Alternative Fuels
A focus area of investment of Boston Asia Capital is in the development of vertically integrated systems to lock in feedstock costs and make alternative fuel investments highly profitable.  Examples of strategic investments being made in this area include the following:

Vegetable Oil Crushing & Biodiesel Production
The major limiting factor affecting profitability of biodiesel is the cost of vegetable oil used for biodiesel production, which is so high in many countries that many plants are operating at only partial capacity.  This presents a large opportunity if investments are made in the primary production of feedstock in conjunction with oil seed crush capacity and biodiesel plants since it allows for the capture of the entire value chain from primary production to conversion to biodiesel.  Areas of focus for these investments include the following:

Palm Oil Production, Processing and Shipping to Biodiesel Plants
Boston Asia Capital is currently evaluating an opportunity to buy a large set of palm plantations and palm oil processing capacity.  This is expected to result in a total of 150,000 hectares of palm plantations in SE Asia with the ability to produce approximately 450,000 tons/year.  BAC plans to apply improved management techniques and increase production output to 750,000 tons consistent with best management practices.  Palm oil will be shipped to biodiesel plants in strategic locations in USA and Europe where BAC has an investment interest to provide a low feedstock costs and good margins on biodiesel production and distribution. The current cost of palm oil production, including recovery of investment and capital borrowing costs is under $250 per ton with palm oil prices now well above $800/ton.

Soybean, Peanut and Tropical Oil Seed Tree Production in Brazil
Boston Asia Capital is in the middle of an evaluation of a project to buy large tracts of farm land in Brazil in conjunction with  the investment in oil seed crush capacity.  This will allow for the production of various oil seeds on both preserved and non-preserved areas of the farm.  Oil seeds that will be produced on these farms include soybeans, peanuts and oil seeds from tropical oil seed trees.   The ability to produce oil from a variety of seeds will allow for oil seed production from both traditional farm land and areas required to  be in "native reserves".  Low land costs and low labor costs combined with good rainfall and yields will insure high profitability from  primary production.  This is being coupled with either the buyout of oil seed crush plants or the construction of new plants that are more strategically located. Tropical oil seed production involves innovative mechanisms to reduce costs and co-financing using methods such as interest in carbon sequestration, compliance with natural preservation requirements.  Trees to be planted including uricuri, macauba and babasu.  Uricuri and macauba have particularly high yields per hectare (4 tons +) if reasonable steps are taken to provide nutrition and moisture. Because the trees are native, they can be planted in protected areas, which increases the overall production area.

Babasu Oil and Charcoal Production
BAC is currently evaluating a project to allow for production and collection of babasu nuts to produce oil for biodiesel, starch for ethanol and charcoal for electrical energy or steel production.  Underpinning the feasibility of the project is an offset agreement for purchase of all of the charcoal that can be produced through an offset agreement with a major UK coal electric power producer.  Also a part of the program  is an offset agreement from Petrobras to purchase biodiesel and an offset for sale of a portion of the oil to a cosmetic company. 

Biodiesel Plant in Houston, Texas
BAC is looking at the feasibility of building a biodiesel plant at a strategic location in a petroleum refinery complex near Houston, Texas.   The advantage of the site is the proximity to the largest port complex in the region, with the ability to allow for docking of large petroleum ships with the maximum draft.  Coupled with this is an offloading, storage and pipeline complex that will allow for delivery production of biodiesel in proximity to one of the main unloading sites for petroleum in the USA.  This will allow for shipment of biodiesel by pipeline in conjunction with diesel fuel and optimize shipping, storage and logistics for delivery of b5 or b10 biodiesel to customers.  The planned capacity of the plant is 60 million gallons with technology for the plant provided by Biodiesel Brazil.  Total project cost is expected to be $35 million, with an equity investment required of $14 million.

Algae Development Program in Mexico
BAC is working with the company Algeenergy to help support an effort to identify key algae species and production strategies that will lead to effective commercial production of oil from algae for use in biodiesel production.  Algeenergy has a research program underway with the Federal University of Mexico and is undergoing a research effort in conjunction with a program to develop a large scale biodiesel/ethanol program with algae in Northwest Mexico. (see below)

Gas to Liquid (GTL) & Biomass to Liquid (BTL) Fuels
BAC is evaluating involvement in a program to provide technical support to a major refinery and biomass/coal to liquid project in Northwest Mexico.  The project is located in a region where 200,000 hectares of desert exists that is flat and free from vegetation and provides an ideal location for large scale production of algae.  This will allow all of the Co2 emissions from the biomass and coal to liquid fuel production or refining of crude petroleum to be sequestered in the algae ponds.  A feasibility study is underway to evaluate the feedstock available (biomass and coal) for the coal/biomass to liquid project and to determine the percentage of Co2 that can be sequestered using algae.  The algae will also provide feedstock for the production of biodiesel with the oil, ethanol with the starch and biomass to liquid with any other components on a continuous basis.  It is anticipated that up to 1 billion gallons of biodiesel and ethanol can be produced at the site from algae as a feedstock.  An additional 1 billion gallons of coal/biomass to liquid fuel will also be produced annually.  Finally, a traditional 200,000 barrel per day refinery will be built at the site using new low cost approaches to refinery construction.  The combination of secondary feedstock from both the petroleum refinery and coal/biomass to liquid plant will also permit for low carbon production of chemicals.  The State of Sonora has already committed $300 million in bond funds to algae project development and is willing to assist in securing the land for algae projects.  Algae will play a critical role in meeting California carbon emission limits on new fuel supply sources and allow the fuel to meet the new low carbon fuel standard going into effect in 2010.

Alcohol
Sugar Cane Plantation, Cane Processing and Alcohol Production in Brazil:
BAC is currently evaluating the feasibility of an investment in either the purchase or construction of a sugar cane processing and alcohol production plant in Brazil.  Several plants and sites are being evaluated in the States of Maranhao and Piaui.  The project benefits derive from low production costs for sugar due to low land and labor costs and reasonable productivity.  Key to the project is to secure an offtake with a European buyer for ethanol in either countries directly outside the EU (Norway, Switzerland) or in anticipation of EU relaxation of regulations to meet a more aggressive 10% biofuel goal by 2020.  Other target markets are in Japan, where they are committing to use of 10% ethanol in all gasoline.  The proposed project sites benefit from rail access to the largest liquid terminal port in Brazil in Sao Luis, which can receive ships up to 400,000 tons in size.  This will allow for backhaul shipping in conjunction with petroleum deliveries to the port. 

Hydrogen
BAC is involved in various project evaluations in order to provide a supply of hydrogen to a network of fueling stations in California starting in 2008.  The project involves the production of hydrogen using novel feedstock sources that are very low in cost and greatly improve hydrogen competitive position as a transportation fuel.  BAC has also coupled up with a set of strategic partners to help couple the introduction of hydrogen with California plans to have most major auto companies introduce hydrogen vehicles starting in the 2009-10 time frame.  Details of the project will be available as soon as key technical and investment details are worked out from the feasibility analysis in February and March.