Investing in Latin America's Green Energy Growth Market

By the Costa Rica News

Biofuels is on the rise… again. The first time some painful lessons were learned for fast-in investors. This time the focus is on second generation biofuels and Central America.

First generation:

Why so bad? Some of it´s obvious and has been covered before: using petroleum-based fertilizer to grow corn, which is sprayed with petroleum-based pesticides and then shipped using fossil-fuel based transport (before and after it´s turned into ethanol), doesn´t make a lot of sense. This is also a problem with sugarcane ethanol exported from Brazil and soybean biodiesel produced in the US. Add to these standard issues like displacement of agriculture onto previously unused land, which contributes to carbon dioxide emissions when the land is cleared, and things start to get messy.

For second generation biofuels, the first investment wave that started in 2005 was short lived, and was already seeing problems before the 2008/9 global economic decline. Fast-in investors pushed their money into any available project based on talk of political capital, market capital, the Green Marketing Movement, and talk of cap & trade carbon markets.

Unfortunately the only investors that really benefited were initiators of large commercial projects. The small to mid level investors, suffered as a whole.

One example is D1, rushed into planting Jatropha on large scale, with very little agronomic research. First billed as a wonder crop, Jatropha, as a non-food crop that grows on marginal was hailed as the cure to Global biofuel shortages. And while Jatropha does grow on marginal lands, any farmer will tell you that marginal inputs mean marginal outputs.

But biofuels, like Jatropha have been quietly developing knowledge, experience, and success stories over the past 3 years.

Where most of the first investment/development projects were developed overseas in Africa, and South Asia, savvy developers have now turned their eye to Central America; where biofuel/oil feedstock are indigenous, vast amounts of available land, rich and fertile soil, cheap labor, time zone benefits, and CAFTA (Central America Free Trade Agreement) have illuminated barriers.

In the mean time the demand continues to growth. Mandates on production or blend continue to put pressure on refineries, and other companies in oil production, both upstream and down-stream, to meet demand. Companies in USA are complaining that they are being fined for not using biofuels that don’t yet exist!

Beaker or Barrel:

Now the second and more sustainable wave has begun. The main factors driving biofuel develop:

The continuing rise of fossil fuel prices; Russia needs $110/barrel just balance their books, Average Middle Eastern per barrel requirement is between $75 and $85 per barrel, just to balance the books.

29% of the global vegetable oil production’s increase and 68% of the global sugar cane production’s increase are expected to go to biofuels. Food for fuel simply doesn’t work; it’s not a sustainable strategy.

China and India are quietly capturing more oil supplies, both fossil and bio fuels, and their demand is outpacing the #1 consumer, USA.

The aviation industry is starting to see blend mandates, and many European airlines (USA soon to follow) will start receiving fines for not using blends, but like the US refineries they will being fined for not using bio-fuels that don’t yet exist in the market. Here is a perfect example, Lufthansa airlines, just completed over 1800 test flights between European cities using a 50% blend with bio-synthetic Jatropha fuel (the #1 drop in replacement choice for airlines). The results: a huge success, emissions using bio-fuel cut by up to 80%, costs dramatically reduced… the problem? Lufthansa said the jatropha and bio-fuel supply was not yet sustainable at the levels only one airline would require let alone all of them.

So here we have a mandated product in a mandated market, countries and industries have to by law purchase your bio-fuel product at fair market value. Mandated markets and products make investors feel secure.

These are just a few of the reasons bio-fuel investors are on the rise.

It’s a more intelligent market, the demand as expected by analysts has continued grow exponentially and now there are investment options for the small and mid level investor to play as well, it’s an opportunity for everyone now, not just for the big boys.

Click here to read the full story by the Costa Rica News

The Future of Costa Rica: Leading Biofuel Production

By Jaz Chopra for the Costa Rica News

Over the years, terms like construction, development and real estate have failed to take into consideration the words sustainability and environmental well-being. In fact, so much so that infrastructural development tends to take place at the cost of natural resource depletion. Fast forward to 2012 and sustainable, eco-friendly development is at the forefront of modern day progression. Blame it on increased awareness of climate change or on the fact that humans have found this new appreciation for nature but biofuel production is the newest craze to hit Costa Rica!

