Drawer of a tailor: Talking about of Strategic Industries ...: Earth Biofuels: Red Chip Conference Presentation Transcript

Executives

Doug Jones - Director of Investor Relations

Presentation

Doug Jones

All right. How are we doing? Okay. Again, my name is Doug Jones. I am the Director of Investor Relations for Earth Biofuels. And I want to just give you a quick presentation here about Earth Biofuels. I know it's getting late in the day, but I want to give a good picture about what Earth Biofuels is. Here is our Safe Harbor statement, which is standard for any forward-looking statements.

The brief synopsis of Earth Biofuels. We are first publicly traded on the Bulletin Board. We've been public since September of 2005. Ticker symbol is EBOF. We have approximately 249 million shares outstanding and we are headquartered in Dallas, Texas. The original company was started in Jackson, Mississippi with the building of a 2 million gallon a year biodiesel plant.

Company highlights. First of all, Earth Biofuels is a vertically integrated company and we are producing biodiesel and ethanol. We are blending biodiesel. We are also distributing a product and then selling it on a retail level under the BioWillie name. And some of you may have heard of BioWillie, some of you may have not, but BioWillie is Willie Nelson's brand of biodiesel. Willie Nelson has been involved in alternative fuels and is a huge renewable fuels advocate, has been involved for five or six years now. We have -- Earth Biofuels has acquired the exclusive rights to use the BioWillie brand name.

We've got extensive experience in the energy and agricultural business, and I'll get to the management in just a minute. We also have a unique technology and we have the exclusivity to state-of-the-art Brazilian technology through Dr. Miguel Dabdoub of San Paolo, Brazil. Dr. Dabdoub has been involved in biodiesel for over 15 years and has played a big part in the biodiesel industry in Brazil. And he has come on to help increase the efficiency of our plants, and hopes to build our biodiesel plants.

Lastly, we are the largest producer of vehicle-grade liquefied natural gas in the western part of the United States. We have an 86,000 gallon a day LNG plant in Topock, Arizona. And I'll get into that in just a little bit.

The three main components of Earth Biofuels. We have biodiesel production, ethanol production and liquefied natural gas production in our distribution channels into the wholesale markets, fleets, we have truck stops, which obviously -- that's where we sell the BioWillie brand -- marine, rail, industrial and municipal, and the bottom sentence state where it's practical we may co-locate biodiesel and ethanol facilities. We have a plant in Durant, Oklahoma where we have additional land nearby where we can possibly put in a small ethanol plant.

Earth Biofuels is made up of four components, Earth Ethanol, Earth Biodiesel, Earth LNG and also American Earth Fuels, which is a wholly owned subsidiary. And that is a company -- basically, its sole purpose is to locate retail -- seek out retail locations for our biodiesel and ethanol as well under the BioWillie name.

This is our plant in current production in Durant, Oklahoma. That's our first plant that we built. That was a 10 million gallon a year facility that we ramped up to 20 million gallons. Houston, Texas is -- we have a 50% interest in that plant. It's a 10 million gallon a year facility that we will be increasing to 20 million. San Antonio, we have a letter of intent to acquire 100% of an 8 million gallon a year facility that we're currently buying all of the biodiesel out of today.

Danville, Illinois is a unique scenario in that we are a joint venture partner with Bunge Corporation. And if you don't know, Bunge is one of the worldwide leaders in -- or world leader in agricultural products. And we can use their feedstock at our plant. We have a 25 percentage at that plant and a future plant in core deal.

Ethanol facilities in Moses Lake, Washington is a 36 million gallon a year plant. And in Jamesville, North Carolina, there's a 55 million gallon a year plant. Those are not currently online. The Moses Lake, Washington will start production this summer. And down to our liquefied natural gas, obviously, the Topock plant, 86,000 gallons a day equates to about 31 million gallons a year and the Bowerman Landfill project, which is basically taking methane from the landfill and capturing it and turning it into LNG.

The management. Dennis McLaughlin is the CEO. He has got 20 years of experience in the energy industry. He is also the Chairman and CEO of Apollo Resources, which is the majority shareholder in Earth Biofuels. Darren Miles is the CFO. He has 20 years of experience in agricultural, chemicals, distribution and financial sectors.

Kit Chambers has been a partner with Dennis for over 15 years. He is the Executive Vice President. Colonel Robert Dubek, COO, he has 26 years of service at US Air Force Base. He is a commander at McGuire Air Force Base in New Jersey. He was in-charge of fuel buying for McGuire.

Joe Wallace is the President of American Earth Fuels. His background is in real estate, got over 20 years of experience there. John Morrison, President of Earth LNG, heads up the Topock plant. He has got extensive experience in oil and gas industry. And then Jim Horton is the VP of Sales for Earth Biofuels. Obviously, he has got experience in sales and telecommunications and natural gas industries.

Biorenewable fuels, well, first of all, we're looking to reduce dependence on foreign oil. Anything we could do to decrease what we're importing from the foreign countries is a plus. Looking to protect the environment, obviously, biodiesel and ethanol are better for the environment. And we're looking to promote US agriculture. Willie Nelson is a great -- someone great to have as a Spokesman for US agriculture. He has been involved to form a -- been involved for Farm Aid for over 20 years and is a huge advocator of promoting or growing feedstock here in the United States.

Just some facts about the US consumption, we consume about 20.5 million barrels of oil a day. With that projected to increase over about 2 million barrels by 2010, we're only producing about 5.2 million barrels a day. So there's 15 million barrels of oil that we're importing on a daily basis. So you can see the need for, you know, for homegrown fuel if we can do that.

Global consumption took the world 125 years to use the first trillion barrels of oil. We'll use the next 30 -- the next trillion in 30 years. And obviously, you can see the increase in demand worldwide and how much oil we're going to be using.

