VILLAGE-SCALE BIO-FUEL PRODUCTION PLANT

BUSINESS OPPORTUNITY PROJECT SUMMARY

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SOPREX Foundation
SOPREX/MIND-BIOS Bldg., MSU-IIT Campus
A. Bonifacio Ave. Tibanga, Iligan City. 9200
(063) 223-8077 / FAX: (063)2238481
 Partnerships in Local Enterprise Development
and Governance Sustainability (PLEDGES) Program

BUSINESS OPPORTUNITY PROJECT SUMMARY

VILLAGE-SCALE BIO-FUEL PRODUCTION PLANT

PROJECT CONCEPT:

The Project adopts the concept of a Village-Scale Waste Vegetable Oil (WVO) Bio-Fuel Plant
with a WVO processing capacity of 60 liters per hour (LPH) or 1,440 liters per day (LPD)
assuming 24 hours continuous operation. Blended with 10% regular petro-diesel fuel, the
end-product is a “clean and green” bio-fuel that can be used directly as diesel engine fuel in
stationary diesel engines and in most indirect injection (IDI) diesel-fed automotive vehicles
without any further blending with petro-diesel fuel or any alteration of the fuel systems. The
basic process is shown in the diagram below:

FIGURE 1. PROCESS FLOW DIAGRAM: WVO BIOFUEL PRODUCTION

WASTE VEGETABLE OIL (WVO)

STORAGE/SETTLIN/ PRE-FILTRATION

PRE-FILTERED WVO
10% DIESEL FUEL

MICRO-FILTRATION/DEHYDRATION

CLEAN&GREEN BIO-FUEL

DAILY PRODUCTION (24-hours): 1,300 Liters of “Clean and Green” Bio-Fuel

ANNUAL OPERATING INCOME: PhP 1.96 ESTIMATED TOTAL PROJECT COST: PhP 2.0 million
RETURN ON INVESTMENT RATE (R0I) /PAYBACK PERIOD: 200% p.a. / 0.5 years

FOR MORE INFO, PLEASE CONTACT:

SOPREX Foundation The LogoTRIPhilNet member organization nearest you.

MSU-IIT Campus, Tibanga, Iligan City 9200 Contact SOPREX Foundation for this member’s contact
Tel./Fax: (063)223-8481/223-8077 person(s), agency, address and contact phones/fax.
Cell Phones: 0918933172 (Maya); 09189420065 (Yesnoy)
I. PROJECT DESCRIPTION

a. Basic Concept

The Project adopts the concept of a Village-Scale Waste Vegetable Oil (WVO) Bio-Fuel Plant
with a WVO processing capacity of 60 liters per hour (LPH) or 1,440 liters per day (LPD)
assuming 24 hours continuous operation. Blended with 10% regural petro-diesel fuel, the
end-product is a “clean and green” bio-fuel that can be used directly as diesel engine fuel in
stationary diesel engines and in most indirect injection (IDI) diesel-fed automotive vehicles
without any further blending with petro-diesel fuel or any alteration of the fuel systems. The
basic process is shown in the diagram below:

FIGURE 1. PROCESS FLOW DIAGRAM: WVO BIOFUEL PRODUCTION

WASTE VEGETABLE OIL (WVO)

STORAGE/SETTLIN/ PRE-FILTRATION

PRE-FILTERED WVO
10% DIESEL FUEL

MICRO-FILTRATION/DEHYDRATION

CLEAN&GREEN BIO-FUEL

b. Purpose and Objectives

The project shall produce on a small scale, and profitably sell to consumers in the immediate
community where it is based, a vegetable oil-based alternative fuel to substitute up to 90% of
petro-diesel consumption of diesel engines, at adequate volumes and at the same price as
petro-diesel fuel. The ultimate purpose is to serve the country and the people by contributing
to:

the reduction of the operating cost of transport and other industries that will redound
to decreased costs of goods and services and improved purchasing power of the
peso;

a significant increase in the use of indigenous and renewable energy resources,
thereby reducing importation of petro-diesel fuel and improving the balance of
payment situation; and

the shift to clean and green fuels leading to the improvement of over-all
environmental quality.
 c. Plant Site

The plant is ideally located in or close to an urban area but not necessarily in the city or town
center. Being a small-scale plant with no large motors or engines used and no hazardous
chemicals and very minimal process wastes, the plant can be located even in non-
commercial/industrial zones, e.g., a low-density residential area. The final products can be
delivered to the target outlets: e.g., garage/service stations of organized transport groups,
diesel-fired plants, fishing ports.

The minimum requirements are: road accessibility, sufficient power and water supply, and
adequate land area of at least 500 sqm and a building area of 100 sqm. If available at
affordable rates, a land parcel with an existing building will be the most ideal for a quick start-
up. Preferably, a property of at least 2,500 sqm will allow for future expansion.

d. Production and Marketing Program

As designed, the Project shall be able to produce about 1,300 liters of 10% diesel-blended
bio-fuel per day. This fuel is ready to use “as is” in any diesel engine without any alteration in
the engine’s fuel supply and combustion system. This entails the recovery of 1,440 liters of
WVO per day at the competitive buying price of Php 10/liter. Opening the door of opportunity
to the suppliers (e.g., hotels, restaurants, canteens) to join as shareholders, the Project is
well positioned to corner the local supply.

Since the raw material and the process are both inexpensive, the Project shall be able to
offer the product at the same price of petro-diesel. The marketing task is not expected to be
difficult. The priority target market is the public transport service sector. Small fleet operators
or cooperatives/associations with their own service station shall be the best client with whom
a long-term supply-purchase agreement shall be given priority.