Renewable Energy Farms are by no means a new concept, what is new however, is their rapid growth in some of the world’s most naturally abundant locations. Based upon the ideals of the above concept, Multi-purpose Real Estate is the latest project to incorporate environmental productivity with economical benefit. The company offers a potential buyer a chance to not only be owners of a self-sufficient piece of property but also offers them an opportunity in making their contribution to reducing green-house gas emissions. With added bonuses of providing local farmers with further work and helping promote a healthier lifestyle choice, property owners would own a share in a global movement. Ultimately, the question that needs answering is, what has given rise to this sudden demand for this industry? Based on EU regulations of ensuring 10% of all fuel at European pumps being biodiesel by 2020, governments in other countries are becoming increasingly open to the idea!

Central America is the ideal location for projects of this nature as there is a demand for emerging markets particularly in connection to the environment. Costa Rica, perhaps agriculturally the most prosperous of Central and South American countries has become the focal point of the bio fuel market. Combining the factors of real estate, low cost labour, biofuel markets and high yielding crop production gives way to the perfect formula for a successful business venture. UBA, formally known as United Biofuels of America have seized the opportunity and are based in Costa Rica permanently. Having joined forces with real estate developers, we have seen the birth of Multi-Purpose Real Estate.

Michael Klein, Chief Development Officer for UBA was quoted stating that “Multi Purpose Real Estate is one of the newest and most promising programs that we have launched in this initiative. Essentially we offer investors that are already in or will be entering land banking market in Central America, the ability to turn land that would be otherwise sitting unused into a Bio-oil Field that generates income while their land continues appreciating.” Summarizing the project to a tee, the concept has a USP (unique selling point) that would capture the imagination of many prospective buyers.

For the estimated price of $35,000, property owners would see returns of 30% or more each year! During the span of a 5 year contract, a prospective buyer could potentially make over $100,000 yielding almost three times their investment. The properties being located in ‘hot zones’ around Costa Rica have also meant that when it comes to re-sale, the land value would be much higher than the original purchase price.

One could potentially argue the ‘what’s the catch’ aspect of the project but the reality of it is that there isn’t one! Buyers are entitled to opting out at any time by selling their land on and following a 5 year agreement will be permitted to build on the property.

Now is the time to invest in the biofuel market for analysts predict a doubling of biofuel prices in as little as 5 years time! From an investment point of view, the current attraction is the substantial amount of return the buyer receives in the long term. With fuel resources estimated to run out during our lifetime, biofuel is the biggest investment out there. With fossil fuels fast depleting, biofuel production takes the lead. Costa Rica provides the biggest asset of the all, the crops themselves. Jatropha Curcas is a native crop originating in a town called Tempate. Exported in the 1700s, this plant has many extra uses pertaining to medicine, cosmetic surgery, latex and glycerin based products. Additionally, Costa Rica’s close proximity to major U.S cities, a stable government and currency and less stringent bureaucracy laws have made Costa Rica the perfect host to the perfect concept.

Foreign buyers’ share the same rights as local citizens, making the actual process of buying fairly hassle free. That aside, having outlined all the successes of this project, it would only seem fair to consider the potential risks involved. Though few and improbable, it is important to understand that almost every element of life carries risk. With regards to failures of the project, the two biggest issues MPRE (Multi-Purpose Real Estate) is faced with are that of natural disasters and the incompletion/ suspension of the new international airport construction. If the new international airport creation was to be deferred or cancelled then land value around the area would not appreciate as much. Similarly, if for reasons of natural disaster, a hurricane was to destroy the crops, then land will be damaged and productivity would come to a standstill leading to property value loss.

