Market Analysis and Strategy

BioPetrol Ltd.’s innovative process is targeted at the following market segments:

-          Municipal Wastewater Treatment Plans (29 million ton in the US in 2009)

-          Treating and disposal of animal waste (est. 500 million tons in the US in 2009)

-          Biomass – any Carbon feedstock (numerous tonnage)

Initially the company intends to focus on applications for extracting oil from urban wastewater treatment plants (WWTPs). The BioPetrol process addresses two very important issues:

1        Avoid the need to transport sewage sludge offsite (94% of the sludge is converted) eliminating that cost and environmental hazard.

2        Lower the operational costs of the WWTP with a cost effective management solution compared to current sludge removal and disposal expenditures.

Proposed Revenue Model

Strategic Option # 1:

BioPetrol will sell its sludge disposal plants directly to WWTPs. BioPetrol will be in charge of installing and launching the plant, but will not operate it.

Revenue Model: BioPetrol will seek revenues from two sources: 1) a 10% markup on the equipment sold to the WWTP, and 2) a licensing/royalty fee of $8-$12/ton of wet sludge treated by the WWTP. The average price for BioPetrol’s medium-size plants is projected to be about $3.5 million, and a large plant for a city of 1.25 million populations is expected to sell for $5.0 million.

Strategic Option # 2:

BioPetrol will not sell its sludge treatments plants to WWTPs, but instead will assume full responsibility for installing and operating the plant at the WWTP’s site.  To this end, BioPetrol will most probably seek financing under the so-called Build, Operate, and Transfer (BOT) model. The latter typically provides for establishing a consortium of companies that form a joint venture for specific regions and assign the proposed technology to that joint venture on an exclusive basis. The consortium will secure the required funds for constructing and operating the BioPetrol Ltd. plant, considering both equity and long-term bank loan.

Revenue Model: BioPetrol will generate revenues from two major sources: 1) receiving the now avoided sludge tipping fees from the WWTP, and 2) selling the fuel oil surplus to off-site users, or savings on fuel purchases for on-site electricity generation.

A Large BioPetrol Plant

- Working Data –

City = 1.25 million population                             Fuel oil yield, %                       42.4%  

Operation efficiency                    80%                  Fuel oil yield, ton                      7,726

Wet sludge quantity, ton/day        240                  Fuel oil yield, barrels               60,736

Wet sludge quantity, ton/yr      70,080                  Price of fuel oil (barrel), $              45

Dry matter (DM)                          26%                  Market value of -

Sludge, TonsDryMatter/day             62                  generated fuel oil, $ million         2.73

 Sludge, TDM/yr                        18,221                 WWTP payment ($55 wet ton)     3.85