their facilities

– Biomass owners want guaranteed off-take

and a pricing mechanism that is fair to them

– Consistent feedstock quality is important to

ensure consistent yields and output

Logistics availability

▪ In-field agricultural residues such as rice straw,

palm fronds, cotton stalk, wheat straw etc.

would require to be collected and

transported to the facilities where it’s used

Infrastructure readiness

▪ Commercial-scale cellulosic ethanol and

chemicals facilities require large volumes

(300k-1m tonnes) of biomass in 1 location

▪ Cellulosic conversion requires access to

utilities and infra-structure

Overcoming challenges of commercializing cellulosic fuels and chemicals, requires focus, particularly from policy makers

POLICY AND REGULATORY SUPPORT

Feedstock availability

▪ Oil & PetroChemicals importing countries can

reduce their dependence on fossil based imports

by incentivizing and making available use of

local biomass

Technology de-risking

▪ To encourage scaling up of local technologies,

some de-risking in the form of loan

guarantees or other debt support for (the first

few) plants

Off-take security

▪ Investors (particularly first few) in 2G conversion

facilities require local demand for their end-

products to reduce their investment risk

▪ To ‘jump-start’ investments in cellulosic

conversion, (2G) Biofuels blending mandates

and Biobased chemicals mandates can

accelerate investments and new industries

Brazil • 27% ethanol in

retail gasoline • 100% ethanol sold

at gas stations

EU • Renewable Energy

Directive • E10 target by 2020 • 0.5% 2G target by

2020

USA • RFS: biofuels by

2022 • Low Carbon Fuel

Standard (CA) • Clean Fuels Program

(OR)

Italy • 2G mandate in place: • 0.6% by 2018 • 0.8% by 2020 • 1% by 2022

EXAMPLES

Due to cost of mobilizing biomass, it’s highly geographical. Biomass availability, govt. support will reduce over time

As number of

refineries go up…

ILLUSTRATIVE

… Biomass will

become more and

more expensive

Number of refineries

Biomass collection radius

… and government

support will dwindle

Government support

There are only a few ‘gold-mine’ biomass opportunities in Asia Pacific

Most countries in South/Southeast Asia have interesting biomass

opportunities

We built a cost curve to understand

opportunity

Opportunities in Sarawak and Sabah confirmed as most attractive near-term options

Malaysia: Bintulu and East Sabah are ‘top tier’ opportunity areas

Source: NGA MSI World Port Index, NREL, ICIS Atec, Fisher Solve, NAICS, company websites, MPOB, Department of Agriculture of Malaysia

1 Based on most recent data point from 2009 the Forest Research Institute of Malaysia

Sabah

Sarawak

City 3rd tier 2nd tier 1st tier Marginal lands Plantation/factory/mill

Legend Cities ( > 100 k)

Key sites Pulp or Paper

Oil ports Deep-sea ports

▪ Availability of 13.5m ton palm oil feedstock

▪ High density of issued plantation concessions between Bintulu and Miri

▪ Good infrastructure including 2 deep-sea ports

▪ Ongoing Sarawak project with secured upstream supply

▪ 127,000 HA of acacia wood available

▪ Availability of 25.6m ton palm oil

feedstock

▪ Availability of good soil for

agricultural use; most good soil

already used for palm

plantations

▪ Access to 3 deep-sea ports in

this area

Novozymes ranks #9 on Fortune Magazine’s list of companies that are changing the world

Finding microbes that make products more eco-friendly.

If enzymes are nature’s secret sauce for managing our world’s resources better, consider Denmark’s

Novozymes as the earth’s indispensable laboratory. The biotechnology company isolates and

produces enzymes and microorganisms that help industries make their products more eco-friendly,

with examples ranging from efficient detergents to enhanced animal feed. Novozymes has helped

customers save 60 million tons of CO2 emissions, and improve their water efficiency by 9% and

energy efficiency by 15%. The company has also partnered with Monsanto to perform test-trials on

how to improve agricultural output, and next year, will start selling corn and soybean seeds coated

with microbes that could increase the average yield of crops by 3%.

