GMIT-Biodiesel-Pro-Forma-Scale50L_02

BIODIESEL PROJECT

PRODUCTION LABORATORY FEASIBILITY AND FINANCIAL STUDY

PRESENTED BY: GMIT BIODIESEL PROJECT TECHNICAL ADVISOR AND EDITOR: LYNDON BEHARRY APRIL 7, 2015

EXECUTIVE SUMMARY Students of German-Mongolian Institute for Resources and Technology (GMIT) plan GMIT Biodiesel Project as a non-profit research and production facility. The Project focuses to instruct chemical and mechanical engineering, production laboratory procedure, entrepreneurial thinking, and sustainable business. The project hopes to foster partnership between GMIT and Nalaikh-Ulaanbaatar. By recycling the community’s waste vegetable oil we hope to learn and teach society how to extract value while reducing pollution and waste. This report discusses the financial viability of constructing a small-scale production research laboratory at German-Mongolian Institute for Resources and Technology. The document glances at the worldwide biofuels industry, and then glimpses at the biodiesel industry in Mongolia. The majority of the report focuses upon the chemistry and financial analysis of producing biodiesel with reclaimed vegetable oil. The study shows that under favorable pricing for ethyl alcohol, GMIT Biodiesel Project can certainly sustain its own enterprise. The Project will provide a practicum-based environment to educate students in small business finance. At the same instant, the Project will produce value to community by recycling a waste item; transforming it into valuable products: biodiesel and glycerin. At small-scale, the Project will achieve a monthly break-even at 150 liters of production. In future, the Project hopes it may achieve a standard of quality to acquire a business license. The Project aims to research the Chemical Engineering of biodiesel. The students aim to produce original scholarship, and to secure research funding to benefit future scholars at GMIT and at GMIT Biodiesel Project. The analysis concludes that the Project will produce true value. Following the assumptions highlighted herein, the financial projections show a positive Net Present Value for small-scale production. GMIT Biodiesel Project looks forward to active contribution to GMIT, the Nalaikh-Ulaanbaatar community, and biofuels scholarship.

EXECUTIVE SUMMARY

Biodiesel | GMIT-Biodiesel-Pro-Forma-Scale50L | 4/7/2015 2:49 PM

CONTENTS | Page 2 of 27

Table of Contents EXECUTIVE SUMMARY ....................................................................................................................................................................................................................... 1 A REVIEW OF BIOFUEL: ECOLOGIC, ECONOMIC, AND STRATEGIC ................................................................................................................................... 3 BIOFUELS IN MONGOLIA ............................................................................................................................................................................................................... 5 PORTER FIVE FORCES MODEL: MONGOLIA ............................................................................................................................................................................. 6 GMIT BIODIESEL PROJECT RESEARCH/PRODUCTION LABORATORY BUSINESS MODEL ........................................................................................ 8 THE COST STRUCTURE: VARIABLE COST DETERMINANTS AND SHUT-DOWN RULE ................................................................................................. 9 THE COST STRUCTURE: CAPITAL COST DETERMINANTS .................................................................................................................................................. 11 THE FOOTPRINT AND MECHANICAL ENGINEERING ......................................................................................................................................................... 15 CONCLUSION AND RECOMMENDATIONS ................................................................................................................................................................................ 16 APPENDICES ..................................................................................................................................................................................................................................... 17 APPENDIX I: ANALYTICAL LABORATORY EQUIPMENT ....................................................................................................................................................... 18 APPENDIX II: PRODUCTION EQUIPMENT ............................................................................................................................................................................... 19 APPENDIX III: RESEARCH PROTOCOL ..................................................................................................................................................................................... 20 APPENDIX IV: PRELIMINARY FEASIBILITY LABORATORY .................................................................................................................................................. 21 APPENDIX V: ABBREVIATIONS AND ACRONYMS ................................................................................................................................................................... 22 APPENDIX VI: ASSUMPTIONS AND FINANCIAL ANALYSIS .................................................................................................................................................. 23 REFERENCES ..................................................................................................................................................................................................................................... A

CONTENTS


A REVIEW OF BIOFUEL: ECOLOGIC, ECONOMIC, AND STRATEGIC | Page 3 of 27

A REVIEW OF BIOFUEL: ECOLOGIC, ECONOMIC, AND STRATEGIC

During the past thirty years, the biofuels industry has become a significant element of worldwide business and public-private partnership throughout developed and less developed economies. With inertia growing since the 1980’s, international assemblies including ADB, EU, IMF, World Bank, and a host of other leading alphabet agencies have heightened their rhetoric concerning global warming and climate change. These groups urge each nation-state to adopt policies to reduce carbon emissions. Nations have motivated indigenous development in biofuel technology through a range of tax incentives, research funding, and direct partnership with business. The global wholesale market for the leading liquid biofuels (biodiesel and ethanol) increased at an average rate of thirty percent, year over year, from 2005 through 2011.1 EU estimates its 2011 costs of producing the liquid biofuels range from €13,600 millions to €16,800 millions.2

Two factors provoke nations to pursue investment in liquid biofuels. Certainly governments dread to add greenhouse gases released from the long-term carbon cycle.3 But beyond this, nations also pursue alternate energy sources to reduce dependence upon fossil fuels imported from external sources. The liquid biofuels address both requisites. Biofuels do not release long-buried carbon. Rather, the liquid biofuels present energy from organic matter grown within the recent past, often within the past year or two. Upon combustion, human society releases that same volume of carbon dioxide gas to again support photosynthesis and regenerate organic matter for biofuel. This mechanism awards a net zero of carbon emissions. And obviously, the native cultivation of plant matter reduces the community’s reliance on imports.

Unfortunately in some instances, national policy toward Green Energy has produced contrary effects. For example, government subsidy may incite farmers to produce biofuel feedstock in lieu of food. This may increase the society’s dependence on imported grain. Data also show that some nations import the biofuel feedstock from less-developed countries. But the fossil fuel energy cost of production, transit, and import may be greater than the benefit from Green Energy. And of course, fossil fuel costs to grow the biofuel in the home country may also be greater than the benefit achieved from incorporating the biofuel within the society’s strategy to reduce its carbon footprint. These are a few of the conundrums which arise through national policy to reduce carbon emissions from fossil fuels.

Nevertheless, biofuels clearly offer certain advantages. Airlines, for example, have been experimenting with bio-jet fuel for a decade or more. And certainly developing nations with surplus arable land may be able to augment their GDP with sustainable production of biofuel feedstock – not only for

1 BioFuels at What Cost? A review of costs and benefits of EU biofuel policies, p. 18. 2 Ibid, p. 23: “The total cost of producing biofuel to meet European consumption in 2011 is estimated to have been between EUR 10.8 and 16.8 billion. This annual production supports the investment in assets, the operational costs (including employment) and the purchase of raw materials.” 3 The long-term carbon cycle: 1) upon their demise, plants and animals surrender their organic matter to the earth; 2) seas and deposition bury the organic matter; 3) over millions of years, heat and pressure act upon this organic matter to produce coal (from carboniferous forests), petroleum and gas (aquatic and land animals). On the timescale of hundreds and thousands of years, the system generates peat and methane.

-3 of 27-


0

50

100

2005 2006 2007 2008 2009 2010 2011

$USD

Bill

ions

2005 2006 2007 2008 2009 2010 2011$USD Billions 15.7 20.5 25.4 34.8 44.9 56.4 83

Global Liquid BioFuel Wholesale Market

A REVIEW OF BIOFUEL: ECOLOGIC, ECONOMIC, AND STRATEGIC | Page 4 of 27

indigenous use, but also for export sales. In recent years, biofuels chemical engineering research has been experiencing vibrant energy. Each month scholarship offers new techniques and potential for production using ultrasonic, microwave, ion exchange, and various types of catalysts to produce useful energy from Green sources. GMIT Biodiesel Project is entering a vital field at an opportune moment.

The GMIT Biodiesel Project is structured to research and develop the liquid biofuel process in Ulaanbaatar-Nalaikh. The Project intends to achieve sustainable business by recycling used waste vegetable oil. As a legacy endeavor, the project expects future students and research fellows at GMIT will continue to develop biofuel technologies to strengthen Mongolia4, minimize overall carbon emissions, and diminish the nation’s dependence upon imported energy. The Project hopes the research will add to international knowledge of biofuels, with particular emphasis on techniques enabling industrial use of biodiesel even within Eur-Asia’s harsh winter environments.5

4 A 1998 U.S. study (National Renewable Energy Laboratory, Urban Waste Grease Resource Assessment, 1998 (NREL/SR-570-26141), G. Wiltsee, p. 2) suggests that each American resident discards approximately 8.87 pounds of waste cooking oil each year. If Mongolian residents produce a similar amount of WVO, it would suggest that each year Mongolia discards 4.023 liters per capita. Multiplying this figure by 3 million residents concludes that the country may generate as much as 13.05 million liters of WVO per annum. If Mongolia converted this volume of WVO to bio-diesel at a retail price of 1,500₮/ltr, it would produce a value of 19,573,107,762₮ for a variable cost of 4,148,274,170₮. This implies a savings of 14,083,558,276₮ (roughly USD $7,094,991 at March 2015 exchange rate). 5 Generally, biodiesel tends to cloud and gel at 2C and below. Additives may maintain a liquid state to -40C and below.

-4 of 27-


BIOFUELS IN MONGOLIA | Page 5 of 27

BIOFUELS IN MONGOLIA

Mongolian biofuel production is currently in its infancy, and somewhat of a mystery. While many nations have firm initiatives to grow biofuels industry, Mongolia lags in this regard. Local news indicates two start-up companies are producing biodiesel: “Эн Би Эф” компани6 and “Цэвэр түлш”7.

Цэвэр түлш employs ten people producing its biodiesel. This company purchases WVO from MCS Kentucky Fried Chicken franchise at a rate of 200₮/ltr.

Цэвэр түлш claims that Mongolia dumps between 20,000 to 30,000 tonnes of WVO and fats each year, which may be turned into profitable biofuel product, and glycerin for the cosmetics industry.

World Bank figures from 2011 indicate that Mongolia imported 174,000 Metric Tonnes of diesel oil fuel.8 Recycling 20,000 tonnes of WVO implies a savings of 11.5% of the 2011 import figure. (This savings imputes a value of slightly under ₮41Billion MNT at retail 1790₮/ltr.) Such a savings would not only translate into reserves in the trade balance account, it would also provide a boost to home-grown industry, and spark new business initiative. These cutting edge companies argue that the nation could reduce its costs of importing fuel while supporting environmentally sound business practices at home. To maintain its quality control, Цэвэр түлш adopted European testing standards; and by 2013 the Government of Mongolia incorporated European standards into its own National Standard for biodiesel. These companies have also realized profits from biofuel by-products. Цэвэр түлш researched the development of liquid hand soap with glycerin. The company has also worked to produce a variety of charcoal lighter product. Most of the production in this new industry has been very labor intensive, but automation is close by.

