Rentability of Biodiesel Plant in Germany

Table of Contents

List of Figures

1 Introduction

2 Market Overview

3 The Case “Biodiesel Plant XYZ”
3.1 Investment
3.2 Plant specifications and capacities
3.3 Products and Price development
3.4 By-products
3.5 Price development in generals
3.6 Key Financials
3.7 Profit and Loss Statement
3.8 Return Sheet
3.9 Cash Flow Statement
3.10 Stress tests
3.11 Summary for bio diesel plant in Germany

List of literature

List of Figures

Figure 1: Sales of Biodiesel in Germany 1998 – 2007 [VDB 01], [FNR 01]

Figure 2: Crude Oil prises in US-$/barrel (03/2007-05/2009) [UFOP]

Figure 3: Price at petrol pump in ct/l incl. VAT (01/2005-05/2009) [UFOP]

Figure 4: Biodiesel plants capacity in operation in Germany [FNR 19]

Figure 5: Biodiesel plants capacity in operation in Germany [FNR 19]

Figure 6: Investment in €

Figure 7: Plant specifications

Figure 8: Plant capacities

Figure 9: Price development for RME at petrol pump [UFOP], [IWR]

Figure 10: Wholesaler price of Biodiesel, €/t net [UFOP]

Figure 11: Price development of coarse colza meal 2002-2006

Figure 12: Average price of coarse colza meal 2005-2009 [UFOP]

Figure 13: Price development of pharmaceutical Glycerine in 2002 - 2006

Figure 14: Forecast price of pharmaceutical Glycerine [IFO]

Figure 15: Average price development of Raps seed €/t [UFOP]

Figure 16: Production factor planning of A&O materials

Figure 17: Average cost structures of the production in %

Figure 18: Turnover and EBITDA 2009-2019 in € million

Figure 19: Profit and Loss Statement 2009 - 2019

Figure 20: Return Sheet 2008 – 2019

Figure 21: Cash Flow Statement 2008 - 2019

Figure 22: Calculation of the Biodiesel pump price (net)

Figure 23: Turnover and EBITDA 2009-2019 in € million for stress test 1

Figure 24: Turnover and EBITDA 2009-2019 in € million for stress test 2

Figure 25: Turnover and EBITDA 2009-2019 in € million for stress test 3

Figure 26: Turnover and EBITDA 2009-2019 in € million for stress test 4

1 Introduction

This documentation will be the first of a trilogy in which each part constitutes an independent document leaving the other parts as additional information sources.

Due to the logical development of the themes, however, all of them are interconnected, displaying the reason and history of climate changes, the biofuel and the positive aspect of the climate protection and an outlook on the biofuel in the future. The last part will be a microeconomic discussion if the production of biofuel in Germany is still profitable.

The trilogy will entail the following points:

- Climate Changes and Fossil Fuel [Kleinschmidt 01]
- Renewable Energy and Biofuel [Kleinschmidt 02]
- Rentability of Biodiesel Plant (this document)

Quality assurance of the literature sources trough Internet and E-Books:

Some literature sources have been retrieved from the Internet home pages. Due to the fact that the quality of the source is difficult to check on the Internet, this is normally not a proper way of getting secured, good quality information. Therefore, all information from the home pages is retrieved from secured well-known providers, such as governmental home pages or officially incorporated or registered societies. The download date of the retrieved information is registered in the list of literature sources.

E-books are to be treated as normal books. Due to the fact that an increasing amount of books is distributed electronically, the quality will be the same as normal hard copy books. Whenever E-books are downloaded, the URL will be listed in the literature index, entailing which sources the documents were downloaded from. I would like to emphasize that E-books should not be seen as Internet home pages but as normal books.

2 Market Overview

Facing the obvious need to switch from fossil fuels, which are limited in their availability, to environmentally friendly and substitutive energy sources, both the national government and the European Union are promoting alternative fuels like biodiesel, bioethanol or biogas. The creation of a common European standard, tax incentives, the opening of new distribution channels and the provision of cultivation related premiums are paving the way for the establishment of a strongly growing market for biofuels.