The purpose of this article is to make the public aware of such projects by highlighting their benefits and discussing their potential risks. If this article has provoked an urge to know more about such initiatives then logging on to www.costaricainvest.ie and reviewing some of the information about Renewable Energy farms will provide you with more of the answers you are looking for.

Photos from JatrophaWorld.org

By Jaz Chopra for the Costa Rica News

Grow your own Green Oilfield - webinar recording

Lowly shrub grows in stature as biofuel

Jatropha seed oil touted for jets
By Mark Kellner - The Washington Times

A plant that some have scorned as a predator might well turn out to be part of the answer to rising fuel bills for consumers.

Jatropha curcas, a poisonous, semi-evergreen shrub that can grow as high as 20 feet, produces seeds laden with oil that backers say is an ideal biofuel. One company that maintains 194,000 acres of the plant under cultivation in India is looking to expand farming, and fuel production, in the United States.

Mission NewEnergy, an Australian-based firm with operations in India and Europe and a recently opened branch in San Antonio, says it can deliver refined Jatropha oil at about $40 to $50 a barrel. The firm’s U.S. entry also included listing its shares on Nasdaq, complementing its Australian Stock Exchange presence.

Mixed with traditional jet fuel, Jatropha oil already has been used on test flights by Continental Airlines, Air New Zealand and other carriers. Once approved for general use, Jatropha could help cut one of the aviation industry’s highest costs.

Jatropha can provide “environmentally responsible fuel without compromising the food supply, so we can help the Earth while helping the public,” said James Garton, president of the firm’s U.S. branch. “That means we can finally reverse the skyrocketing prices at the pump and dependence on traditional sources of oil.”

The race for the next big thing in biofuels is attracting serious investor attention. Jatropha is seen as a leading candidate along with such rivals as algae and camelina, a flowering flaxlike plant that, like Jatropha, can grow in marginal agricultural lands.

Jatropha has been touted as among the most promising biofuel sources, but it is not without problems.

In a study released last month, a team of researchers at the Massachusetts Institute of Technology looked at the efficiency of Jatropha and more than a dozen other proposed biofuel sources. Jatropha scored well as a fuel source and because the plant’s husks, shells and meal could be used as fertilizer and other industrial purposes. Some of that gain, however, is offset by production and refining costs and the need for land to cultivate the plant.

“You can’t say a biofuel is good or bad - it depends on how it is produced and processed, and that’s part of the debate that hasn’t been brought forward,” James Hileman, who teaches in MIT’s Department of Aeronautics and Astronautics, said in a statement accompanying the survey, which was published in the journal Environmental Science and Technology.

Mission NewEnergy said it is linked to its producers via contract farming agreements in more than 15,000 villages across five Indian states. Those operations, the firm said, are providing sustained employment for more than 140,000 previously impoverished farmers. It takes three to four years to get maximum yield from a Jatropha plant, with a 20-year productive life estimated for most plants.

Using a biofuel such as Jatropha in an industry such as aviation has its appeals.

At the end of May, two industry executives briefed congressional staffers on a report about the use of biofuels in the U.S. aviation industry. Speaking with The Washington Times by phone after the event, the executives noted the need for biofuels as a way to help meet the rising cost of jet fuel. A 1-cent increase in the price of jet fuel rings up an extra $175 million in costs for U.S. airlines, reports indicate.

“Fuel is our single biggest cost. Today, fuel costs 47 percent more than it did last year. That’s a pretty big spike for your single largest cost,” said Keith Loveless, vice president of corporate and legal affairs for Seattle-based Alaska Airlines. “We are looking for all sorts of alternatives,” he added.

Added Billy M. Glover, environment and aviation policy vice president at Boeing Commercial Airplanes, “It’s not a matter of one [biofuel] feedstock being better than others. It’s going to take a portfolio of feedstocks, a portfolio of processing methods. … [T]o get to scale and make biofuels viable, you need feedstock options and a variety of processing methods.”