6 http://www.petroleum.mn/en/news/69-picture-news/348-2011-05-05-01-52-22.html 7 http://mass.mn/n/10579 8 http://data.worldbank.org/indicator/IS.ROD.DESL.KT

-5 of 27-


http://www.petroleum.mn/en/news/69-picture-news/348-2011-05-05-01-52-22.html

http://mass.mn/n/10579

PORTER FIVE FORCES MODEL | Page 6 of 27

PORTER FIVE FORCES MODEL: MONGOLIA

In 2015, Mongolia’s biofuels production remains in its infancy. Few producers engage in commercial biodiesel production. And none of these engage in capital intensive industrial scale production. This analysis reveals that Mongolia presently imports nearly all its liquid fuels. Two factors drive the nation’s relatively high per capita demand for diesel fuel. Primarily, Mongolia places great focus upon the mining sector for well-being and economic growth. This sector sparks a terrific demand for diesel to power vehicles and machinery. Secondly, the nation relies on trailer trucks for trans-national hauling. This reliance on imported fossil fuels creates severe disadvantage to national economy on several fronts:

1. Stresses the nation’s balance of payments; 2. Gives the exporter’s government explicit negotiating power over trade in other goods and

services; 3. Denies Mongolia’s agricultural and waste recycling sector alternative sources of business

revenue; 4. Tends to increase the nation’s carbon footprint; 5. Fails to stimulate national research and development toward strategies for self-sufficient,

sustainable enterprise; etc.

The novelty of Mongolia’s infant biofuels industry creates excellent opportunity for new entrée at industrial production, but also in the Research and Development sector. Costs of Biodiesel Production estimates €3.8 Million capital cost for a 20,000 tonne per annum modular processing plant generating biodiesel from waste tallow and vegetal oil.9 In other words, if it were feasible to recycle the lion’s share of Mongolia’s annual waste vegetable oil product, the capital infrastructure would cost under €4.0 million (including delivery trucks, processing equipment, and storage capacity). Costs of Biodiesel Production estimates €5.1 million could secure the capital equipment to process 60,000 tonnes of biodiesel each year.10 The implication of these capital costs suggests extraordinary advantage to not only recycle waste vegetable oil product, but also to stimulate agricultural production of vegetable oil feedstock.

Of course, airline jet fuel is the other biofuel of strategic significance to Mongolia. The nation imports all of its jet fuel at exorbitant markups due to high import tariffs and transport. Though bio-jet fuel is wholly beyond the scope of this instant analysis, the reader should conclude that Mongolia ought to stimulate a research and development program for the various liquid biofuels. Public-private and University partnerships could produce strong economic and strategic returns on investment in biofuels.

In biodiesel’s present infant stage, the Porter Five Forces analysis shows that suppliers of the waste vegetable input possess relatively low bargaining power. In the presence of low demand for the waste vegetal oil, and absence of a well-defined market for biofuels, suppliers are inclined to give away or sell WVO at low costs. However, a vibrant biodiesel market would likely stimulate enterprise in intermediary entities. Such establishments could create value by cleaning and treating the waste vegetal feedstock for biofuel processors. While local retailers of other reagents (providers of ethyl and methyl alcohol) seem to possess market power in Ulaanbaatar’s limited market; international suppliers do not possess market power. In particular, China retail establishments offer excellent competition for reagent, especially at the level of bulk commercial sales.

At present, no single producer has market power to deny new entrée. This leaves enormous potential for many minor biodiesel producers to enter the market. However, trifling capitalization on the order of €5 million could enable a lone producer to gain significant market power – particularly if the entity

9 Costs of Biodiesel Production, Duncan, J., May 2003: Energy Efficiency and Conservation Authority, p. 11 10 Ibid.

-6 of 27-


PORTER FIVE FORCES MODEL | Page 7 of 27

possessed backward integration. The ideal market leader should control its supply of fresh agricultural feedstock. One possible structure logically associates partnership of aimag feedstock with an industrial production facility to guarantee regional employment. Such a synergy could quickly dominate national biodiesel production. But significantly, any Mongolian industrial producer should look toward the export market, particularly to China, Japan, and Republic of Korea.

Because the biofuels sector is so new to Mongolia, buyers boast substantial market power. Buyers are naturally wary of the quality of the biofuel product, primarily out of concern for the national enforcement of standard. On the one hand, buyers are attracted to biodiesel for: 1) the advantage of buying local; and 2) reduced carbon emissions. But on the other hand, buyers are concerned that biofuel might damage fuel injection systems and engines. Buyers demand discounts on the purchase price of biofuel - as a form of insurance against damage to their equipment. Furthermore, biodiesel typically rates slightly lower power than petro-diesel; though B20 to B30 blends would not impact fuel consumption.

Petro-diesel fuel is the natural biodiesel substitute for buses, farm equipment, train locomotives, mining equipment, and trailer-trucks. But the nation’s personal automobile market is in remarkable flux. While most personal vehicles in Mongolia run on gasoline or diesel, the nation experiences transition among hybrid vehicles, and also in the LPG vehicle sector. Mongolian households focus sorely upon cash investment in vehicles and the cost of fuel consumption.

In 2015 Mongolia supports few players in commercial biofuels. Mongolia’s biofuel sector experiences low levels of industrial rivalry. But one well-capitalized industrial biodiesel facility with expertise in chemical engineering could quickly achieve market dominance over the limited national market. And equally significant: long-term strategy for biofuels ought to embody production for export, and also for other nationwide potential markets – including furnace heating oil, among other things.

-7 of 27-


GMIT BIODIESEL PROJECT RESEARCH/PRODUCTION LABORATORY BUSINESS MODEL | Page 8 of 27

GMIT BIODIESEL PROJECT RESEARCH/PRODUCTION LABORATORY BUSINESS MODEL

GMIT Biodiesel Project will collect and recycle waste vegetable oil (WVO) and produce useful consumer items. During its first months of operation, GMIT Biodiesel Project will collect WVO from student homes, the campus cafeteria, student dormitory facilities, and nearby restaurants. The Project will dehydrate and filter this oil, and season the oil onsite in storage containers to assure additional water and impurities settle out. This will leave relatively clean WVO floating above. In the ideal case, the Project aims to contain a continuous rolling six-month supply of WVO in settling tanks. This phase will improve the rate of biochemical transformation to quality biodiesel, wholesome natural soap, and other useful consumer items.

The biochemical process: transesterification converts the WVO triglycerides to fatty acid esters (FAEE: fatty acid ethyl esters using ethyl alcohol; or FAME: fatty acid methyl esters using methyl alcohol). Thousands of scholarly articles and industry manuals describe the reaction of WVO with alcohol under heat and vigorous agitation in alkali buffer catalyst (typically NaOH or KOH). The reaction creates biodiesel, typically in percentages of 95% to 99% of WVO by volume. This transformation generates dense glycerol as the major by-product, along with contaminated alkaline water. Contingent upon its thoroughness, the reaction will also yield trace levels of free fatty acids (FFAs). Each product and co-product will emerge contaminated with the alcohol and a Group 1 alkali metal (K or Na). The science literature suggests recycling the alcohol via vacuum distillation.11 Ecological biodiesel processing typically neutralizes the alkali with an acid. This produces an inert or useful salt co-product, and returns water to the hydro-system.

Triglycerides (1) react with an alcohol such as ethanol (2) to give ethyl esters of fatty acids (3) and glycerol (4)12:

GMIT Biodiesel Project will design and create its own processing reactor. The Project will test configurations to amplify production yield and minimize variable costs13. The Project aims to maximize recovery and assure a positive, and significant energy return on energy invested (EROEI). To assure its focus on entrepreneurial pedagogy, the Project will closely monitor the costs of: A) capital equipment; B) reagents and production materials; C) labor; and D) energy consumption. The Project targets production of high quality, saleable biodiesel within its first six months of operation. Finally, the Project encourages participants to generate scientific articles appropriate for publication in domestic and international journals with unique production and laboratory data.

11 Y. Zhang, M.A. Dube, D.D. McLean,M. Kates, “Biodiesel production from waste cooking oil: 1. Process design and technological assessment,” Bioresource Technology 89 (2003): 1–16. This article and other literature describe vacuum distillation. 12 Graphic sourced from: http://en.wikipedia.org/wiki/Biodiesel_production 13 As the best case scenario, the Project should aim to isolate the minimum practical proportion of reagents per mass of biodiesel output.

-8 of 27-


THE COST STRUCTURE: VARIABLE COST DETERMINANTS AND SHUT-DOWN RULE | Page 9 of 27

THE COST STRUCTURE: VARIABLE COST DETERMINANTS AND SHUT-DOWN RULE

In its current iteration, the GMIT Biodiesel Project focuses upon pedagogical research and sustainable business through a production laboratory. The Project will educate students in entrepreneurial thinking and proper business procedure. In order to grow and fund future improvements, the business model requires revenue to meet or exceed costs. This table summarizes the Project’s 2015 estimate of variable cost parameters:

Currency: ₮ MNT

Variable Costs: Bulk Cost Purchase Size Cost per Unit Per Ltr VO Variable Cost/Ltr

Either liter Anhydrous 99.5% Ethanol (Per Liter)** 2,000.000 1.00 2,000.000 0.300 600.000

Or liter Anhydrous 99.5% Methanol (Per Liter)** 19,050.000 18.00 1,058.333 0.250 264.583

And liter Waste Vegetable Oil: WVO (Per liter) 0.000 1.00 0.000 1.000 0.000

Or liter Straight Vegetable Oil: SVO (Per liter) 10,000.000 4.00 2,500.000 1.000 2,500.000

And kg NaOH: Catalyst (Per kg) 12,500.000 1.00 12,500.000 0.007 87.500

And liter H2SO4: Sulfuric Acid (Per Liter) 23,800.000 1.00 23,800.000 0.002 45.220

And liter Water (Per Liter) (UB Gov't) 0.480 1.00 0.480 1.000 0.480

And kW-hr Electricity (Per Kilowatt Hours) 79.000 1.00 79.000 0.250 19.750

And Hours Labor (per hour) 2,000.000 0.00 0.000 0.100 0.000

Biodiesel Type: Ethyl WVO 752.950

Methyl WVO 417.533

Significantly, this analysis rests upon one key assumption: the price of Ethyl Alcohol. This cost structure presumes that the Project is able to secure ethyl alcohol at a price equal to or less than ₮2,000/Ltr. The analysis basis this assumption upon the possible acquisition of 95% ethanol at ₮2,000/Ltr and then drying the 95% ethanol through zeolite 3A molecular sieve, to produce the necessary 99.5% anhydrous Ethyl Alcohol.14

Transesterification uses WVO as reactant, and alcohol (Ethyl or Methyl) as reagent. The cost of these materials commands the production. Even though Methyl alcohol offers a substantial savings over Ethyl, the Project prefers to use Ethyl alcohol. Methanol is highly toxic, and its metabolic effect is cumulative. Human physiology suffers Methanol toxicity through ingestion, absorption through epithelial tissue, and through inhalation of vapors.15 A mild dose (10ml) over a short time may cause permanent blindness or liver dysfunction; and a dose equivalent to four or five standard drinks may cause death. While the majority of U.S. and European biodiesel producers perform transesterification with Methyl alcohol, the research literature suggests that producers in Brazil, Malaysia, Thailand, and in other Asian states use some Ethyl alcohol. GMIT Biodiesel Project uses Ethanol for strict safety.