Biodiesel is the most frequently used alternative fuel in Germany. Its market volume has steadily increased with double-digit growth rates over the last couple of years. Sales of biodiesel increased from 2004 to 2007 approx by a massive 280% and reached a new peak of 3.32 million tons (see Figure 1, page 2).

It is currently the best-known alternative fuel for the fossil diesel in Germany [BMU 2006]. In 2007, around 72 percent of the total biofuels in Germany was biodiesel [FNR 01].

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Figure 1: Sales of Biodiesel in Germany 1998 – 2007 [VDB 01], [FNR 01]

Biodiesel can be used in pure form in specially equipped engines. For standard diesel engines, a biodiesel portion of 5 percent in the normal diesel does not require any adaptation for the engine [FNR 02]. Since the 1st of January 2004, this admixture portion is also legally allowed by the oil industry [Puls 2006]. With the implementation of the legal constraint BioKraftQuG (1st of January 2007), at least 4.4 percent of biodiesel must be mixed into normal diesel. A further increase of the biodiesel quota mixed into normal diesel is expected to occur in the future [BioKraftQuoG 200601].

According to the association of German biodiesel manufacturer’s inc. society^[1], the biodiesel sales in Germany increased from approx. 0.10 million tons in 1998 to 2.88 million tons in the year of 2006 [VDB 01]. In 2007, the biodiesel portion already amounts to more than 5.4 percent of the primary fuel consumption in Germany [FNR 03].

The positive development of the biodiesel among others is a result of its low sales price. Through the tax exemption of biodiesel in pure form until August 2006, the price per litre in the same year was below the price range of normal diesel [UFOP 200611]. Since August 2006, a tax of 9 €Cent/ litre is imposed on biodiesel. From 2008 onwards, the tax will be increased yearly. Biodiesel, which will be mixed through the legal constraint of the BioKraftQuG, underlies the normal taxation for fossil fuel [BioKraftQuoG 200602]. At the time the tax is 15 €cent/ litre.

Also due to the massive drop in price in the crude oil market (see Figure 2, page 4) and also due to the financial crisis, the rentability of a biodiesel plant must be investigated again.

About 0.91 litres of normal diesel can be substituted for 1 litre of biodiesel. Therefore biodiesel has about 10 percent lower energy portion per litre than normal diesel [Kleinschmidt 02]. In other words, the equivalent price of biodiesel in comparison to diesel must be less or equal in order to be competitive (see Figure 3, page 4)

Formula of EBP:

Equivalent price of biodiesel (EBP) = biodiesel price / 0.91

EBP ≤ Diesel price

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Figure 2: Crude Oil prises in US-$/barrel (03/2007-05/2009) [UFOP]

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Figure 3: Price at petrol pump in ct/l incl. VAT (01/2005-05/2009) [UFOP]

3 The Case “Biodiesel Plant XYZ”

Considering this situation a company wants to take advantage of the current market developments in order to benefit best from the offered business opportunities. Therefore the company focuses on the production of biodiesel. The company will investigate if the rentability of these business opportunities still exists in Germany

The company wants to run the Biodiesel plant XYZ with a production capacity up to approx. 264.000 tons of biodiesel. This is a common used size of the biodiesel plant in the last years to use the advantage of the scaling factor to reduce cost and increase production (see Figure 4). Rape seed and rape oil are the main raw materials for biodiesel. The by-products coarse colza meal, glycerol and fatty acid distillate, which arise in the production process of Biodiesel complete the biodiesel plant XYZ's product portfolio.

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Figure 4: Biodiesel plants capacity in operation in Germany [FNR 19]

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Figure 5: Biodiesel plants capacity in operation in Germany [FNR 19]

[...]

^[1] Verband Deutscher Biodieselhersteller e.V.

^[2] Reference to Figure 4