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Meil methes corporate presentation - jsi - jan 2014
- 2. Forward Looking Statements This presentation has been prepared by the company and includes information from other sources believed by management to be reliable. No representation or warranty, express or implied is made as to the accuracy or completeness of any of the information set forth herein. This presentation may contain summaries of the terms of certain documents and agreements, but reference is made to the actual documents and agreements for the complete information contained herein. The information contained herein is as of the date hereof and is subject to change, completion or amendment without notice. This presentation contains statements, estimates and projections with respect to the anticipated future performance of the company that may be deemed to be “forward‐looking statements.” These statements, estimates and projections reflect various assumptions made by the company concerning anticipated results, which may or may not prove to be correct. All statements contained in the presentation that address operating performance, future direction, management and control of the company, events or developments that are expected to occur in the future (including statements related to earnings, expectations, sales of assets, capital expenditures, or statements expressing general optimism about future operating results) are forward‐looking statements. Actual results could differ materially from those reflected in the forward‐looking statements contained herein as a result of a variety of factors, many of which are beyond the company’s control. The Company is in the development stage and to date has generated limited revenue. In the future the Company may not be profitable and the securities offered by the Company may, ultimately, have little value. Methes Energies International Ltd. trades on NASDAQ Capital Market under the symbol “MEIL”. This is not an offering of securities. Any such offer must be accompanied by an Offering document. ‐2‐
- 3. Company Overview • Methes Energy International Ltd (“MEIL”) was founded in 2004 • MEIL has designed and built the first fully automated, compact, state of the art continuous flow biodiesel processor • MEIL owns two production facilities in Ontario with a combined nameplate capacity of 14.3 MMGPY – Demonstration facility in Missisaugua, ON – New large‐scale production facility in Sombra, ON registered with EPA (product eligible for Renewable Identification Number “RIN” generation) – Sombra expected to qualify for California Low Carbon Fuel Standard (LCFS) program • The company also sells its biodiesel processors and provides support services ‐3‐
- 4. What is Biodiesel? • Biodiesel is a clean‐burning, biodegradable and renewable fuel • It is produced by reacting feedstock with short‐chain alcohols (methanol or ethanol) – Potential feedstock includes vegetable and seed oils, waste vegetable oil, animal fats, algae and sewage sludge • Biodiesel can be used in pure form or be blended with petrodiesel and used in most modern injection pump diesel engines – • Blends of 20% biodiesel (B20) or less can be used in conventional diesel equipment with little or no modification Use of biodiesel keeps engine performing better and cleaner – – Provides increased lubricity over ultra‐low sulfur diesel which protects fuel systems and extends life High cetane level leads to more complete combustion of fuel increasing engine responsiveness ‐4‐
- 5. The US Market for Biodiesel Mandated Use of Total Renewable Fuel (billion gallons) US Biodiesel Mandate • Through the Renewable Fuel Standards program (RFS), the United States Environmental Protection Agency (“EPA”) has legislated the use of 1.28 billion gallons of biodiesel and 2.20 billion gallons of advanced biofuel in 2014 • The EPA has mandated the blending of 36 billon gallons of biofuel into US gasoline and diesel by 2022 35 30 25 20 15 10 5 0 2008 2010 2012 2014 2016 2018 2020 2022 Source: United States Environmental Protection Agency • 21 billion gallons of the 2022 mandate is for advanced biofuels which include: 30 Biodiesel (litres in billions) – Biodiesel – Cellulosic biofuel (biofuel made from indigestible parts of plant – usually forestry/agricultural/food waste) • While corn ethanol production is already closing on the 2022 production target , advanced biofuels production is still small 25 20 15 10 5 Trade Balance 0 ‐5 2005 2007 2009 2011 2013 2015 Source: OECD‐FAO Agricultural Outlook 2013 ‐ 2022 ‐5‐ 2017 2019 2021