The scope of the marketing effort is also very manageable. At the least bio-fuel ratio of only
10%, the target number of vehicles (at the low daily fuel usage of 20 liters per vehicle) is
about 650 only. At the maximum bio-fuel ratio of 70%, which is not unlikely given the
competitive pricing and over-all beneficial impact, the target number of vehicles is less than a
hundred. This market volume threshold is very possible to attain even in medium-sized towns
with basically an agricultural economy where small diesel engines are the mainstay of
agricultural machineries and post-harvest facilities.

e. Organization and Management Plan

The Project shall be established and managed as a joint-venture enterprise of the co-investors.
To be regis-tered as a stock corporation, the business shall be managed under the corporation
code with management involvement and income sharing in proportion to the equity shares of
the shareholders. These shall include both consumers, i.e., public transport service firms,
especially cooperatives or associations of drivers and operators, and suppliers of the raw
material, i.e., food service establishments. Any person or entity willing to put up the land and/or
buildings where the Project can be located is also welcome.
II. FINANCIAL PLAN AND PROJECT EVALUATION

a. Project Cost and Funding Sources

The total Project cost is estimated at Php 2.0 million more or less. Fixed assets will cost Php
893,000 inclusive of site development (perimeter fence, roads/drainage, water and power
systems, and building construction), trans-port and office equipment.

If local investor-partners already have these assets and are willing to put in the same as their
share contribution, then the cash outlays for the machinery and equipment will be a minimal
Php 150,000, mainly for the imported components. This will be sufficient as initial paid-up
capital for purposes of registering the business with the SEC.

The biggest cash outlay is the estimated requirement for initial working capital amounting to
Php 937,000, part or all of which can be mobilized after incorporation and registration in the
form of loans and/or grants. This includes a 1-month inventory each for raw materials costing
Php 486 thousand and Php 304,000 more or less for finished products to ensure no
disruptions in the production and selling operations. This cash outlay will be substantially
reduced if the local suppliers of WVO are willing to join and contribute the basic raw material
as part or all of their share capital.

b. Project Evaluation

The business as planned is projected to earn an annual net income of Php 1.96 million, thus
yielding a very high return on investment (ROI) rate of almost 200% p.a. or four times the
assumed hurdle rate of 24% p.a. Investors can thus expect to recoup their investment in
only half a year and opt to plough back all or part of the profit for replication of the model
plant in other areas.

The proposed business is basically sound because it produces and sells a commodity that
everyone needs and uses, directly or indirectly, as owners or operators of vehicles and
factories using diesel fuel or as commuters and consumers of goods and services affected by
transport and manufacturing costs. Its greatest advantage is that the raw material is
renewable and indigenous. As the finite world petroleum reserves approach depletion levels,
petro-fuels will become increasingly scarce and unaffordable.

In fact, the crisis is now staring at us all in the face, rich and poor nations alike. Bio-fuel is no
longer the future; it is here and now. For poor nations like the Filipino, investing in this and
similar projects is a contribution towards assuring our national survival and return to the path
of total and genuine development.
 ANNEX: PRELIMINARY COST & BENEFITS SUMMARY

BASIC PRODUCTION
I. ASSUMPTIONS:
1 Operating Days Per Year 300
Capacity/Hr. of Waste VegOil (WVO) Bio-Pass Processing System
2 (Liters) 60
Hours of Operation/Day: 3 shifts @ 8
3 hrs./shift 24
4 Total Volume of (WVO) Processed per day (Liters) 1,440
5 Vol. of diesel fuel mix per day @ 10% of WVO volume processed 144
Average Bio-Fuel Yield: % of WVO volume
6 processed 80.0%
Volume of Bio-Fuel Produced Per Day (Liters) + diesel fuel
7 mix 1,296
Cost of diesel fuel per liter (aver. 5 years from
8 Project Yr. 1) 35.00
Manual Labor: Man-Hrs/Day @ 3/shift @ 3
9 shifts/day 72
10 Skilled Labor: Man-Hrs/Day @ 1/shift @ 3 shifts/day 24
Prod. Supervisors: Man-Hrs/Day @ 1/shift @ 3
11 shifts/day 24

II. MARKETING TARGETS

1 Daily Production Volume of WVO Bio-Fuel (Liters) 1,296

Average Petro Diesel Consumption Per Vehicle:
2 Liters/Day 20
3 Target Market: No. of Vehicles Buying WVO Bio-Fuel Per Day
Bio-Fuel ratio to Petro-Diesel
a. = 10% 648
Bio-Fuel ratio to Petro-Diesel
b. = 20% 324
Bio-Fuel ratio to Petro-Diesel
c. = 50% 130
Bio-Fuel ratio to Petro-Diesel
d. = 70% 93

PROJECTED INCOME
III. STATEMENT
Gross Sales Income:
Sale of WVO Bio-Fuel @ same price as diesel fuel 13,608,000
Less: Rebate/Savings & Capital Build-Up Fund @
8% 1,020,600
Total Sales Income,
Net 12,587,400
Less: Cost of Sales 7,409,280
 Gross Profit 5,178,120
Less: Administrative & Selling Expenses 1,220,480
Net Income Before Interest & Taxes (NIBIT) 3,957,640

IV. ESTIMATE OF TOTAL PROJECT COST

A. PRE-OPERATING EXPENSES 160,000
B. FIXED ASSETS 893,000
C. INITIAL WORKING CAPITAL 937,178
TOTAL PROJECT
COST 1,990,178

V. MAJOR INDICATORS OF VIABILITY/PROFITABILITY

Return on Investment Rate (on total project cost): % per

1 annum 198.9%
Payback Period (on total project cost):
2 Years 0.50