1. The Biojet fuel market :
Strategic Management Consultation
José Castro
Jasmin Steinhardt
Miguel Melo
Filippo Pendin

2. 2015
Hottest year on record
2016
To surpass 2015 by far
15
New Record for hottest
year in history recorded
from 2000
GLOBAL CHALLENGE

3. GERMANY
Topped its energy demand with
renewables for the first time on
May 15, 2016

4. Green Bonds Market in 2015
$100 billion
The UK
Has set up the first green
investment bank in 2012
2nd Generation BIOfuels
As most viable solution
for airline industry
GLOBAL CHALLENGE

5. AGENDA
PROBLEM IDENTIFICAITON AND DISAGGREGATION
Product description
Demand
Supply
Regulatory Enviornment
Price Analysis
Strategic Analysis
RECOMMENDATION
Marketing Plan
Commercial Plan

6. DEMAND ANALYSIS

7. Globe
• 5,4 million barrels per day;
• Constant increase over the
last decades, 3,3%;
• 2008 peak;
GEOGRAPHICAL ANALYSIS

8. GEOGRAPHICAL ANALYSIS
• 1,1 million barrels per day;
• similar growth to world,
2,7% in last 30 years;
• UK, Germany, France,
Spain and Italy;
• 2008 peak;
European Market

9. • Similar pattern as Europe,
however 5,2 % in the last 30
years;
• 24 thousand barrels per day;
• Peak in summer months;
GEOGRAPHICAL ANALYSIS
Portuguese market

10. • 115 thousand barrels per day;
• Railway Sines – Madrid;
GEOGRAPHICAL ANALYSIS
Spanish Market

11. GEOGRAPHICAL ANALYSIS
• 73 thousand barrels per day;
• Rotterdam port – biggest in
Europe;
• Central European Pipeline
System (CEPS);
Dutch Market

12. Expected increase in jetfuel consumption till 2040 – driven by
globalization, low transportation costs
• Worlwide:1,7%
• Europe: 1,2%
• Portugal: 1,2%
• Developing countries: 2,9%
Regarding now the Biojet fuel consumption from 2020 to 2050 – driven
by European Union Policy
• Europe: 13%
• Portugal: 13
Demand growth and drivers

13. SUPPLY ANALYSIS

14. INTERNATIONAL COMPETITORS
• Green Subsidiary of
Honeywell
• Bio fuel innovation leader
• Produce and sells in the US
• Had agreements with Repsol
in Spain
• Born as joint venture
between airline industry
stakeholder
• World leading supplier of Bio
Jet
• RSB partnership
• Bio Port worldwide

15. Country Production (MT)
Europe 27,80399874
Netherlands 5,06050016
Germany 3,748600005
United Kingdom 3,566500045
France 3,354500015
Turkey 2,82429992
Greece 1,74389992
Italy 1,59009987
Belgium 1,178699975
Portugal 0,83929998
JET FUEL PRODUCTION
BEAKDOWN (Europe)

16. SCANDINAVIA
• Over 20 million liters
produced
• AtJ (alcohol to Jet)
process
• Very high costs
• Major shareh. of
Povoo Bioport
• Bio fuel world
leader
• Bio port in Karlstadt
• Bio jet from cellulosic
• Set up storing facilities in
Karlstadt airport

17. NORTH SOUTH CORRIDOR
• 800.000 tonne/year refinery
(biofuel)
• Rotterdam Bio Port shareholder
• HEFA process
• Connections with Rotterdam and
Amsterdam – Schipol
• Access to CEPS
CEPS advantages:
• Frankfurt direct connection
• Zurich direct connection
• 400 million liter HVO plant started
in 2014
• Production focused on road
transport (Bio diesel)
• Possibility of Bio Jet production

18. FRANCE AND IBERIA
• 500.000 tons of biodiesel by
2017, sided by Bio Jet
• Aim to cover 30% of
continental Europe bio fuel
market
• Partnership with Thyssen for
second plant
Joint Venture Total/Amyris
• Uses lignocellulosic to
produce Bio Jet (FT process)
• Expected to be operative
late this year
• 220.000 tons from 1MT of raw
material
• 376 million liter of bio
diesel in 2014
• No hints over bio jet
production
• Refineries in Cartagena
and Puertollano

19. PORTUGAL OVERLOOK
3.3 M liters per day

20. 30%
70%
CLC
15% 15% 65%
• Owner of the 2 refineries
• Major supplier for Jet Fuel
• GOC (Grupo Operacional de Combustíveis)
Reception à Storage à Distribution of the jet fuel
inside the Lisbon Airport
PORTUGAL OVERLOOK