Jatropha is being developed in Ghana, Tanzania, Peru and other nations such as India; a common denominator is the effort to grow the plant in areas where other crops aren’t easily cultivated. Some environmentalists have said Jatropha has been overhyped and that optimal oil production requires initial irrigation and fertilizer that otherwise would be used for food production, a condition supporters say would affect only the short term.

Government officials in the southern African nation of Namibia late last month put the brakes on plans for large-scale Jatropha plantations in the country’s northeast, citing the need for more study on the potential disruptive impact on food cultivation, landownership patterns and a loss of access to communal property.

Patrick M. O’Brien, a retired executive of the U.S. Department of Agriculture’s Economic Research Service who is now consulting for Mission NewEnergy, said Jatropha could find a domestic production base in an area extending “from Texas around the Gulf Coast up to South Carolina,” although not too far north because of frost concerns. The areas where Jatropha could be grown domestically include some where farmers might reap profits.

To read the full story in the Washington Times, click here

SG Biofuels secures 250,000 acres for hybrids

Jim Lane | May 16, 2011 |

SG Biofuels announces 250K acres secured for with JMax jatropha hybrids – 1MM acres in pipeline. What’s different about jatropha 2.0?

In California, SG Biofuels announced it has signed customers for the deployment of 250,000 acres of Jatropha using its JMax hybrid seeds. According to SG, “the JMax hybrid seeds on average provide double the yield of existing commercial varieties planted in similar conditions, resulting in greater uniformity and vigor while significantly reducing seed handling and deployment costs.”

The company is adding to its Jatropha crop improvement network by deploying JMax development centers in multiple locations around the world where SG Biofuels will optimize hybrid varieties of Jatropha that are adapted to the specific growing conditions of its customers. The centers feature hybrid material from the company’s germplasm library totaling more than 12,000 unique genotypes.

Executives at such as Syngenta, Monsanto and others have indicated privately that jatropha will enter the ranks of “major crops” when it passes the 1 million acre barrier. Accordingly, it was significant that SG Biofuels CEO Kirk Haney indicated that “In addition to our signed customers, we have a large global pipeline totaling more than 1 million acres of planned Jatropha projects worldwide.”

“Jatropha is here to stay,” commented Haney. “This validates the commercial market for jatropha, which has eight times the yield of soybeans, four times rapeseed, just on the volome of oil.”

Hybrid seeds have historically been responsible for significant increases in agricultural production and profitability. Since the introduction of hybrid corn in the 1940’s, along with improved agronomic practices, the average U.S. yield has increased by more than 400 percent from 30 bushels per acre to 150+.

The company said that its customer list would become more clear by year end – for now, the customers remain secret, although Haney did confirm that the minimum acreage for this round of announcements was in the 10,000 hectare (25,000 acre) range, and that the company has not shifted from its strategic focus on Latin America and Asia.

Jatropha 1.0 vs Jatropha 2.0

SG Biofuels jatropha JMax hybrid

Seeds. There are notable differences between jatropha 1.0 and jatropha 2.0 – the most significant of which is the seed itself, and the sophistication with which jatropha 2.0 companies are offering a range of seeds optimized for specific geographies and climactic conditions.

Partners. With genetics pioneer Life Technologies, processing partner Bunge, and offtake partner Flint Hills Resources (a division of Koch Industries), SG has created an ecosystem of serious players with which to surround jatropha development.

Development services. Also notable is the focus on establishment of the JMax development center, which will test numerous seed types for a given geography and proceed forward with those that show the best yield and cost characteristics. These are Centers established around multi-year contracts that will test between 200-500 hybrids, to narrow to a few, and scale up from there. The plant yield data will be correlated with SG Biofuels’ 5-year data in Guatemala and in other countries over the past 12 months.

“We can be their Monsanto,” said Haney, “here are your seeds and best practices. Or we can build out an entire ecosystem with quality management and partners like Koch FHR and Bunge. We can refere to companies like Bunge, our bring them in ourselves as a general partnership.