“We look at sustainability and profits as one conjunction,” said CEO Peder Holk Nielsen, the

company’s outspoken leader who believes his company’s mission could help reduce world hunger

and carbon emissions, both integral parts of the United Nation’s sustainable development goals. “Our

task is to always try to do more with less.”

Company recognized for helping customers increase efficiency and save CO2

Fortune Magazine has announced its annual “Change the World” list for 2016 and Novozymes is ranked

#9. The list recognizes the world’s top 50 companies that address major social problems as a core part of

their business strategy and innovation.

According to Fortune, Novozymes helps industries make their products more eco-friendly, with

examples ranging from efficient detergents to enhanced animal feed. Novozymes has helped customers

save 60 million tons of CO2 emissions, and improve their water efficiency by 9% and energy efficiency by

15%.

“If enzymes are nature’s secret sauce for managing our world’s resources better, consider Denmark’s

Novozymes as the earth’s indispensable laboratory,” writes Fortune.

The Fortune ranking follows other prestigious media recognitions for Novozymes recently. Forbes included

the company on their annual “Most Innovative Companies” list for 2016, while also naming CEO Peder

Holk Nielsen one of 30 “Global Game Changers”. Science Magazine ranked Novozymes the best

science employer in the world, and Business Insider included Peder Holk Nielsen on a list of the world’s

top 100 business visionaries.

2015

23 Bn gallons of fuel

ethanol produced every

year in USA, Brazil and

Europe.

Increased mandates

globally for energy

independence, economic

and environmental benefits

In 1990 Congress passes

amendments to the 1970

Clean Air Act encouraging

the use of ethanol as

replacement for benzene,

toluene and xylene octane

boosters.

1992

A war investigating committee chaired by

Senator H. Truman finds that Standard Oil

(Exxon) had colluded with German chemical

companies to prevent the development of

ethanol-based synthetic rubber production

in the United States, the agreement was

designed to "outlast the war" no matter who

won

1942 1933

Concerned about renewed

interest in fuel ethanol,

various oil companies and

the American Petroleum

Institute argue ethanol

would hurt the oil industry

and reduce state treasuries.

They also claim alcohol fuel

is inferior to gasoline.

GM forms Ethyl Corp with

Standard Oil (Exxon) to market

tetraethyl lead as anti-knock, which

could be patented, unlike ethanol. Ethyl

Corp would receive royalty on every

gallon of gasoline sold for the life of the

patent. Public health scientists are appalled

at the prospects for lead poisoning.

1924 1919

Prohibition of beverage alcohol in the USA.

Farm belt politicians are split on ethanol as a

fuel as it would be a "bargain with the devil."

Sources: Team Analysis, Renewable Fuels Association, General Accounting Office, USDA, EIA, American Petroleum Industries Committee, US Treasury Department, Scientific American

U.S. Geological Survey

reports: "In regard to

general cleanliness,

such as absence of

smoke and

disagreeable odors,

alcohol has many

advantages over

gasoline as a fuel"

1914 1908

Henry Ford’s

Model T is

introduced

to run on Corn

Ethanol with

gasoline as an

option.

1906

Theodore Roosevelt lifted

the alcohol tax in the United

States, to place a check on the

dominant new petroleum industry.

At 14 cents corn ethanol was

now cheaper than gasoline at 22

cents per US gallon.

Henry Ford built his first Automobile,

the Quadricycle, to run on pure ethanol

As a result of cheap and abundant new

gasoline, while ethanol is still highly taxed,

US automobiles are adapted to gasoline

However Racing cars still use ethanol

because more power could be developed

in a smaller, lighter engine.

1896 1862

To fund the

Civil War a

$2.08 per

gallon tax is

placed on

alcohol/

ethanol.

Alcohol blends

replace expensive

whale oil for lighting in

the USA.

By 1860, 90 M gal.

alcohol per year for

lighting, cooking and

industry produced.

1830s