14 Because GMIT Biodiesel is both a research program and a production laboratory, the project aims to obtain some partnership or arrangement with a commercial enterprise to acquire the required purity of Ethyl Alcohol. In addition, the Project aims to use vacuum distillation to reclaim a portion of Ethyl Alcohol from production. 15 The human metabolism transforms methanol to its toxic metabolites: formaldehyde and formic acid. “Almost all cases of acute methanol toxicity result from ingestion, though rarely cases of poisoning have followed inhalation or dermal absorption. The absorption of methanol following oral administration is rapid and peak methanol concentrations occur within 30–60 minutes... Methanol poisoning typically induces nausea, vomiting, abdominal pain, and mild central nervous system depression. There is then a latent period lasting approximately 12–24 hours, depending, in part, on the methanol dose ingested, following which an uncompensated metabolic acidosis develops and visual function becomes impaired, ranging from blurred vision and altered visual fields to complete blindness.” (American Academy of Clinical Toxicology Practice Guidelines on the Treatment of Methanol Poisoning http://informahealthcare.com/doi/abs/10.1081/CLT-120006745?journalCode=ctx)

-9 of 27-


THE COST STRUCTURE: VARIABLE COST DETERMINANTS AND SHUT-DOWN RULE | Page 10 of 27

Because of this constraint, the Project must acquire Ethyl Alcohol and WVO at minimum costs. The project seeks partnership with the Nalaikh-Ulaanbaatar community for WVO. The Project must isolate high quality anhydrous ethanol at industrial prices. Ultimately, the Project seeks unit production costs below retail petro-diesel. Insofar as consumers are divorced from the true cost of externality16, consumers would feel injury using expensive biodiesel. Simply put, the Project’s business model requires biofuel product will retail for less than the petrol analog. Since the GMIT Biodiesel Project teaches entrepreneurship, the entity intends proper enterprise in the absence of wasteful subsidy.17 This table displays the shut-down rule: Retail PriceWVOFeedstock + Production Variable CostsLabor, Biodiesel Reagents, and Energy ≤ Retail PricePetrolDiesel This primary focus notwithstanding, the Project also functions as a research facility to GMIT. GMIT Biodiesel Project retains the flexibility to change this business model to perform beneficial research contingent upon future presently unknown economic factors.

16 The externalities associated with petroleum products and biofuels include: emissions, environmental degradation, the costs to maintain a road and rail network, and other factors. 17 Though created as a not-for-profit entity, the Project operates as a PROFIT CENTER not as a COST CENTER. While subjecting itself to the rigors of the market, the Project welcomes contracts to sell quality product. It will sustain itself on these sales.

₮ WVO Price

₮ Total Production VC/unit

₮ Petrol Diesel Price

Shut-Down Rule

0.00 400 1790 Produce 0.00 1000 1790 Produce

800 1800 1790 Shut Down

300 800 1790 Produce

-10 of 27-


THE COST STRUCTURE: CAPITAL COST DETERMINANTS | Page 11 of 27

THE COST STRUCTURE: CAPITAL COST DETERMINANTS

At total throughput, the GMIT Biodiesel Project may produce as many as 200 liters of quality biodiesel each month. To achieve this target, the Project designed its reactor to comfortably handle a 40 liter capacity for a single 4-day production run: processing, washing, and drying the fuel.

The Project’s capital structure will comfortably generate a monthly 150 liter yield of biofuel. The reaction vessel is the most significant hardware. The Project will employ a 60-liter stainless steel water boiler for initial small-scale production. Equipped with a thermostat and heating element, this functional hardware is safe with little retro-fitting. Once the Project has mastered the chemistry and production procedures, GMIT Biodiesel may ramp up with larger processing equipment. This capital structure concludes with all-in cost of under MNT ₮1,000,000 including Project-specific sensitive laboratory equipment for fine analytical work. This table lists the particular capital equipment and per item costs: DESCRIPTION OF EQUIPMENT: UNITS COST TOTAL PRICE 02. Laboratory General: Assorted Glassware 1.00 135,000.00₮ 135,000.00₮ 02. Laboratory General: Balance (500gm scale; 0.10 gm sensitive) 1.00 75,000.00₮ 75,000.00₮ 02. Laboratory General: Magnetic Stirrer / Heater 2.00 40,000.00₮ 80,000.00₮ 02. Laboratory: Carboy Spigot Tank (20-50 Liter) 10.00 5,000.00₮ 50,000.00₮ 02. Laboratory: Filters (Various Micron Gauge) 5.00 10,000.00₮ 50,000.00₮ 03A. Reaction: Reaction Vessel (50 Liter Capacity) 2.00 95,000.00₮ 190,000.00₮ 03B. Reaction: Electric Pump (0.25-2HP) 2.00 50,000.00₮ 100,000.00₮ 03C. Reaction: Assorted Piping 0.10 100,000.00₮ 10,000.00₮ 03C. Reaction: Assorted Valves, Flanges, etc. 0.10 100,000.00₮ 10,000.00₮ 03D. Other: Miscellaneous O-Rings, Sealant, Caulking, etc. 0.25 50,000.00₮ 12,500.00₮ 03E. Other: Miscellaneous Temperature; Pressure Gauges 4.00 15,000.00₮ 60,000.00₮ 04. Wash Tank: Soapstone / Tank Bubble Pump 2.00 25,000.00₮ 50,000.00₮ 05A. Recovery: Distillation Set (Industrial Grade Cu Tubing) 0.25 100,000.00₮ 25,000.00₮ 05A. Recovery: Vacuum Pump 2.00 30,000.00₮ 60,000.00₮ 05B. Recovery: 20L Storage Containers (Glycerine) 5.00 5,000.00₮ 25,000.00₮ 05C. Recovery: Glycerine Soap Forms/Molds 5.00 10,000.00₮ 50,000.00₮

982,500.00₮

To assure its role as an independent Project, albeit under the governance of GMIT, the Project will fund its capital expenditures under a lease-loan arrangement with GMIT. Under this lease-loan protocol, the Project will supply biofuel to GMIT at a cost not to exceed ₮1,250/Ltr. The Project intends this business acumen will reinforce an entrepreneurial philosophy within its culture.

-11 of 27-


CORE ASSUMPTIONS TO THE FINANCIAL PROJECTIONS | Page 12 of 27

CORE ASSUMPTIONS TO THE FINANCIAL PROJECTIONS 1. The Project will partner with local businesses and the community to acquire WVO for

recycling at no cost; 2. The Project will acquire the variable cost determinant: Ethyl Alcohol, at 2,000₮/Ltr18 or less; 3. At startup, the Project should produce no less than 131 liters of quality biofuel per month; 4. During production rhythm, the Project will produce no fewer than BE Quantity (150 Liters)

in a given month (on average); 5. Until the Project masters its production and quality testing, GMIT will be the sole consumer; 6. The Project will grow its production and facility over time (10% per annum) to produce

wealth to fund future projects at GMIT; 7. The Project will pay a 5.00% capital cost to the lease-loan arrangement; 8. The sales price is 1250₮/Ltr of biodiesel product. 9. The Variable Cost is 753₮/Ltr biodiesel product. The project estimates that each production

unit (liter) will absorb approximately ₮753 of energy, raw materials, (WVO, plastic consumables, etc.), reagents (acid, alcohol, and alkali), volunteer labor19, and wash water.

10. The Fixed Cost

component:

Annual Monthly

Administrative Volunteer 0

Depreciation 207,504 17,292

Insurance 25,000 2,083

Maintenance 103,750 8,646

Note Payment 314,904 26,242

Rent/Lease 180,000 15,000

Utilities (Admin) 25,200 2,100

11. The Revenue and

Cost Drivers:

DESCRIPTION DAILY TRAFFIC

GROSS PURCHASE

NET PURCHASE

NET REVENUE

Biodiesel B100 Liter (@130Ltr/month 30workdays) 4.3 1,250₮ 1,250₮ 5,375₮

DESCRIPTION UNIT VOLUME

COST PER UNIT INVENTORY % TRAFFIC

Biodiesel B100 Liter (@130Ltr/month 30workdays)20

4.3 753₮ 3,238₮ 100.00%

18 This cost structure requires preferential pricing including the use of Ethyl Alcohol for research purposes in a pedagogical school or Academic setting. 19 Although student technicians volunteer their labor, the Project aims to provide lunch for production runs. 20 Refer to the Variable Cost analysis for this factor breakdown.

-12 of 27-


DATA AND ANALYSIS OF DATA: RAW MATERIALS AND PRODUCTION COST ACCOUNTING | Page 13 of 27

DATA AND ANALYSIS OF DATA: RAW MATERIALS AND PRODUCTION COST ACCOUNTING Based upon the foregoing assumptions, the budget projections yield a Fixed Cost regime and a monthly Break Even scheme following this structure. To assure sustainable business acumen at the stated total cost structure, the Project must produce and sell 146 liters each month. The analysis forecasts monthly revenue and costs for Sixty months forward following the stated growth rate: 10.00% per annum.21 At entrée small-scale, the Project anticipates these assumptions will produce a Net Present Value of approximately 9,300,000₮. Certainly incremental adjustments to the capital structure (human capital and economic capital) could produce drastic changes to the Project’s valuation possibilities.22 Notably, under this hypothetical projected cost structure, the Project retains a positive outlook even at 0.00% growth.

Net Present Value sensitivity analysis forecasts the project valuation at different growth rates of revenue (with variable costs tied to the same periodic rate change).

This Net Present Value sensitivity analysis forecasts the project valuation at different capital costs. On the one hand, this structure for Weighted Average Cost of Capital may seem generously low. Nevertheless, the Project will provide true value to the GMIT community through original research and grant solicitation. This consideration justifies the low hurdle rate.

Certainly, GMIT Biodiesel Project suggests a successful outlook as a viable business venture under production laboratory setting.

21 For the line-by-line accounting, please refer to the Cash-Flow projections in the Appendix. 22 Refer to the Appendix VI For a detailed rendering of the Cash-Flow projections following the aforementioned assumptions.

-13 of 27-


DATA AND ANALYSIS OF DATA: RAW MATERIALS AND PRODUCTION COST ACCOUNTING | Page 14 of 27

LOOKING FORWARD

This initial level of scale presents a contribution margin of approximately ₮500 per unit sold. Greater scale could potentially award significant benefits to margin. Large scale would enhance potential to recycle significant volumes of alcohol for reuse in subsequent reactions, while reducing per unit costs of energy. Larger volumes of raw materials and reactants would retain heat over longer timescales, reducing per unit consumption of electric power. Other near-term ventures include the manufacture of natural scented hand soap form the glycerin by-product. Over the next several years, the Project aspires to slash future power consumption from external sources to a bare minimum, pulling energy from renewable sources – including self-contained electric generator using biodiesel.