Markets. For now, energy customers – primarily biodiesel and biojet, with other jatropha growers indicating strong offtake interest from power gen customers as well. “Not too much renewable diesel, so far,” Haney observed, “and similarly, its early days in terms of companies with renewable chemicals operations.”

Pricing and yields. Depends on the cusomer and contract, but SG Biofuels is discussing its jatropha oil in terms of being competitive with $58/barrel oil, or $1.40 fuel. “We are not saying that we are going back to jatropha 1.0,” commented Haney, “and saying that on horrible land with insufficient soil quality, rainfall or fertilizer that these numbers can be achieved. Jatropha needs inputs. Plus, rainfall and slope variations – microclimates – have to be considered; we will have multiple seeds for a given large-scale farm.”

The Biofuel's Digest’s Take

The good news: “Spray and pray” jatropha seed distribution strategies are a thing of the past.

We have seen companies like SG Biofuels bring back jatropha from the brink of biofuels oblivion or, rather, bringing forward a new jatropha business model based on sound agronomics and plant development. Last year, SG cracked the 50 Hottest Companies in Bioenergy after developing and launching its JMax platform. With these deployment milestones, jatropha 2.0 appears to be well on the way.

The cautionary note. Jatropha 2.0 has a long ways to go – even at double the yields realized under conventional planting, the current announced global acreage would produce around 100 million gallons of crude jatropha oil, reaching 400 million gallons or so as the crop passed the 1 million acre installed base.

Opportunity. We also will look forward to development of de-toxification genetics in jatropha that would lower the cost of making the jatropha residual seedcake available for high-value animal feed in the $400/tonne range, as opposed to low-value combustion for power generation or organic fertilizer at around $200 per tonne.

Click here to read the full story in the biofuels digest

United Biofuels of America: “We are developing the next big Costa Rican export”

By Henriette Jacobsen, TheCostaRicaNews.com

UBA President, Daniel Yepez.

United Biofuels of America (UBA) has developed a program to sell renewable energy farms to potential green tech investors, the first of its kind in the world. The President of UBA explains why he thinks this is the next big export for Costa Rica in an exclusive interview.

The President of UBA, Daniel Yépez, says his company along with the partners Day Group and International Energy Advisors (IEA), are developing a biofuel project and green investment idea that’s so unique that he believes it can become bigger than Costa Rica’s three main exports combined. It includes sustainable farms that grow UBA’s biofuel cash cow or “cash crop,” jatropha.

“In such a demanding industry, there’s no competition. The sky is the limit,” Yépez says in all seriousness. “We’ll never be able to fulfill the demand for fuel on this planet. But we will try.”

Jatropha oil and seeds.

Many green tech companies have experimented with different sorts of crops like maize, rice, wheat and sugar to come up with a suitable bioethanol. They have often been criticized of using food for fuel; food that could have benefitted starving children in Third World countries around the world. Yépez says jatropha will give all its investors a green conscience. For many reasons. Jatropha is a non-edible feed stock and has the highest qualities of properties in oil, around 40%. It grows in marginal land, regenerates the soil and can be intercropped with food crops.

“The biggest culprits are the cattle rangers. Their land has become unproductive, but we recover that land. We recover unproductive marginal land, capture carbon, reforest the fields and introduce nitrogen, which is one of the most important elements for food to grow,” Yépez states.

Jatropha plant.

Jatropha is indigenous to Central America, but when Portuguese colonists came to conquer Costa Rica, they discovered the energetic opportunities of the plant and propagated it throughout Africa and Asia. Now we can even talk about a “jatropha belt” as it grows 30 degrees north and 30 degrees south of the equator.

For a long time jatropha was only used as a green fence around farms and houses in Costa Rica because it’s toxic and animals won’t eat it. Though it has been well-known for more than one hundred years that vegetable oil could be a source of biofuel. Now the great challenge awaits jatropha.

Green jatropha fruit, not quite ripe yet.

