Flash course Business Development Bioenergy

Frank Stiksma MSc

The Netherlands

Professional background

• Lecturer School of Commerce and Entrepreneurship, Saxion University.

• Lecturer Management Science, Open University.

• Researcher, research group Regio Development, focus on Social Entrepreneurship and Global Business.

• Business models, export, sustainable business, supply chain management, innovation and marketing.

• International affairs.

• Professional coach. Interested in empowerment, motivation and learning behaviours.

Your challenge

• To deliver a solid business case related to yourbioenergy ambitions.

• Develop a profound business model.

• Multiple value creation.

• Develop a bankable project.

• Are investors willing to invest in your business idea?

Business model definition

A business model describes the rationale of how an organization creates, delivers, and captures value (Osterwalder and Pigneur(2010).

Changing dynamics in thebusiness environment

The world as we think we know it no longer exists. Because we don’t have a detailed image of the future, we stick to an old-fashioned world view based on the ideas of the second Industrial Revolution, which led to enormous growth in prosperity in the years following the Second World War. There are several clues to support the premise that we are currently at such a turning point. Everywhere in the world we can see a combination of crises: a financial crisis, an energy crisis and a climate crisis. These are global problems of size and complexity that we have never experienced before, let alone solved. There are no guidelines to follow. One thing is clear: we cannot keep heading in the direction we have chosen (Tex Gunning, NRC 10.11.11).

Global goals

Features of sustainablebusiness models

• Deliberately creating multiple value(s): this is about aiming for a kind of balance among values such as nature, care, attention and money.

• Money is no longer the only means of trade. Time, energy or care can also be earned, deployed or exchanged.

• Economy based on needs and uses (now and later).

• Parties expressing and securing long-term commitment to each other. There needs to be a large amount of trust in the relationship.

• Connecting will have more and more social and economic value.

• Working with alternative ‘money’ (time, points, etc.).

Multiple value proposition

• Value creation. Value for whom?

• New ways of doing business.

• Social, geopolitical, ecological challenges.

• The world dynamics are changing.

• Business models are not only profit driven but more and more value driven.

• Needed: entrepreneurs and investors withvision, vigor and future ambitions.

• Values: gaz independence, servingcommunities, sustainability, climate agreement.

Conventional and new business development

Conventional New

Principles Financial, single Multiple, shared,collective

Economy Lineair Circulair

Ownership Ownership central Acces more important

Corporation Less Network of value

Transaction Transactions based on money. Seperation of producer andconsumer

Producer andconsumer can be thesame. Transactions not only based on money.

Organizational design Functionalorganizational design

Community central, virtual community

Succes Cost-benefit analysis Several incomespossible for severalpersons

Who are your stakeholders?

• Local and European banks.

• Local stakeholders, communities, farmers.

• Governments.

• European Union.

• Investors. Crowdfunding investment.

Sustainable business models (1)

Sustainable business models (2)

Time for new business models (1)

• Financial capital: doing good things with your money.

• Social capital: serving communities.

• Natural capital: taking care for our earth.

Business model

How to create a business model?

Analyze your business environment, industry analysis (1)

1. Understand the macro environment.

2. Review available energy industry reports.

Analyze your business environment, industry analysis (2)

3. Demand & supply scenario. Future demand and supply forecasting help investors understand the viability of future investments in terms of profits and losses.

4. Competitive scenario.

Analyze your business environment, industry analysis (3)

5. Identify recent developments.

6. Understand the industry dynamics.

7. Summarize your findings in a SWOT model.

Building a profitablebusiness case

World trade price ethanol

Bioethanol prices

Statistics fuel market andforecast bioethanol price

Checklist business case (1)

• Be prepared! • Move yourself in the perspective of the investor

and other stakeholders: identify their interests.• Make clear what your added value is.

Clarify the social, ecological and economical impact of the project.

• Emphasize you have an entrepreneurial vision and business objectives that respond to the interests of various stakeholders. How does your business case change their (energy) situation? Believe in your own vision and be realistic.

• Provide a good basis for your financial business case and assumptions.

Checklist business case (2)

• Think about the length of the payback period. What is realistic?

• Make the link with (national and international) policy regarding bioenergy and climate change.

• Know the energy market. Identify where opportunities and threats are.

• Provide a calculation model in which your earnings model has been worked out. Cost-benefit analysis. Quantify your main costs, expected returns and payback period. Cash flow planning.

Checklist business case (3)

• Provide support for your elaboration.• How much capital do you need at least to start?

Make explicit what you are going to spend this amount on. When do you think your break even point will be reached?

• Be realistic in your returns. Substantiate your assumed returns.

• Map the financial and legal risks. Be clear about the way you are dealing with these risks.

• Identify who your investors might be. • Explore alternative financing options. • Make your strategic vision and calculations

visable.

Calculation example business case

AVERAGE PRODUCTION COST PER LITER OF ALCOHOL € 0,43

TOTAL ALCOHOL PRODUCTION COST

BEETS € 25.220.937

CORN KERNELS € 21.280.643

TOTAL € 46.501.581

REVENUS PER LITRE:

Alcohol selling price per liter € 0,50

Produced liters, plant capacity 94162500

ANNUAL TURNOVER € 47.081.250

PROFIT € 579.669

SPECIFICATIONS PRODUCTION COSTS per YEAR DURING the PAYBACK TIME

BEETS CORN KERNELS total

RAW MATERIALS 69% € 16.800.000 75% 14280000 31080000

TRANSPORT 10% € 2.400.000 3% 510000 2910000

CHEMICALS 0% € 116.440 0% 86602,39875 203042,5988

UTILITIES 14% € 3.504.390 13% 2575934,063 6080324,063

PERSONNEL 2% € 595.000 3% 595000 1190000

MAINTENANCE 1% € 180.000 1% 180000 360000

LABORATORY 0% € 56.000 0% 56000 112000

INTERESTS 3% € 722.054 4% 722053,5116 1444107,023

GENERAL 1% € 125.000 1% 125000 250000

100% € 24.498.884 100% € 19.130.590 € 43.629.474

ANNUAL TURNOVER € 47.081.250

GROSS PROFIT BEETS & CORN KERNELS € 3.451.776

Calculation examplebusiness case

Calculation example Business case bioenergy

Investment bioenenergy 10000 666,6667

Inflation 4%

Year 1 Year 2 Year 3 ….. Year 10

Operating cash flow

Annual turnover € 47.081.250

Production costs € 46.501.581

Variabele costs

Fixed cost

Depreciation

Operating cash flows € 579.669

Payback period

Netto Present Value

Return on investment

Break analysis

Questions?