-14 of 27-


THE FOOTPRINT AND MECHANICAL ENGINEERING | Page 15 of 27

THE FOOTPRINT AND MECHANICAL ENGINEERING

The production facility requires approximately 25 square meters of industrial laboratory space, following a similar footprint outline (adjacent). The space requires these improvements: A) dedicated vent to expunge noxious toxic vapors; B) fire safety equipment; C) dedicated source of running water; D) dedicated electricity backup for lighting and safety protocol:

A schematic of the production vessel.

This particular schema uses a pump to draw fluid from the bottom of the chamber and circulate it back through the top.

The Project’s initial production vessel will agitate reactants with a rotating impeller, similar to a paint mixer.

The Project will also endeavor to recover ethyl alcohol through vacuum distillation.

-15 of 27-


CONCLUSION AND RECOMMENDATIONS | Page 16 of 27

CONCLUSION AND RECOMMENDATIONS Biofuels have become an important element of world economy. Many jurisdictions impute a high strategic and economic significance to enterprise and R&D in biofuels. GMIT Biodiesel Project believes that Mongolia would gain considerable benefit by incorporating biofuels within national policy and economic initiatives. Biodiesel, in particular, could significantly (11.5% or more) reduce national dependence upon imported petro-diesel. Biofuel production would create demand for alternative agricultural production. And certainly, biofuels would create an additional source of export revenue. This would improve national economic vitality. Mongolia ought to support Research and Development in biofuels to cultivate new industry and enrich GDP. GMIT Biodiesel Project’s focus on research, development, and enterprise to recycle waste vegetal oil in Mongolia will provide value for all stakeholders: The Project will foster partnership between GMIT and the Nalaikh-Ulaanbaatar

community. The Project will educate GMIT and Nalaikh-Ulaanbaatar stakeholders to pursue value

through recycling and laboratory production. The local community will gain an incentive to mitigate pollution by recycling WVO.

The Project will provide a practicum-based workshop for students to hone their laboratory and entrepreneurial skills. The production of biodiesel will give students useful expertise and confidence, incentive to preserve unique intellectual property, and potentially spark student enterprise.

The Project should attract grant funding for targeted Chemical Engineering research to develop biofuels in Mongolia.

Etc. GMIT Biodiesel Project will produce significant benefit for GMIT, the local community, and ultimately for academic scholarship and business in Mongolia. The Project hopes that GMIT governors will look favorably upon this endeavor, and will assist the Project with start-up financing.

-16 of 27-


APPENDICES | Page 17 of 27

APPENDICES

-17 of 27-


APPENDIX I: ANALYTICAL LABORATORY EQUIPMENT | Page 18 of 27

APPENDIX I: ANALYTICAL LABORATORY EQUIPMENT Description Units Size Scale Per Unit Cost ₮MNT Cost ₮MNT Need Erlenmeyer 4 1000 ml 8300 33200 Need Erlenmeyer 4 500 ml 7100 28400

Need Funnel Separator 2 1000 ml 27000 54000

Need Titration Pipette 2 100 ml 8700 17400

133000

-18 of 27-


APPENDIX II: PRODUCTION EQUIPMENT | Page 19 of 27

APPENDIX II: PRODUCTION EQUIPMENT Item Specs Cost Image

Reaction Vessel

60Ltr Water Heater/Coffee-Tea Urn (Retrofit with clamps at the top seal, a borehole for the impeller, and replace the plastic spigot with a durable industrial seal and valve setting.)

95,000₮

Plastics For decanting Bio-fuel and for storing glycerine, etc. 25 Ltr Storage / Decanter

4,500₮

200 Ltr Storage For storage of biofuel for up to two months; for WVO storage up to 6 months.

25,000₮

Heating Unit For test samples and for laboratory work.

₮40,000

-19 of 27-


APPENDIX III: RESEARCH PROTOCOL | Page 20 of 27

APPENDIX III: RESEARCH PROTOCOL GMIT Biodiesel Project proposes the following two research protocols for study in 2015:

1. Testing the economic and chemical viability of producing quality biodiesel product from Waste Vegetable Oil (WVO) in Nalaikh-Ulaanbaatar varying reaction time, agitation method (impeller, ultrasonic, bubble agitation), heat for reaction; recording efficiency of product and by-product recovery, and ethanol recovery via vacuum distillation.

2. Testing the efficiency of reducing the Free Fatty Acid content (FFA%) with H2SO4 prior to NaOH base catalyzed reaction.

The following summation incorporates both protocols:

After filtration and dehydration, the analysis determines the quality of the WVO through standard titration measuring the percentage of Free Fatty Acids (FFA) in the WVO. After titration to isolate the FFA content, the research team will initially…

1. Neutralize (deacidify and esterify) the FFA by application of H2SO4 to samples of one particular batch of WVO. Since the team will not know the exact organic origin of the WVO, the particular batch should be a mixture of WVO from several sources. Because batch processing of WVO generally does not predict the feedstock origin of the oil, this mystery composition mimics real-world production of biodiesel.

2. Push the transesterification through the standard NaOH catalyst protocol with Ethyl alcohol to donate the hydroxyl group to form Fatty Acid Ethyl Esters from WVO triglyceride, with co-products (glycerin and Na2SO4).

These experiments measure the following variables: 1) the effect of heat (as defined by the temperature) on the reaction; 2) type of agitation (vigor of rpm, ultrasonic frequency, or bubble aeration); 3) duration of time under reaction; and 4) success of recovery of reagents (ethanol volume by vacuum distillation, glycerin by volume, and Na2SO4 by mass). Finally, the team will quantify the purity of the Biodiesel according to ASTM rigor. This analysis will test four 200ml samples per period, holding temperature and time as the constant in each regime. For example, Trial 1 will measure outputs at TemperatureA and TimeA for Sample 1AA at 500 rpm, Sample 2AA at 1000 rpm, Sample 3AA with bubble aeration, and Sample 4AA in ultrasonic bath. The protocol will investigate temperature increments at 10 degree intervals from 40C to 60C, maintaining temperature of the reactant and reagents throughout both elements of the 2-step process, allowing for 15 minutes; 30 minutes; 45 minutes for each phase of the two phases of reaction:

1. Esterification of free floating FFA within the sample – which contaminates and could potentially kill Ethyl alcohol transesterification outright; and then

2. Transesterification via Ethyl alcohol and NaOH base-buffer catalyst for the desired biodiesel product with co-products.

The collected data will provide original scholarship to benefit GMIT and others aiming to use Ethyl Alcohol to transform WVO into useful fuel in Mongolia.

-20 of 27-


APPENDIX IV: PRELIMINARY FEASIBILITY LABORATORY | Page 21 of 27

APPENDIX IV: PRELIMINARY FEASIBILITY LABORATORY Students assisted in performing this protocol in March, 2015:

-21 of 27-


APPENDIX V: ABBREVIATIONS AND ACRONYMS | Page 22 of 27

APPENDIX V: ABBREVIATIONS AND ACRONYMS

AFV alternative fuel vehicle ASTM ASTM International B100 100% biodiesel B20 20% biodiesel, 80% petroleum diesel Btu British thermal unit Ca Calcium CFPP cold filter plug point CI compression ignition CO carbon monoxide CO2 carbon dioxide COA certificate of analysis DOE U.S. Department of Energy DOT U.S. Department of Transportation ECRA Energy Conservation Reauthorization Act of 1998 EPA U.S. Environmental Protection Agency EPAct Energy Policy Act of 1992 (amended in 1998) FAEE fatty acid ethyl esters FAME fatty acid methyl esters FFA Free fatty acid GHG greenhouse gas HC Hydrocarbon HFRR high-frequency reciprocating rig IRS Internal Revenue Service K Potassium KOH potassium hydroxide LTFT low-temperature flow test Mg Magnesium MSDA material safety data sheet MSHA U.S. Department of Labor Mining Safety Health Administration Na Sodium NBB National Biodiesel Board NFPA National Fire Protection Association NOx nitrogen oxides NREL National Renewable Energy Laboratory OEM original equipment manufacturer OSHA Occupational Safety and Health Administration OSI Oil Stability Index PAH polyaromatic hydrocarbons PM particulate matter ppm parts per million RCRA Resource Conservation & Recovery Act of 1976 RFS Renewable Fuels Standard SO2 sulfur dioxide SVO Straight vegetable oil UL Underwriters Laboratories VOC volatile organic compound WVO Waste vegetable oil

-22 of 27-


APPENDIX VI: ASSUMPTIONS AND FINANCIAL ANALYSIS | Page 23 of 27

APPENDIX VI: ASSUMPTIONS AND FINANCIAL ANALYSIS

-23 of 27-


BUSINESS PLAN GMIT BIODIESEL PROJECT ULAANBAATAR-NALAIKH MONGOLIA

SCENARIO VARIABLESPush me to Amortize the Loan and Balance the Books! :

FIELDS MAY VARY FOR SCENARIO ANALYSISFIELDS MAY NOT VARY FOR SCENARIO ANALYSIS

The Name of my Company is : GMIT Biodiesel ProjectIn this City and State : Nalaikh-Ulaanbaatar, Mongolia

I am projecting this annual growth rate of Revenue : 10.00%

In the Scenario, Revenue and Inventory Cost will grow at the stated rate until this month. 60

How many hours will I operate each working day : 0.5I will operate this many days per week : 7

I expect this average number of sales on the first day : 4.30

I will compensate my staff an average rate of this per hour : 0.00₮

I will begin raising Staff Salary after this Month. [The default is after 1 year (Month 12)] : 12.00At this Annual Rate of Increase for Payroll : 10.00%

Annual Manager's remuneration (Not inclusive of Dividends ) : 0.00₮

In addition to Management, I'll need this many staff members during business hours : 2.00

I'll need this many employees to fill my operating hours : 0.18

In an average year, I will incur this percentage of original cost to maintain my equipment : 10%I will need to grow revenue and cost at this rate after Year5 to keep up with Inflation : 2.300%

The financial analysis scenario runs for this many years : 5The total NATIONAL TAX RATE I will pay each quarter on positive earnings : 0.00%

This is the sum of my PROVINCIAL AND LOCAL SALES TAX : 0.00%Goodwill (a non-cash transaction) I assume at start-up. This ADVANTAGE will earn tax savings. : 0₮

YOUR SHORT-TERM COST OF EQUITY CAPITAL. [LONG-TERM RETURN ON U.S. EQUITY 11.000%] : 11.000%

This is the cost of my business loan : 5.000%There are this many Discounting Periods Per Annum: 12

Loan Amortization At Month60 : 0Monthly Note Payment : -26,242

Minimum financing [Conservative Estimate]. All Equipment + 25% of All Annual Costs : 1,400,000.00₮

This is the amount of my business loan : 1,400,000.00₮

If the loan does not meet my Financing needs, I'll need to invest this much Equity : 0.00₮

This is the Acquisition Cost of the Business Being Purchased :

What is the date this enterprise will begin : 1-Aug-15

Net Present Value: The value of ongoing operations : 9,277,262.96₮

Purchase Value to BuyerNPV - Buyer Equity Financing : 9,277,262.96₮

Shareholder Dividend Provision: Feb-29-2016 0Shareholder Dividend Provision: Aug-31-2016 0Shareholder Dividend Provision: Feb-28-2017 0Shareholder Dividend Provision: Aug-31-2017 0Shareholder Dividend Provision: Feb-28-2018 0Shareholder Dividend Provision: Aug-31-2018 0Shareholder Dividend Provision: Feb-28-2019 0Shareholder Dividend Provision: Aug-31-2019 0Shareholder Dividend Provision: Feb-29-2020 0Shareholder Dividend Provision: Aug-31-2020 0

Your plan has great potential! Please double-check your assumptions!