21. Best Countries:
- Portugal
- Spain
- Italy
Worst Countries:
- Scandinavia
- Holland & Germany
- The UK
EUROPEAN EXPANSION FEASIBILITY MAP

22. REGULATORY ENVIRONMENT

23. ENVIRONMENTAL COMPLIANCE
The Production process- HVO

24. ENVIRONMENTAL COMPLIANCE

25. • Maintenance of aviation components
Component Status biojet fuel maintenance
Fuel tank Inspecion of tank of seal property damage and
corrosion leading to leak, cracking or pump
blockage needed
Fuel filter Normal sediment possibility coming from the tank
or the biomass residue
Engine fuel pump/
electric booster pump
Fuel flow needs to be tested for minimum flow
rate (low for bio jet fuel)
Fuel nozzles decreasing fuel flow rate led to decrease in fuel
nozzle supply enhancing disturbance on
complete combustion
TECHNICAL COMPLIANCE

26. EUROPEAN UNION OVERLOOK
2010 to 2050
Worldwide Aviation ↑ 5% per year
Operational efficiency ↓CO2 emissions = 2% per year
350%
growth CO2 emissions (2050)
EUROPEAN UNION GOAL
“In 2050 technologies and procedures
available allow a 75% reduction in
CO2 emissions per passenger
kilometre” Flightpath 2050 Europe’s
Vision for Aviation

27. EMISSIONS TRADING SYSTEM (ETS)
11 000 power stations and industrial plants in 31 countries, as well as airlines (2012)
+ 10 CO2 tonnes + 10 CO2 tonnes
- 20 CO2 tonnes
SELL

28. ETS – AIRLINES (2012)
World Carbon Market Database
Aviation ETS Database

29. CARBON MARKET
AVAILABILITY PRICE
Thomson Reteurs - 2030 EU carbon price forecast: What`s next for the EU
ETS

30. EUROPEAN ADVANCED BIOFUEL PATH
2016
Goal: 300 000 tonnes of biofuel produced
Investment: 1.3B €
2018
Goal: 800 000 tonnes of biofuel produced
Investment: 1.7B €
2020
Goal: 2 000 000 tonnes of biofuel produced

31. THE TREND
No specific law will be imposed to
airlines to further use biofuel in the future
EU`s “Flightpath 2050 Europe’s Vision for Aviation”
2050, technologies and procedures available will allow a
75% reduction in CO2 emissions per passenger kilometre
Short-term success
Price + Performance + Origin

32. PRICE ANALYSIS

33. PRICE ANALYSIS
Feedstock Selection
Correlation factors
• With Oil
• With US $
UCO Application
Carbon Credit Application

34. RECOMMENDED FEEDSTOCKS
Used Cooking Oil Jatropha Camelina
Advantages
- Highest CO2 reduction
- No land use
- Do not compete with food
- Relatively cheap
Disadvantages
- Fragmented nature
- Limited up-scaling potential
- Short-term solution, but not
competitive in the long run
Advantages
- Grow in poor soil
- Low water necessary
- High yields
- Up-scaling potential
- Low prices
Disadvantages
- Need rich soil and lots of water
to produce high yields
- Scale economies will interfere
with food crops
- Price increase if RSB is granted
- Low prices probably fake
Advantages
- Grow in poor lands
- Do not require much water
- Up-scaling potential
Disadvantages
- Grow in developed countries
- High prices
- Not very high carbon
reduction compared to UCO
Best Price:
€270/ton
Best Price:
€200/ton
Best Price
€950/ton

35. 367%
Biofuel Production
Increase from 2000
to 2010
• Increased correlation
from 2000 onwards
• High volatility with
recessions
• Oil and Jet-A1
prices totally
bounded
FOOD , OIL , and USD CORRELATIONS

36. • Strong negative
correlation between
Oil and US Dollar
Estimated exchange
rate EUR/USD as of
2020
0,97
FOOD , OIL , and USD CORRELATIONS

37. UCO Application
• Best scenario with
High Oil prices
20%
Incidence of “fixed
costs” for the low
case scenario
Feasibility TestJet-A1

38. CARBON CREDITS APPLICATION
• Emission savings to play
a major role
• Impact ranging from
3,7% to 9,5%

39. STRATEGIC ANALYSIS

40. STRATEGIC ANALYSIS
Future Strategic Issues
Strategic
Issues
Competition
Substitution
SustainabilityImplementation
Profitability