Environmental benefits. Biodiesel, the harmful emissions are reduced by more than 50%, CO2 emissions are reduced by 78% and it's biodegradable, making it safer for the environment. There's a saying that it's less acidic than table salt and more biodegradable than sugar.

Strategy of Earth Biofuels. Three main points here were build, acquire or operate biodiesel and ethanol facilities throughout the US, Southern US predominantly. We continue to develop the blending and distribution of the BioWillie name and other trademark names, and also drive consumer demand by developing fueling stations and that's their American Earth Fuels, Joe Wallace.

Can we get biodiesel production and distribution in the main revenue streams? 2005, there were 75 million gallons consumed just in federal mandates alone that’s looking to be over 2 billion gallons by 2010. We think that could be upwards of three or maybe even 4 billion gallons.

Our production plant in Durant, the 20 million gallon EBI biodiesel plant is located just north of us, in Dallas. We have an on-location railroad spur where we could bring in feedstock directly to the plant and that should be completed this month. There is an additional state tax credit, 26 per gallon from the State of Oklahoma. So that coupled with the federal tax credit of $1 for blenders credit, you can have up to $1.20 tax credit which is huge, specially for -- you know, sounds like this when the biodiesel renewals is not as high and feedstocks are up. We have adjacent land for future expansion.

Here is just a couple of pictures of Durant, they don’t really do justice, it’s much larger than that but those are just a few of the tanks there. Production cost here, we feel we can built a 20 million gallon facility at about $0.55 to $0.60 to get on a gallon. We’ve get revenues of 57 million, EBITDA of 9.7 million a year. And then also the Oklahoma production credit 20 cents and federal small producers credit of 10 cents per gallon for your first 15 million gallons.

Distribution, we have the exclusive rights of the BioWillie brand. We’re able to brand the commodity, use in pull through demand. We’ve firm supply agreements in addition to our own production to meet market demand. There’s -- and also obviously established market relationships with major truck-stop chains. We’ve been able to do that. Right now we have about 22 locations, truck-stops where we are selling the BioWillie brand. We are looking to increase that significantly.

We have a unique situation with Shell, Motiva. We’ve developed a blending facility at the actual terminal, where they sell diesel in Dallas, where we have put in this tank here. It cost about $200,000 to do that. What it allows us to do is blend biodiesel and petroleum diesel at the rack. And what that allows us to do is cut down on transportation cost. You can do it all in one location. It has worked very well for us so far. We’re going to look to expand that in different terminals throughout the country with Motiva.

The economics for the distribution terminal, basically the number you want to look at is at the very bottom, about $0.20 a gallon, if we are selling it for 246 to be 100, it’s for 285. There is the federal blenders’ credit that I was speaking of earlier. Once it’s all said and done, there is about $0.20 gallon margin there.

Can we get the ethanol? In 2005, again, there are 4 billion gallons concerned to that number in 2010 is looking to get up to about 10 billions gallons. And again, here just in mandates alone, that’s going to be 7.5 billion gallons by 2012.

Phasing out MTBE, which is an additive to gasoline and that's what ethanol will take the place of. MTBE is -- basically, it's founding groundwater, it can cause serious health problems and so the government is phasing that out.

Our production facility at Moses Lake, Washington, it's an 80% ownership that we have in a 36 million gallon year facility. It is an existing facility that was built in '92, was a 6 million gallon year facility and we’ll be ramping that up starting now. And it will be coming online this summer getting up to 36 million gallons by beginning of '08. So there's a strong ethanol market in the Pacific Northwest and there’s lot of competition.

Again, the plan is -- we'll be up to 36 million gallons over the first quarter of 2008. It's located in -- I apologize -- located in Grant County, which is the largest corn producing county in the State of Washington. We'll be able to process both corn and barley as feedstock for that plant, they are interchangeable. And again, there is excess land there where we can possibly put in a biodiesel plant.

Getting into liquefied natural gas, this plant that we have in Topock is an 86,000 gallons year plant. It's wholesale vehicle quality LNG. This is the map of the five vehicle grade LNG plants in the country and we have one of them, its located right here.

The others are Exxon, BP, clean energy. And also Williams, so there is -- obviously, you can see there is enormous competition in our area, but we are looking to expand on that plant.

And this kind of shows the distribution of LNG, the feedstocks that we're going to be using, natural gas. We can also use landfill, methane and biomass methane as renewable feedstock distributing it to transportation, industrial and municipalities.

This is just a slide here, that basically shows the market for LNG transportation turned to fuel, industrial and agriculture application and also municipal heating fuels and utilities.

This is a picture of the plant. From up above it doesn’t generally show that much. But it is located right on the El Paso Pipeline, where we can basically take natural gas directly off the pipeline. It’s currently 86,000 gallons a day. We have 50 customers, and we're looking to increase the production through 2012 and get it up to 200,000 gallons a day.

Last but not least, American Earth Fuels, this is basically the company that was created to form retail locations there, approximately 140,000 gas stations and truck stops throughout US. And a large number of those are independent operators. We feel we can either buy the real estate outright or go on and just franchise the Earth Biofuels’ name, BioWillie.

The management, Tom Davidson, Chairman of the Board, Joe Wallace that I spoke of earlier, Elizabeth Carroll, Senior Vice President, and then also at bottom, Rusty Wallace, who many of you may know is a former NASCAR-driver. He is on Board to be a spokesman for American Earth Fuels.

That's the company. Again, there is other information there. I am the Director of Investor Relations. So if any of you have any questions, you can feel free to give me a call. I'll send out information to you as you request. Thank you.

Unidentified Company Speaker

Doug, you've got about a minute or so. So if anybody has one or two questions, you are welcome to take it.

Doug Jones

Sure. Yeah.

Question-and-Answer-Session