RECONCILE AND BALANC

Confidential: Internal Eyes OnlyAPPENDIX VI

Scale50L-GMIT_BiodieselProForma_Biz-Eval4.2_MNT: Financing AssumptionsPage 1 of 18 Pages

Analysis as of 4/3/2015 6:36 PM


REVENUE AND COST ACCOUNTINGAVERAGE DAILY REVENUE FROM OPERATIONS

DESCRIPTION DAILY TRAFFIC GROSS PURCHASE NET PURCHASE NET REVENUE

O1 Biodiesel B100 Liter (@130Ltr/month 30workdays) 4.300 1,250.00₮ 1,250.00₮ 5,375.00₮O1 Biodiesel B80 Liter 0.000 0.00₮ 0.00₮ 0.00₮O1 Biodiesel B50 Liter 0.000 0.00₮ 0.00₮ 0.00₮O1 Biodisel B20 Liter 0.000 0.00₮ 0.00₮ 0.00₮

O1 0.000 0.00₮ 0.00₮ 0.00₮

O1 0.000 0.00₮ 0.00₮ 0.00₮O1 0.000 0.00₮ 0.00₮ 0.00₮O1 0.000 0.00₮ 0.00₮ 0.00₮O2 0.000 0.00₮ 0.00₮ 0.00₮O2 0.000 0.00₮ 0.00₮ 0.00₮O2 0.000 0.00₮ 0.00₮ 0.00₮O2 0.000 0.00₮ 0.00₮ 0.00₮

O2 0.000 0.00₮ 0.00₮ 0.00₮

O2 0.000 0.00₮ 0.00₮ 0.00₮

O2 0.000 0.00₮ 0.00₮ 0.00₮O2 0.000 0.00₮ 0.00₮ 0.00₮

4.300 1,250.00₮ 5,375.00₮MONTHLY AVERAGE 163,041.67₮

OFF-SEASON / LOST BUSINESS / VENDOR FEE 0.00%ANNUAL: BASED ON MONTH0 PROJECTION 1,956,500.00₮

DAILY OPERATING INVENTORY: COST OF GOODS SOLD (Materials only. Not Labor)DESCRIPTION UNIT VOLUME COST PER UNIT INVENTORY % TRAFFIC

O1 Biodiesel B100 Liter (@130Ltr/month 30workdays) 4.30 753.00₮ MNT 3,237.90 100.00%O1 Biodiesel B80 Liter 0.00 0.00₮ MNT 0.00 0.00%O1 Biodiesel B50 Liter 0.00 0.00₮ MNT 0.00 0.00%

O1 Biodisel B20 Liter 0.00 0.00₮ MNT 0.00 0.00%

O1 0.00 0.00 0.00₮ MNT 0.00 0.00%

O1 0.00 0.00 0.00₮ MNT 0.00 0.00%

O1 0.00 0.00 0.00₮ MNT 0.00 0.00%

O1 0.00 0.00 0.00₮ MNT 0.00 0.00%

O2 0.00 0.00 0.00₮ MNT 0.00 0.00%

O2 0.00 0.00 0.00₮ MNT 0.00 0.00%

O2 0.00 0.00 0.00₮ MNT 0.00 0.00%O2 0.00 0.00 0.00₮ MNT 0.00 0.00%O2 0.00 0.00 0.00₮ MNT 0.00 0.00%O2 0.00 0.00 0.00₮ MNT 0.00 0.00%O2 0.00 0.00 0.00₮ MNT 0.00 0.00%O2 0.00 0.00 0.00₮ MNT 0.00 0.00%

DAILY AVERAGE MNT 3,237.90MONTHLY AVERAGE MNT 98,216.30

OFF-SEASON / LOST BUSINESS / VENDOR FEE 0.00%ANNUAL: BASED ON MONTH0 PROJECTION MNT 1,178,595.60





PROPERTY PLANT & EQUIPMENT AND IMPROVEMENTS AND BETTERMENTS

Capitalize the Equipment Costs? Yes. Capitalize the costs.Biodiesel Production OPERATING EQUIPMENT

Description of Equipment: Units Cost Total Price01. Safety: Dedicated Water Inlet 1.00 0.00₮ 0.00₮

01. Safety: Fire Suppression Equipment 1.00 0.00₮ 0.00₮02. Laboratory General: Assorted Glassware 1.00 135,000.00₮ 135,000.00₮

02. Laboratory General: Electric Meter (kW-Hr) 0.00 0.00₮ 0.00₮

02. Laboratory General: Gantry / Scaffolding 1.00 0.00₮ 0.00₮02. Laboratory General: Magnetic Stirrer / Heater 2.00 40,000.00₮ 80,000.00₮

02. Laboratory General: Balance (500gm scale; 0.10 gm sensitive) 1.00 75,000.00₮ 75,000.00₮

02. Laboratory General: Work Bench (3mX1.5m) 1.00 0.00₮ 0.00₮

02. Laboratory: Filters (Various Micron Gauge) 5.00 10,000.00₮ 50,000.00₮02. Laboratory: Carboy Spigot Tank (20-50 Liter) 10.00 5,000.00₮ 50,000.00₮

03A. Reaction: Reaction Vessel (50 Liter Capacity) 2.00 95,000.00₮ 190,000.00₮

03A. Reaction: Alternate Reaction Vessel ( (50 Ltr Water Heater) 0.00 0.00₮ 0.00₮

03B. Reaction: Electric Pump (0.25-2HP) 2.00 50,000.00₮ 100,000.00₮

03B. Reaction: Immersion Heating Element 0.00 0.00₮ 0.00₮

03B. Reaction: Impeller Setup 0.00 0.00₮ 0.00₮03B. Reaction: Ultrasonic Rod Transducer 0.00 1,000,000.00₮ 0.00₮

03C. Reaction: Assorted Piping 0.10 100,000.00₮ 10,000.00₮03C. Reaction: Assorted Valves, Flanges, etc. 0.10 100,000.00₮ 10,000.00₮

03D. Other: Miscellaneous O-Rings, Sealant, Caulking, etc. 0.25 50,000.00₮ 12,500.00₮

03E. Other: Miscellaneous Temperature; Pressure Gauges 4.00 15,000.00₮ 60,000.00₮

04. Wash Tank: Soapstone / Tank Bubble Pump 2.00 25,000.00₮ 50,000.00₮

05A. Recovery: Distillation Set (Industrial Grade Cu Tubing) 0.25 100,000.00₮ 25,000.00₮05A. Recovery: Vacuum Pump 2.00 30,000.00₮ 60,000.00₮

05B. Recovery: 20L Storage Containers (Glycerine) 5.00 5,000.00₮ 25,000.00₮05C. Recovery: Glycerine Soap Forms/Molds 5.00 10,000.00₮ 50,000.00₮

Equipment z 0.00 0.00₮ 0.00₮

Equipment 1 0.00 0.00₮ 0.00₮

Equipment 2 0.00 0.00₮ 0.00₮

Equipment 3 0.00 0.00₮ 0.00₮

Equipment 4 0.00 0.00₮ 0.00₮

Equipment 5 0.00 0.00₮ 0.00₮

Equipment 6 0.00 0.00₮ 0.00₮

Equipment 7 0.00 0.00₮ 0.00₮

Equipment 8 0.00 0.00₮ 0.00₮Equipment 9 0.00 0.00₮ 0.00₮

Equipment 10 0.00 0.00₮ 0.00₮Vehicle 0.00 0.00₮ 0.00₮

Total Operation1 Equipment 982,500.00₮





PROPERTY PLANT & EQUIPMENT AND IMPROVEMENTS AND BETTERMENTS

Yes. Capitalize the costs.Administrative OPERATING EQUIPMENT

Description of Equipment: Units Cost Total PriceN/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮

N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮N/A 0.00 0.00₮ 0.00₮

Vehicle 0.00 0.00₮ 0.00₮

Total Operation2 Equipment 0.00₮





FACILITY AND OVERHEAD

FACILITY LEASEUnits in FT2 or M2 Annual Cost/Unit2 Total Price

Administrative Unit Rental Cost: Units in Ft2 M2 25.00 5,000.00₮ 125,000.00₮Other Facility Charges 25.00 2,000.00₮ 50,000.00₮

Total 175,000.00₮

Monthly 14,583.33₮

FACILITY IMPROVEMENTS & BETTERMENTSUnits Cost Total Price

Lighting 3.00 10,000.00₮ 30,000.00₮

Other Theme Decoration: Units in Ft2 M2 25.00 1,000.00₮ 25,000.00₮Total Improvements & Betterments 55,000.00₮

FACILITY UTILITIESAdministrative Utilities Per Annum 25,000.00 25,000.00₮

Telephone 0.00 0.00₮Total Facility Utility And Telephone 25,000.00₮

Monthly 2,083.33₮

FUEL EXPENSEKilometers or Miles Per Day Per Vehicle 0

No. of Vehicles 0.00Total Daily Kilometers or Miles Traveled 0

Average Efficiency in Km/Liter or Mi/Gallon 0Fuel Required In Liters 0.00

Fuel Cost Per Liter or Fuel Cost Per Liter or Gallon 0.00₮

Daily Fuel Cost 0.00₮

Annual Fuel Cost 0.00₮

Adjusted for Off-Season 0.00₮

INSURANCE, RISK MANAGEMENT, AND RELATED COST

Business Property & Liability Insurance 25,000.00₮Life and Health Insurance 0.00₮

Workers Compensation Insurance 0.00₮Business Automobile Insurance 0.00₮

Related CostsTOTAL INSURANCE AND RELATED COSTS 25,000.00₮





REVENUE PROJECTION, COST PROJECTION, AND COST ACCOUNTINGREVENUE PROJECTION OPERATIONS EQUIPMENT, INVENTORY, & INCIDENTALS