41. Strategy formulation
Enter market and
secure positoin
Expand over borders
Exit strategy - selling
Address strategic issues
Leverage key success
factors
Exploit first
mover
advantag
e
Cost
efficiency
differenti
ation
Strategic
Issues
-
-
--
-
STRATEGIC ANALYSIS

42. MARKETING PLAN

43. 4P’s OVERVIEW
• Fairs and conferences
• International trad fair for
aviation industry
• European Business aviation
convention & exhibition
• Sustainbaility summit
• Advanced bioeconomy
feedstock conference
• Magazines (Lufthansa, E&T)
• Sales force
Product
Price
Place
Promotion

44. CLIENTS SHORTLIST
1st phase: Promotional / Sales channel setup (2018 – 2021)
2nd phase: Sales consolidation (2021 – 2024)
National International
between others

45. Advantages Disadvantages
ü Easier to enter into the
market
ü Easier to establish a long-
term purchase agreement
û High risk exposure and
dependency
û Margins could be squeezed
(lower bargaining power from Infraventus)
Sales channel setup and consolidation (2020 – 2024)
Establish a 1st mover advantage
One Costumer
Advantages Disadvantages
ü Split the risk exposure
ü Higher possibility of selling
the full production capacity
ü Better margins
(higher bargaining power)
û Difficult to convince; no 1st
-
mover advantage
û Difficult to fulfil all the three
companies if demand ↑
Spit Sales

46. Diversification and increase Sales
International
Sales
Advantages Disadvantages
ü Portfolio diversification: risk
reduction
ü Additional increase in sales
û International competition
û Additional costs: tariff
barriers + transportation
BIOFUEL PLATFORM
Sales channel setup and consolidation (2020 – 2024)

47. MARKETING OVERLOOK
Establish a 1st mover advantage Diversification and increase Sales
2018-2020 2020-2024
(-) Risk exposure based on customers` dependence
(+) Profit margins
(+) Long-term contract stability
(+) Probability of selling the full installed capacity
1. Galp enters organically into the market
2. Galp tries to acquire Infraventus
Promotion activities

48. COMMERCIAL PLAN

49. Market analysis
European comission targets Biojet fuel
consumption:
- 2 MT in 2020;
- 156 MT in 2050;
According to this, we get an annual increase of
13% on the consumption of Biojet fuel.
Adding to that, we know that the Portuguese
market represents roughly 2% of the european
consumption of jetfuel;
COMMERCIAL PLAN

50. Summary:
• Investment – 50m €;
• Total Variable Costs – 367€ /ton;
• Total fixed costs – 2723800€ +
%maintenance;
• Depreciation – 2000000€ per
year;
It is important to notice that the ratio between fixed costs and variable is
really high, which shows us the relatively low importance of it;
COST BREAKDOWN

51. Breakeven analysis, yearly, for given prices
• Low capacity of production in order to breakeven;
• Low operational efficiency;

52. Breakeven analysis with respect to
Infraventus targets
Infraventus desired targets:
• Production capacity of:
• 1st year : 35%
• 2nd year: 50%
• 3rd year: 65%
• 4th year: 80%
• After the 4th: 85%
• 10% compounded ROI;
• Payback of investment made after 7,2 years
of the beginning of the project;

53. COMMODITY TARGET PRICE
Now, controling for the ROI, prices given, and the quantity produced in 7,2 years, we
can obtain the maximum price that Infraventus can buy the commodity for each
scenario:
Further, we can even analyze the percentage of the cost of commodity on the
price and thus analyze the advantages and disadvantages of each scenario:

54. Net Income with 10% compound ROI – high Scenario
Concluding, using the commidity cost found, we see that Infraventus can
payback fully it’s invesment in 7,2 years, and obtain a compounded ROI of 10%
during this period;

55. High scenario:
• High financial exposure;
• Bigger capacity to “play” with margins;
Low scenario:
• Low financial exposure;
• Lower capacity to vary the margins;
COMPARISON BETWEEN THE SCENARIOS

56. Timeline
2016 2018 202420222020
PLANT BUILT
PROMOTION SALES
2027 2045
Invest.
Payback
END OF THE PROJECT
ETS
4th phase
ICAO & EU
agreement

57. Recommendation
Product
-100% bio
jet to
energy
companies
Price
-increase
stock during
low oil prices
Place
-Galp
national
-Sky NRG
international
Promotion
-fairs and
conferences
-magazines
-salesforce

58. THANK YOU COMPANY NAME FOR YOUR TIME !