Almost four years ago, Applied Research Association (ARA), who works for the United States’ government, contacted UBA because they were looking for a new fuel for the United States’ air force. ARA had a new technology and UBA delivered jatropha oil to be converted into jet fuel. Since then, numerous airlines including Virgin and Continental Airlines have tested jatropha and flown with up to a 50% based jatropha combined with 50% petroleum based jet fuel.

One of the jatropha fields used in research and development.

With governments around the world trying to become energy independent and committed to reducing CO2 emissions, airlines have come under pressure as they are primary contaminants of CO2 emissions in the transport sector. Aircrafts can’t use solar energy, and jatropha has proven to be the best solution because of its high quality oil with caloric and burning values. By 2015, aircrafts will be flying with biofuel blends that consist of 50% jatropha and 50% petroleum-based jet fuel.

This is the million gallon challenge. ARA now has a technology that can convert jatropha oil into jet fuel, which will require a million gallons per day of cjo (crude jatropha oil). Producing a million gallons of oil per day requires 300,000 hectares of land.

“How can we do this within the next four years? We can’t just do it in Costa Rica because there’s not enough land. Therefore, we’ll have to do it around the region. And that’s why UBA was born; to develop renewable energy farms with the help of micro and macro investors,” says the President of UBA.

Though there’s no patent on selling jatropha oil, Yépez says no other company has the same extent of knowledge about the plant than UBA. However, UBA will seek to collaborate with as many companies from around the world to help achieve the million gallon challenge.

UBA is the first regional biofuel consultancy and development consortium in Central America. The company has expertise in facilitating sustainable results in private and government led development and has been conducting research and development for five years with agro field plantations. Together with Day Group, UBA has come up with the idea for multi-purpose real estate, bringing added value to real estate such as agro fuel production. Day Group, which is a real estate advisory consulting company founded in 2001, searches for hot spots, which are areas in Costa Rica where it’s suitable to grow biofuel plantations according to UBA standards. IEA joined the group last year and sells and promotes the renewable energy farms.

So far, Day Group has located a hot spot in the southern zone of Costa Rica in Buenos Aires. The hotspot is close to Costa Rica’s next international airport and the second largest investment in Central America after the expansion of the Panama Canal – a hydro electric dam that will generate electricity to the whole of Costa Rica and neighboring countries. This is where the first real renewable energy farms will be located by the end of this year. So far UBA has had over 20 test farms in Costa Rica, Panama, Honduras, Colombia and Florida.

Working closely with the farmers to promote production on a local level as well as regulate and control quality.

UBA is not listed on any stock exchange, but IEA, which markets and sells renewable energy farms, is seeking to get listed on the BNV share index or in the United States within three years. So a potential green investor can either wait for IEA to become an IPO (initial public offering) or purchase one of the renewable energy farms. One farm is 124 hectares of planted parcel real estate property that is segregated and costs $35,000. The purchase includes 800 – 1,000 jatropha and palm trees, a Costa Rican corporation (the investor owns that for tax and transfer advantages), irrigation, management, road, water and electricity. UBA will sell the jatropha oil produced on the farm and give all revenues to the investor minus a 10% management fee. The oil will be sold to a guaranteed buyer, Recope, which is the national petroleum company of Costa Rica. They have a mandate to put a 10% blend in their fuel by next year.

Based on crude prices of $90 or less a barrel, Yépez says, infrastructure that is developed has an added value of $35,000 because the price of the farm doubles when facilities are added. After ten years the value will be over $120,000, giving the investor a 380% return on investment. The investor will also have $50,000 produced in revenues from the biofuel plantation. It’s a ten-year investment where you can opt out any time.

But there might be unforeseen obstacles on the horizon, so what can go wrong with this investment and for UBA?

“Natural disasters because of climate changes can destroy a lot. There are no guarantees. New plagues and diseases that we are still unaware of could also become a factor,” says Yépez.

For more information, visit Costa Rica Invest's website www.costaricainvest.ie