Facility Hours Each Day 0.50 The Company budgets these items at 100% of cost

Facility Days Each Week 7.00 Facility Improvements & Betterments 55,000₮ 2.48%

Daily Traffic At Start-up (Number of Clients) 4.30 Year1 Annual Operation1 Inventory 1,178,596₮ 53.18%Net Revenue Per Client (After Tax and Surcharges) 1,250.00₮ Year1 Annual Operation2 Inventory 0₮ 0.00%

Projected Daily Revenue At Start-up 5,375.00₮ Year1 Capitalized Operation1 Equipment 982,500₮ 44.33%Average Projected Monthly Revenue (Adjusted for Off-Season)

At Start-up163,041.67₮ Year1 Capitalized Operation2 Equipment 0₮ 0.00%

Average Traffic Per Day at Peak 6.93 TOTAL OPERATIONS SUPPLY / EQUIPMENT 2,216,096₮ 100.00%Average Net Daily Revenue at Peak 8,656.49₮

Average Net Monthly Revenue At Peak 264,674.09₮ Straight Line Depreciation and Amortization 0.01667

Goodwill Assumed at Inception 0₮

Time Horizon (Months) to Peak Traffic 60.00 Annual Maintenance and Upkeep of Equipment 10%

SALARY BASIS PROJECTION FACILITY AND LEASE

No. of Employees Required 0.18 Annual Leasing Cost 175,000₮

Total Weekly Hours of Operation 3.50 Facility Utilities Including Telephone 25,000₮

Work Week Per Employee in Hours 40.00

Wage Rate 0.00₮Weeks Per Annum 52

Support Staff Payroll: Annual Projection 0.00₮ AGGREGATE REVENUE AND COSTSupport Staff Raises 10.00% YEAR1 PROJECTED ANNUAL REVENUE

Support Staff Growth Rate Per Period 0.80% TOTAL START: YEAR1 ANNUAL COST

Annual Support Staff Payroll at Year2 0.00₮ YEAR1 PROJECTED PAYROLL (W/ Payroll Tax)

Annual Salary: Management 0 YEAR1 PROJECTED SALARY (w/ Payroll Tax)

Annual Payroll Tax: Pension Tax / Savings Rate 0.000% YEAR1 PROJECTED REVENUE PER Currency COST National Unemployment Tax Rate 0.000%

Per Employee National Payroll Tax Limit 0.00₮Staff Payroll Adjusted for National Tax 0.00₮

Effective Staff Payroll Rate Per Hour After Other Tax And Cost 0.00₮

Adjusted Management Salary 0

Work Year in Days 360

1,956,500.00₮2,539,345.60₮

0.00₮

0.00₮0.77₮





REVENUE AND COST ACCOUNTING

OPERATION1 COST STRUCTURERevenue Attributed to Operation1 Items 100.00% 0.00₮ Operation1 Staff Payroll (Adjusted for Tax)

Currency Revenue Generated By Operation1 Operations 1,956,500.00₮ 0.00₮ Operation1 Manager Salary (Adjusted for Tax)

Annual Operation1 Equipment Cost 982,500.00₮ 4.30 Operation1 Clients Per Day (Frequency of Service)

Annual Operation1 Equipment Maintenance 10.00% 0.50 Operating Hours Per Day

Annual Operation1 Inventory Cost 1,178,595.60₮ 7.00 Operation1 Days Per Week

Operation1 Facility & Overhead Costs 100.00% 52.00 Weeks Per Annum

Lease 175,000.00₮ 0% Off-Season Downtime Factor

Utilities 25,000.00₮ 1,565.20₮ Operation1 Jobs Per Annum

I&B 55,000.00₮ 182.00 Operating Hours Per Annum

Insurance 25,000₮ 1,622.38₮ Operation1 Cost Per Patron Served

Fuel: All fuel to Operation1 Operations 0 13,952.45₮ Operation1 Cost Per Operating Hour

Total Cost Operation1 Operations Facility 280,000.00₮ 0.77₮ Operation1 Revenue Per Currency Unit Cost At Year1

Do you wish a special cost allocation to Operation1? Type "No" or % Allocation No 2,539,345.60₮

Do you have 2 Operations? Type "2" or "1" 1

OPERATION2 COST STRUCTUREPresent Value of Sales Generated By Operation2 0.00% 0.00₮ Operation2 Staff Payroll (Adjusted for Tax)

Currency Revenue Attributed to Operation2 Operations 0.00₮ 0.00₮ Operation2 Manager Salary (Adjusted for Tax)

Annual Year1 Operation2 Equipment Cost 0.00₮ 0.00 Operation2 Clients Per Day (Frequency of Service)

Annual Operation2 Equipment Maintenance 10.00% 0.50 Operating Hours Per Day

Annual Operation2 Inventory Cost 0.00₮ 7.00 Operating Days Per Week

Operation2 Facility & Overhead Costs 0.00% 52.00 Weeks Per Annum

Lease 0 0% Off-Season Downtime Factor

Utilities 0 0.00 Operation2 Jobs Per Annum

I&B 0 182.00 Operating Hours Per Annum

Insurance 0 0.00₮ Operation2 Cost Per Patron Served

Total Operation2 Facility 0 0.00₮ Operation2 Cost Per Operating Hour

N/A Operation2 Revenue Per Currency Cost At Year1

AVERAGE MONTHLY NET INCOME : YEAR1 -63,704.57₮ANNUAL OPERATION2 COST AT

YEAR1 0.00₮

PROJECTED ANNUAL NET INCOME : YEAR1 -764,454.87₮

2,539,345.60₮

AVERAGE MONTHLY NET INCOME : YEAR2 20,674.14₮

PROJECTED ANNUAL NET INCOME : YEAR2 248,089.62₮ 1,956,500.00₮


PROJECTED ANNUAL NET INCOME : YEAR3 334,763.56₮





ANNUAL AGGREGATE REVENUE :

ANNUAL OPERATION1 COST AT YEAR1

SUM OF OPERATION1 AND OPERATION2 COST





OPERATIONS FINANCING

Debt Service Annual Percentage Rate 5.000%

Required Return on Equity (ROE) 11.000%

Annual Weighted Average Cost of Capital 0.05

Annual Weighted Average Cost of Capital (with Tax Shield) 5.000%Periodic WACC 0.407%

Periodic Rate of Debt Service 0.407%

Periodic Compound Growth Rate 0.797%Periodic Compound Growth Rate (Inflation) after Year5 0.190%

Long-term Opportunity Cost of Equity Capital 11.000%

Financing Compounding Period after Year5 12Periodic Compound Cost of Capital after Year5 0.873%

Projected Cash Balance at Month25 812,894.30₮

Terminal Projected Cash Balance at Month60 2,184,309.48₮

Projected Value of Equity Capital Investment at the Stated ROE 0.00₮

Terminal Projected Balance Less Equity Valued at Stated ROE 2,184,309.48₮Level of Financing Required for Scenario 1,400,000.00₮

Required Financing Less Actual Capitalization 0.00₮

Total Required Financing 1,400,000.00₮

Debt Financing 1,400,000.00₮

Equity Financing 0.00₮

Initial Equity Interest: 0.00₮Is PerCent Ownership Stake of: 0.00%

And a Net Present Value of Equity of: 0.00₮

Equity Stake at This Financing: 0.00₮

Total Equity Stakeholder Interest: 0.00%

Net Present Value of All Equity: 0.00₮

Debt / (Debt+Equity) 100.00%




BUSINESS PLAN CLIENT: Scale50L-GMIT_BiodieselProForma_Biz-Eval4.2_MNT CITY: STATE

PERIOD: MONTH Currency: MNT₮ 1 2 3 4 5 6 7 8 9 10 11 1231-Aug-15 30-Sep-15 31-Oct-15 30-Nov-15 31-Dec-15 31-Jan-16 29-Feb-16 31-Mar-16 30-Apr-16 31-May-16 30-Jun-16 31-Jul-16

Discounting Period Per Annum 12

TARGETED MAXIMUM REVENUE PER PERIOD 262,580Revenue and Certain Costs Grow Through Month: 60

Per Period (Month) Compound Growth Rate 0.797%Annual Business Growth Rate after 5 Years = Inflation Rate 2.300%

PROJECTED REVENUE AT PERIODIC GROWTH RATE 163,042 164,342 165,652 166,973 168,305 169,647 171,000 172,363 173,738 175,123 176,519 177,927

LEASE, PPE, INVENTORY, UTILITIES, AND INSURANCE EXPENSE Facility Lease 175,000 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583

All Operations Inventory: Cost of Materials 1,178,596 -98,216 -98,999 -99,789 -100,585 -101,387 -102,195 -103,010 -103,832 -104,660 -105,494 -106,335 -107,183

Fuel ExpenseUtilities 25,000 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083

Insurance Expense and Related Assessment (Follows Payroll Increase) 25,000 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083

COGs REMUNERATION (INCLUSIVE OF TAX AND ASSESSMENTS)Support Staff Payroll Growth Rate (Raises) : 10.000%

Per Period Growth Rate 0.797%The Company will provide Annual raises after Month : 12

Payroll (including % National Unemployment Insurance, Sponsored Savings, etc.) :

OVERHEAD SALARY (INCLUSIVE OF TAX AND ASSESSMENTS)Management Salary (including % National Insurance, Sponsored Savings, etc.) :

DEPRECIATION AND AMORTIZATION (A Non Cash Transaction) -17,292 -17,292 -17,292 -17,292 -17,292 -17,292 -17,292 -17,292 -17,292 -17,292 -17,292 -17,292

EARNINGS BEFORE INTEREST AND TAXES (EBIT) 28,784 29,301 29,822 30,347 30,876 31,410 31,948 32,490 33,036 33,587 34,142 34,702

COST OF FINANCINGPERIODIC (MONTHLY) DEBT SERVICE 0.407% -5,704 -5,620 -5,535 -5,450 -5,365 -5,280 -5,194 -5,108 -5,021 -4,934 -4,847 -4,759

EARNINGS BEFORE TAX (EBT) : EXCLUSIVE OF CAPITAL FINANCING 23,080 23,681 24,286 24,896 25,511 26,130 26,754 27,382 28,015 28,653 29,295 29,943

INCOME TAX (FEDERAL and LOCAL) @ STATED PERCENT

DEPRECIATION AND AMORTIZATION (Add Back) 17,292 17,292 17,292 17,292 17,292 17,292 17,292 17,292 17,292 17,292 17,292 17,292

DEBT FINANCING PRINCIPAL PORTION -20,538 -20,622 -20,706 -20,791 -20,876 -20,962 -21,048 -21,134 -21,220 -21,307 -21,395 -21,482

CAPITALIZED COSTS / EQUIPMENT (Not Operations Expense) 1,037,500PerCent Maintenance and Upkeep After Year1 10.00%

Capitalized Facility Improvements and Betterments 55,000 -55,000Capitalized Equipment: Operation1 982,500 -982,500Capitalized Equipment: Operation2