- 7. The Canadian Market for Biodiesel Canadian Biodiesel Mandate Ontario Biodiesel Mandate • Effective December 15, 2010, fuel producers and importers were required to have an average renewable content of at least 5% • The Ontario government has repealed the fuel tax exemption for biodiesel and is moving towards creating a renewable content mandate – These regulations include provisions for tradable compliance units • Effective July 12, 2011, producers and importers of diesel and heating oil were also required to have an average renewable content of at least 2% • The Canadian Renewable Fuels Association has recommended a content mandate of 2% renewable diesel content (estimated 42.3 MMGPY gallons of B100) • Total Canadian Biodiesel demand is estimated at ~150 MMGPY (based off of 2012 demand figures)(1) while current and under‐ construction production capacity is only 118 MMGPY(2) • Implementation of an Ontario provincial content mandate would increase local demand and reduce imports from western provinces and US (1) (2) Source: Canadian Association of Petroleum Producers, Company Calculations Source: Biodiesel Magazine ‐7‐
- 8. MEIL Production Facilities Mississauga, ON Sombra, ON Equipment: 1 × Denami 600 Capacity: 1.3 MMGPY(1) Commercial Ops. Date: 2009 Revenue: $5 – $6 MM per year(2) Equipment: 2 × Denami 3000 Capacity: 13 MMGPY(1) Commercial Ops. Date: 2013 Revenue: $52 ‐ $60 MM per year(2) Used for biodiesel production, storage and transloading (fleet of 36 rail cars) Facility used to showcase equipment to prospective buyers Potential to double production using existing two existing Denami 3000s (1) (2) Nameplate Capacity At full production ‐8‐
- 9. Biodiesel Production MEIL Monthly Biodiesel Production 350 2014E Sombra Project Economics ‘000 gallons Biodiesel Price ($/gal) 100 50 ‐ Dec‐12 Feb‐13 Apr‐13 Jun‐13 Aug‐13 Oct‐13 • Produced more Biodiesel in Sept – Nov 2013 period than all of 2012(1) – $0.41 EBITDA(3) ($/gal) 150 $0.74 SG&A(2) ($/gal) 200 $3.56 Gross Margin ($/gal) 250 $4.30 Production Cost(1) ($/gal) 300 $0.33 Total Production(2) (gallons) Ramp‐up to 14.3 MMGPY nameplate capacity expected to be complete in Q1 2014 • Doubling of Sombra production to 26 MMGPY can be attained by retrofitting current Denami 3000s, reducing fixed cost per gallon significantly Source: JSI Estimates (1) Includes credit for ecoENERGY incentive (2) Assumes 80% capacity factor (3) Excludes glycerine sales ‐9‐ 10.2 MM
- 10. Equipment Licensing Denami 600 Denami 3000 Fully Automated, Modular and Scalable Fully Automated, Modular and Scalable Footprint: 11’ × 16’ Footprint: 22’ × 16.5’ One operator Eight operators Output: 1.3 MMGPY Output: 6.5 MMGPY Price: $980,000 Price: $3.50 MM Gross Profit: $190,000 Gross Profit: $2.00 MM Revenue: $5 MM/yr(1) Revenue: $26MM/yr(1) Ancillary Services • • • • • (1) Operations and Maintenance contract Sale of feedstock and other input commodities Sale of customers’ output in US and Canada Feedstock tracking software to ensure compliance with EPA Quality Assurance Program Royalty of $0.03 per litre (~$0.11 per gallon) charged on production At full production ‐ 10 ‐
- 12. Equipment Sales Current Noroxel Inc. QFI Inc. St‐Jean Richelieu, QC Denami 600 2010 Springfield, ON Denami 600 2010 Signed LOIs U.S. Energy Initiatives BioFuel Aruba Santa Clarita, CA Denami 3000 January 2013 Oranjestad, Aruba Denami 600 May 2013 ‐ 12 ‐
- 14. Revenue Streams Biodiesel sales Sales of biodiesel produced by MEIL Equipment Sales of Denami biodiesel processors Royalties Software license fees paid by Denami operators Biodiesel resale Sales of third party biodiesel Feedstock and commodity sales Sales of inputs to Denami operators as well as production by‐products Per‐gallon incentive paid by Canadian government under the ecoENERGY program Licensing of SAP‐based accounting and inventory‐tracking package Government Incentive Future: Software Licensing ‐ 14 ‐