NET CASH FLOW: NET OPERATING PROFIT AFTER TAXES -1,017,666 20,351 20,872 21,397 21,926 22,460 22,998 23,540 24,086 24,637 25,192 25,752

OPERATION NET PRESENT VALUE 9,277,263Annual Weighted Average Cost of Capital 5.000%

Periodic WACC 0.407%

PROVISION FOR INVESTING ACTIVITIESDebt Financing 1,400,000 1,400,000

Equity Financing

PROVISION FOR DIVIDEND

WORKING CAPITAL AFTER DIVIDENDS (Including Retained Earnings) 382,334 402,684 423,556 444,953 466,879 489,339 512,337 535,877 559,963 584,601 609,793 635,545

Confidential: Internal Use OnlyAPPENDIX VI

Scale50L-GMIT_BiodieselProForma_Biz-Eval4.2_MNT Cash Flow SummaryPage 9 of 18 Pages



PERIOD: MONTH Currency: MNT₮




PROJECTED REVENUE AT PERIODIC GROWTH RATE

LEASE, PPE, INVENTORY, UTILITIES, AND INSURANCE EXPENSE Facility Lease 175,000

All Operations Inventory: Cost of Materials 1,178,596

Fuel ExpenseUtilities 25,000

Insurance Expense and Related Assessment (Follows Payroll Increase) 25,000





DEPRECIATION AND AMORTIZATION (A Non Cash Transaction)

EARNINGS BEFORE INTEREST AND TAXES (EBIT)

COST OF FINANCINGPERIODIC (MONTHLY) DEBT SERVICE 0.407%

EARNINGS BEFORE TAX (EBT) : EXCLUSIVE OF CAPITAL FINANCING


DEPRECIATION AND AMORTIZATION (Add Back)

DEBT FINANCING PRINCIPAL PORTION


Capitalized Facility Improvements and Betterments 55,000Capitalized Equipment: Operation1 982,500Capitalized Equipment: Operation2

NET CASH FLOW: NET OPERATING PROFIT AFTER TAXES



PROVISION FOR INVESTING ACTIVITIESDebt Financing 1,400,000

Equity Financing


WORKING CAPITAL AFTER DIVIDENDS (Including Retained Earnings)

13 14 15 16 17 18 19 20 21 22 23 2431-Aug-16 30-Sep-16 31-Oct-16 30-Nov-16 31-Dec-16 31-Jan-17 28-Feb-17 31-Mar-17 30-Apr-17 31-May-17 30-Jun-17 31-Jul-17

179,346 180,776 182,217 183,671 185,135 186,611 188,099 189,599 191,111 192,635 194,171 195,720

-14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583

-108,038 -108,899 -109,768 -110,643 -111,525 -112,415 -113,311 -114,215 -115,125 -116,043 -116,969 -117,902

-2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083

-2,292 -2,292 -2,292 -2,292 -2,292 -2,292 -2,292 -2,292 -2,292 -2,292 -2,292 -2,292

-19,021 -19,021 -19,021 -19,021 -19,021 -19,021 -19,021 -19,021 -19,021 -19,021 -19,021 -19,021

33,329 33,897 34,471 35,048 35,631 36,218 36,809 37,406 38,007 38,613 39,223 39,839

-4,672 -4,583 -4,495 -4,406 -4,316 -4,226 -4,136 -4,046 -3,955 -3,864 -3,772 -3,680

28,657 29,314 29,976 30,643 31,314 31,991 32,673 33,360 34,052 34,749 35,451 36,159

19,021 19,021 19,021 19,021 19,021 19,021 19,021 19,021 19,021 19,021 19,021 19,021

-21,570 -21,658 -21,747 -21,836 -21,926 -22,015 -22,105 -22,196 -22,287 -22,378 -22,470 -22,562

-5,500-98,250

-77,642 26,677 27,250 27,827 28,410 28,997 29,588 30,185 30,786 31,392 32,003 32,618

557,903 584,580 611,829 639,657 668,066 697,063 726,652 756,836 787,622 819,014 851,017 883,635































Equity Financing




197,280 198,854 200,439 202,038 203,649 205,273 206,909 208,559 210,222 211,899 213,589 215,292

-14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583

-118,842 -119,789 -120,745 -121,707 -122,678 -123,656 -124,642 -125,636 -126,638 -127,648 -128,666 -129,692

-2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083

-2,521 -2,521 -2,521 -2,521 -2,521 -2,521 -2,521 -2,521 -2,521 -2,521 -2,521 -2,521

-20,750 -20,750 -20,750 -20,750 -20,750 -20,750 -20,750 -20,750 -20,750 -20,750 -20,750 -20,750

38,501 39,127 39,757 40,393 41,033 41,679 42,330 42,986 43,647 44,313 44,985 45,662

-3,588 -3,495 -3,402 -3,308 -3,214 -3,120 -3,026 -2,931 -2,835 -2,739 -2,643 -2,547

34,914 35,632 36,355 37,084 37,819 38,559 39,304 40,055 40,812 41,574 42,342 43,116

20,750 20,750 20,750 20,750 20,750 20,750 20,750 20,750 20,750 20,750 20,750 20,750

-22,654 -22,747 -22,840 -22,933 -23,027 -23,121 -23,216 -23,311 -23,406 -23,502 -23,598 -23,695

-5,500-98,250

-70,740 33,635 34,265 34,901 35,542 36,187 36,838 37,494 38,155 38,822 39,494 40,171

812,894 846,529 880,795 915,696 951,237 987,425 1,024,263 1,061,757 1,099,912 1,138,734 1,178,227 1,218,398































Equity Financing




217,008 218,739 220,483 222,241 224,014 225,800 227,600 229,415 231,245 233,089 234,947 236,821

-14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583

-130,726 -131,768 -132,819 -133,878 -134,946 -136,022 -137,106 -138,200 -139,302 -140,413 -141,532 -142,661

-2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083

-2,773 -2,773 -2,773 -2,773 -2,773 -2,773 -2,773 -2,773 -2,773 -2,773 -2,773 -2,773

-22,479 -22,479 -22,479 -22,479 -22,479 -22,479 -22,479 -22,479 -22,479 -22,479 -22,479 -22,479

44,364 45,052 45,745 46,444 47,149 47,859 48,575 49,297 50,024 50,757 51,496 52,241

-2,450 -2,352 -2,255 -2,156 -2,058 -1,959 -1,859 -1,760 -1,660 -1,559 -1,458 -1,357

41,914 42,700 43,491 44,288 45,091 45,900 46,716 47,537 48,365 49,198 50,038 50,885

22,479 22,479 22,479 22,479 22,479 22,479 22,479 22,479 22,479 22,479 22,479 22,479

-23,792 -23,889 -23,987 -24,085 -24,184 -24,283 -24,382 -24,482 -24,582 -24,683 -24,784 -24,885

-5,500-98,250

-63,149 41,289 41,983 42,682 43,387 44,097 44,813 45,534 46,262 46,995 47,734 48,479

1,155,250 1,196,539 1,238,522 1,281,204 1,324,590 1,368,687 1,413,500 1,459,034 1,505,296 1,552,291 1,600,024 1,648,503































Equity Financing



49 50 51 52 53 54 55 56 57 58 59 60 Perpetuity31-Aug-19 30-Sep-19 31-Oct-19 30-Nov-19 31-Dec-19 31-Jan-20 29-Feb-20 31-Mar-20 30-Apr-20 31-May-20 30-Jun-20 31-Jul-20 31-Aug-20

238,709 240,613 242,531 244,465 246,415 248,380 250,360 252,357 254,369 256,398 258,442 262,580 262,580

-14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583 -14,583

-143,798 -144,945 -146,101 -147,266 -148,440 -149,624 -150,817 -152,020 -153,232 -154,454 -155,686 -158,178 -158,178

-2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083 -2,083

-3,050 -3,050 -3,050 -3,050 -3,050 -3,050 -3,050 -3,050 -3,050 -3,050 -3,050 -3,050 -3,355

-24,208 -24,208 -24,208 -24,208 -24,208 -24,208 -24,208 -24,208 -24,208 -24,208 -24,208 -24,208 -24,208

50,986 51,742 52,505 53,274 54,049 54,831 55,618 56,412 57,212 58,018 58,831 60,477 60,172

-1,255 -1,152 -1,050 -947 -843 -739 -635 -530 -425 -319 -213 -107 0

49,731 50,590 51,456 52,328 53,206 54,091 54,983 55,882 56,787 57,699 58,618 60,370 60,172

24,208 24,208 24,208 24,208 24,208 24,208 24,208 24,208 24,208 24,208 24,208 24,208 24,208

-24,987 -25,089 -25,192 -25,295 -25,398 -25,502 -25,607 -25,711 -25,817 -25,922 -26,028 -26,135

-5,500 -458-98,250 -8,188

-54,798 49,709 50,472 51,241 52,016 52,797 53,585 54,379 55,179 55,985 56,798 58,443 11,151,479

1,593,705 1,643,415 1,693,887 1,745,128 1,797,144 1,849,941 1,903,526 1,957,904 2,013,083 2,069,068 2,125,866 2,184,309































Equity Financing



0₮

2,000,000₮

4,000,000₮

6,000,000₮

8,000,000₮

10,000,000₮

12,000,000₮

14,000,000₮

16,000,000₮

18,000,000₮

3,799,812₮ 4,992,004₮

6,296,841₮ 7,722,431₮

9,277,263₮

10,970,222₮

12,810,596₮

14,808,083₮

16,972,803₮

REVENUE GROWTH RATE FOR SPECIFIED PERIOD

NET PRESENT VALUE SENSITIVITY ANALYSIS

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Month

Cash Flow Analysis

FCFE and Working Capital Debt Amortization Net Income

9,629,338₮

9,510,327₮

9,392,978₮

9,277,263₮

9,163,155₮

9,050,628₮

8,939,656₮

WEIGHTED AVERAGE COST OF CAPITAL

NET PRESENT VALUE SENSITIVITY ANALYSIS





Balance Sheet Projection: Aug-31-2015Currency: MNT ₮

ASSETS

Current Assets Current LiabilitiesReceivables and Deposits 382,334 Salary Payable 0

Pre-Paid Insurance 2,083 Short-Term DebtInventory and Equipment 98,216 Current Portion of Long-term Debt 26,242

Other Current Assets 2,083 Accounts Payable 1,154,466Tax Payable 0

TOTAL CURRENT ASSETS 484,717 TOTAL CURRENT LIABILITIES 1,180,708

Long Term Assets Long-term LiabilitiesI&B Including Property and Equipment 1,037,500 Long-term Debt 1,379,355

Leasehold InterestGoodwill 0

Other PPE Shareholder Equity: 2 Shares at MNT1,000 Par Value 2,000Other Additional Capital Paid In / Retained Earnings -1,039,846

Dividend Payable 0

TOTAL LONG-TERM ASSETS 1,037,500 TOTAL LONG-TERM LIABILITIES AND SE 341,509

TOTAL 1,522,217 TOTAL 1,522,217

CURRENT RATIO 0.411ACID TEST RATIO 0.324

Balance Sheet Projection: Feb-29-2016Currency: MNT ₮

ASSETS



Other Current Assets 2,083 Accounts Payable 121,760Tax Payable 0

TOTAL CURRENT ASSETS 619,514 TOTAL CURRENT LIABILITIES 148,002

Long Term Assets Long-term LiabilitiesI&B Including Property and Equipment 933,750 Long-term Debt 1,253,708


Other PPE Shareholder Equity: 2 Shares at MNT1,000 Par Value 2,000Other Additional Capital Paid In / Retained Earnings 149,554

Dividend Payable 0

TOTAL LONG-TERM ASSETS 933,750 TOTAL LONG-TERM LIABILITIES AND SE 1,405,262

TOTAL 1,553,264 TOTAL 1,553,264


LIABILITIES and STOCKHOLDER EQUITY


Confidential Internal Use OnlyAPPENDIX VI

Scale50L-GMIT_BiodieselProForma_Biz-Eval4.2_MNT Balance SheetPage 15 of 18 Pages




ASSETS





Long Term Assets Long-term LiabilitiesI&B Including Property and Equipment 933,750 Long-term Debt 1,124,958



Dividend Payable 0


TOTAL 1,604,066 TOTAL 1,604,066



ASSETS





Long Term Assets Long-term LiabilitiesI&B Including Property and Equipment 819,625 Long-term Debt 993,029



Dividend Payable 0


TOTAL 1,663,963 TOTAL 1,663,963









ASSETS








Dividend Payable 0


TOTAL 1,745,590 TOTAL 1,745,590



ASSETS

Current Assets Current LiabilitiesReceivables and Deposits 1,024,263 Salary Payable 0



TOTAL CURRENT ASSETS 1,153,509 TOTAL CURRENT LIABILITIES 170,071




Dividend Payable 0


TOTAL 1,838,259 TOTAL 1,838,259









ASSETS







Other PPE Shareholder Equity: 2 Shares at MNT1,000 Par Value 2,000Other Additional Capital Paid In / Retained Earnings 1,095,306

Dividend Payable 0


TOTAL 1,954,832 TOTAL 1,954,832



ASSETS







Other PPE Shareholder Equity: 2 Shares at MNT1,000 Par Value 2,000Other Additional Capital Paid In / Retained Earnings 1,467,883

Dividend Payable 0


TOTAL 2,084,588 TOTAL 2,084,588







REFERENCES | PAGE A

REFERENCES Allen, M. and Prateepchaikul, G. The modelling of the biodiesel reaction. Department of Mechanical Engineering. Faculty of Engineering. Prince of Songkla University. Hadyai, Thailand. Alternative Fuels Data Center-–Fuel Properties Comparison (www.afdc.energy.gov) Altic, L. E. P. October 2010. Characterization of the Esterification Reaction in High Free Fatty Acid Oils. University of South Florida Scholar Commons. American Academy of Clinical Toxicology Practice Guidelines on the Treatment of Methanol Poisoning. 2002. Vol. 40, No. 4 , Pages 415-446 ASB Biodiesel (Hong Kong) Limited. September 2007. Development of a Biodiesel Plant at Tseung Kwan O Industrial Estate. Project Profile. (www.erm.com) Austic, G. (Piedmont Biofuels) and Lobdell, S. (Chatham Environmental Consulting). Treatment, Disposal and Reuse of Biodiesel Derived Waste Products. (www.chathamenv.com) Avramović, Jelena M.; Stamenković, Olivera S.; Todorović, Zoran B.; Lazić, Miodrag L.; Veljković, Vlada B. 2010. The optimization of the ultrasound-assisted base-catalyzed sunflower oil methanolysis by a full factorial design. Fuel Processing Technology. (www.elsevier.com/locate/fuproc) Biodiesel: Journey to Forever. (http://journeytoforever.org/biodiesel.html) Biodiesel Production from Rapeseed. (http://www.esru.strath.ac.uk/EandE/Web_sites/02-03/biofuels/quant_biodiesel.htm) Биотүлш хэрэглэдэг автомашинаас хоолны үнэртэй утаа ялгардаг. (http://mass.mn/n/10579) Boucher, Matthew B.; Unker, Steven A.; Hawley, Kyle R.; Wilhite, Benjamin A.; Stuart, James D.; and Parnas, Richard S. 2008. Variables affecting homogeneous acid catalyst recoverability and reuse after esterification of concentrated omega-9 polyunsaturated fatty acids in vegetable oil triglycerides. Royal Society of Chemistry. Green Chem., 2008, 10, 1331–1336. (www.rsc.org/greenchem) Canakci, Mustafa. November 2005. The potential of restaurant waste lipids as biodiesel feedstocks. 2005 Elsevier Ltd. All rights reserved. doi:10.1016/j.biortech.2005.11.022 Cason, M. and Satishchandra, R; (Client Liaison and Consultant: Anthony Gokianluy). The Green Economics Group. May 2014. A Cost and Benefit, Case Study Analysis of Biofuels Systems. Chai, Ming; Tu, Qingshi; Yang, Jeffrey Y.; and Lu, Mingming. Esterification pretreatment of free fatty acid in biodiesel production, from laboratory to industry (2014). U.S. Environmental Protection Agency Papers. Paper 212. http://digitalcommons.unl.edu/usepapapers/212 Charles, C.; Gerasimchuk, I.; Bridle, R.; Moerenhout, T.; Asmelash, E.; Laan, T.; April 2013. Biofuels—At What Cost? A review of costs and benefits of EU biofuel policies. The International Institute for Sustainable Development: Global Subsidies Initiative. Chavez, L.I., et. al. 2012. Fuel specific consumption and emission analysis in a cycle diesel motor generator using diesel and biodiesel from waste frying oil blends. African Journal of Biotechnology Vol. 11(80), pp. 14578-14585, 4 October, 2012. de Paiva, Eduardo J. Mendes; Barboza, Jayne Carlos S.; da Silva, Maria Lucia Caetano Pinto; de Castro, Heizir Ferreira; and Giordani, Domingos Sávio. April 2010. Comparative study of Biodiesel Production from Ethanol and Babassu oil using Mechanical Agitation and Ultrasounds. European Association for the Development of Renewable Energies, Environment and Power Quality (EA4EPQ), International Conference on Renewable Energies and Power Quality.

- REFERENCES: A-


REFERENCES | PAGE B

Ding, Jincheng; Xia, Zheng; and Lu, Jie. 2012. Esterification and Deacidification of a Waste Cooking Oil (TAN 68.81 mg KOH/g) for Biodiesel Production. Energies 2012, 5, 2683-2691; doi:10.3390/en5082683. (www.mdpi.com/journal/energies) He, B.B.; Singh,A.P.; Thompson, J.C. 2004. A Novel Continous-flow Reactor Using Reactive Distillation for Biodiesel Production. Transactions of the ASABE. Vol. 49(1): 107−112. 2006 American Society of Agricultural and Biological Engineers ISSN 0001−2351. Duncan, John. Costs of Biodiesel Production. May 2003. Energy Efficiency and Conservation Authority. Hofman, Vern. 2005. Biodiesel fuel. North Dakota State University Extension Publication AE-1240 (www.ext.nodak.edu/extpubs/ageng/machine/ae1240.pdf). Ma, F. and Hanna, MA. 1999. Biodiesel production: a review. Bioresource Technology. 70: 1-15. National Biodiesel Board (www.nbb.org). Marchetti, J.M.; Pedernera, M.N.; and Schbib, N.S. 2011. Production of biodiesel from acid oil using sulfuric acid as catalyst: kinetics study. International Journal of Low-Carbon Technologies 2011, 6, 38–43. Oilybits Guide to Making Biodiesel. (http://www.oilybits.com/how-to-make-biodiesel.html) Peterson, Charles L.; Reece, Daryle; Hammond, Brian; Thompson, Joseph C.; Beck, Sidney. July 1995. Making and testing a biodiesel fuel made from ethanol and waste french-fry oil. Idaho Deparment of Water Resources: Energy Division. Union Zur Förderung Von Oel- Und Proteinpflanzen E.V. Rapeseed – Opportunity or risk for the future!? U.S. Department of Energy. July 2014. Clean Cities Alternative Fuel Price Report. University of Idaho. Dec. 1994. Production and Testing of Ethyl and Methyl Esters. (http://www.biodiesel.org/resources/reportsdatabase/reports/gen/19941201_gen-005.pdf) Utah Biodiesel Supply, Biodiesel Articles. (https://utahbiodieselsupply.com/biodieselarticles.php) Vegetable Oil and Biodiesel Wiki. (http://www.biopowered.co.uk/wiki/Vegetable_oil_and_Biodiesel_wiki) Virginia Biodiesel Conference - Small Scale Production and Use. James Madison University, April 3, 2006. http://www.cisat.jmu.edu/biodiesel/conference2006.html Wen, Z., Grisso, R., Arogo, J., and Vaughan, D. 2006. Biodiesel fuel. Virginia Cooperative Extensive (VCE 442-880). (www.ext.vt.edu/pubs/ageng/442-880/442-880.html). Wiltsee, G. National Renewable Energy Laboratory. 1998. Urban Waste Grease Resource Assessment (NREL/SR-570-26141). World Bank. (http://data.worldbank.org/indicator/IS.ROD.DESL.KT) Хаягдал тосоор монгол биодизель түлш үйлдвэрлэж эхэллээ. (http://www.petroleum.mn/en/news/69-picture-news/348-2011-05-05-01-52-22.html) Zawadzki, Artur; Shrestha, Dev; He, Brian. 2005: ASAE Annual International Meeting. Use of a spectrophotometer for biodiesel quality sensing. Paper Number: 053133. Zhang, Y., Dube, M.A., McLean, D.D., Kates M. (2003). Biodiesel production from waste cooking oil: 1. Process design and technological assessment. Bioresource Technology 89.

- REFERENCES: B-


REFERENCES | PAGE C

GRAPHICS: Biodiesel Chemical Reaction Graphic (p. 8) adapted from (http://en.wikipedia.org/wiki/Biodiesel_production) Cover Page Biodiesel Cycle Graphic adapted from (http://www.metaefficient.com/wp-content/uploads/2004/07/BiodieselCycle.jpg) Mechanical Engineering (p. 15) Biodiesel Appleseed Processor Graphic adapted from (http://www.biopowered.co.uk/wiki/Processor_-_Appleseed) GMIT Green Truck Logo and Footer adapted from (http://www.greentruckassociation.com/portals/0/Green%20Eco%20Truck.jpg) Mongolia Map Graphic (Executive Summary) amended/adapted from http://www.mad-mongolia.com/

- REFERENCES: C-


GMIT-Biodiesel-Pro-Forma-Scale50L_02

Documents

project hopes

biodiesel industry

liters of production

production facility

financial study

financial analysis

financial projections

financial viability