- 16. Acquisition of OTC Energy Technologies OTC Energy Technologies • • • Acquisition Highlights Owner of a gasification technology used to convert biomass into synthetic gas Inputs can be a range of organic materials • Forestry & agricultural waste • Urban yard waste • Food waste • Sewage/Sludge/biosolids • Waste organic gas Outputs include • Alcohols (i.e. ethanol, methanol) • Hydrocarbon Fuels (i.e. gasoline) • Chemicals (i.e. ammonia) • • • Only existing technology to produce high‐quality synthetic gas with almost no by‐products • Output purity of up to 95% gas Production costs low enough to make products competitive with petroleum derived fuels without subsidies Provides technology to produce cellulosic biofuels – the segment of the EPA mandate with the highest future growth potential The OTC acquisition provides the potential for MEIL to enter the rapidly growing cellulosic biofuels market with a game‐changing technology ‐ 16 ‐
- 17. Key Milestones Q1‐2014 – Ramp‐up of Sombra production to 13 MMGPY – Estimated closing of OTC Energies acquisition – Sombra facility accreditation for California LCFS 2014 and beyond – – – – – Sale of Denami 3000 processors Double production at Sombra to 26MMGPY BQ9000 Producer Accreditation International expansion to Europe, South America and Asia Expansion of North American network ‐ 17 ‐
- 18. Management Michel Laporte Han Swoong (Nicholas) Ng Chairman & CEO President & Co‐Founder • Former military engineer with 6 years business development experience in Europe • Founded asset management firm in 1992 • Most recently acted as President and CEO of a US publicly traded company involved in the solar industry in China • Over 9 years experience in biodiesel • Software development and financial expertise • Designer of Denami operating software as well as feedstock‐tracking software Edward Stoltenberg, CPA Johann (John) Loewen CFO VP Operations & Co‐Founder • 25 years experience with NASDAQ listed companies • Served as CFO of Naugles Inc., Gucci Timepieces • Former Managing Director of Phoenix Management Group LLC • Over 9 years experience in biodiesel • Hands‐on engineering and R&D expertise • Designer of Denami hardware ‐ 18 ‐
- 19. Board of Directors Kebir Ratani Perichiyappan Senthilnathan Independent Director Independent Director • Senior Vice President at SNC Lavalin • Formerly Senior Vice President for Africa Infrastructure & Construction at SNC Lavalin • Chair of Compensation Committee • Masters in Chemical/Environmental engineering • 25 years management and advisory experience in waste water treatment • Extensive list of publications in chemical and environmental engineering • Ph.D. in Environmental Engineering and M. Tech in Chemical Reaction Engineering John Pappain Anthony T. Williams, CPA, CA Independent Director Independent Director • President & CEO of Terrajay Holdings Energy Consultants • Extensive experience in financing and construction of renewable energy production facilities in Ontario • Over 10 years experience in energy and environmental policy at Federal and Provincial level • Extensive experience in business planning and restructuring in the manufacturing industry • Board experience with large multinational US manufacturing companies • Chair of Audit Committee ‐ 19 ‐
- 20. Appendix ‐ 20 ‐
- 21. Corporate Timeline 2004 Founded Methes Energies 2007 Introduction of Denami 600 2009 Commercial operations begin at Mississauga Facility 2010 First sales of Denami 600 processors to producer clients 2012 IPO of MEIL on NASDAQ 2013 Commercial operations begin at Sombra facility ‐ 21 ‐
- 22. Corporate Structure Methes Energies International Ltd. MEIL Corporate Operating Entities NASDAQ: MEIL Methes Energies Canada Inc. Methes Energies USA Ltd. Import Biodiesel to U.S.* Laboratory Services Market Biodiesel in U.S.* Market Biodiesel Logistic RIN Generation* Consulting R&D RIN Transaction* Equipment Provider Feedstock Collection* Business Lines Biodiesel Producer Engineering* * Coming in 2014 ‐ 22 ‐ IT / Software Services*
- 23. Share Overview NASDAQ: MEIL $6.00 1,400 1,200 $5.00 Share Price 800 $3.00 600 $2.00 400 $1.00 $0.00 Nov‐12 200 0 Jan‐13 Share Information Symbol Exchange 52 Week Range Shares Outstanding Market Capitalization Source: Bloomberg As of January 10, 2014 Mar‐13 May‐13 Jul‐13 Sep‐13 Nov‐13 Ownership Structure(1) MEIL NASDAQ $1.60 ‐ $5.40 Management 25.7% Institutional 7.3% $24 MM Retail 67.0% (1) As per September 23, 2013 Proxy Statement ‐ 23 ‐ Volume (‘000s) 1,000 $4.00