1 ABSTRACT Title of Document: AGRONOMIC AND ECONOMIC VIABILITY OF MISCANTHUS X GIGANTEUS AS A NOVEL BIOFUEL IN THE MARYLAND CLIMATE Vishney Ambalavanar Michael Kang Felicia Kulp Theodore Michaels Alexander Muroyama Saad Rehman Olufemi Sokoya Aalap Trivedi Kaiyi Xie Directed By: Dr. Gary Felton, Associate Professor, Environmental Science and Technology Our study examined the effects of land quality and water-absorbent polymer on the growth of Miscanthus x giganteus. Our goal was to help utilize previously uncultivable land efficiently and meet U.S. energy goals. Currently, most U.S. biofuel is produced from corn, which requires arable land for growth and therefore significantly disrupts the production of food crops. We predicted that M. x giganteus would be able to thrive on marginal land, unlike corn, with the aid of a water-absorbing polymer. After growing M. x giganteus on both arable and marginal land, with and without the application of a polymer, we found that our crop grew better on the arable land. We also found that the presence of the water-absorbing polymer in the soil did not affect the growth of M. x giganteus. Finally, an economic cost-benefit analysis showed that growing M. x giganteus would not be a viable commercial enterprise, without the use of a commercial fertilizer and based on existing revenue and expense scenarios. 2 AGRONOMIC AND ECONOMIC VIABILITY OF MISCANTHUS X GIGANTEUS AS A NOVEL BIOFUEL IN THE MARYLAND CLIMATE By Gemstone Team BioFUELS Vishney Ambalavanar Michael Kang Felicia Kulp Theodore Michaels Alexander Muroyama Saad Rehman Olufemi Sokoya Aalap Trivedi Kaiyi Xie Thesis submitted to the Faculty of the Gemstone Program of the University of Maryland, College Park, in partial fulfillment of the requirements for the Gemstone Citation. 2012 Advisory Committee: Dr. Gary Felton, Dr. Frank Coale, Dr. Steve Hutcheson, Dr. Stephanie Lansing, Dr. John Lea-Cox, and Dr. Alan Kaufman 3 ? Copyright by Vishney Ambalavanar Michael Kang Felicia Kulp Theodore Michaels Alexander Muroyama Saad Rehman Olufemi Sokoya Aalap Trivedi Kaiyi Xie 2012 4 Acknowledgements ? Our mentor, Dr. Gary Felton ? Our expert panel: o Dr. Frank Coale o Dr. Steve Hutcheson o Dr. John Lea-Cox o Dr. Stephanie Lansing o Dr. Alan Kaufman ? Everyone we consulted for our research o Dr. Joshua McGrath o Dr. Martin Rabenhorst o Dr. Ray Weil ? Our librarian, Ms. Nevenka Zdravkovska ? The Kulp family and ERCO, Inc. for providing the land ? Dr. Jim Wallace ? All of the Gemstone staff who have supported us through the years and made this program possible 5 Table of Contents Acknowledgements ....................................................................................................... 4 List of Tables ................................................................................................................ 6 List of Figures ............................................................................................................... 7 CHAPTER 1: INTRODUCTION ................................................................................. 8 CHAPTER 2: LITERATURE REVIEW .................................................................... 12 Miscanthus x giganteus ........................................................................................... 13 Agriculturally Marginal Land ................................................................................. 18 Biofuel Conversion ................................................................................................. 20 Economic Factors .................................................................................................... 23 Economic Implications ........................................................................................... 24 U.S. Energy Consumption .................................................................................. 24 U.S. Energy Production (Excluding Renewable Energy) ................................... 28 Energy In Maryland ............................................................................................ 34 CHAPTER 3: METHODOLOGY .............................................................................. 36 Research Design ? Field Aspect ............................................................................. 37 Woodstock Site Description ............................................................................... 37 Brandywine Site Description .............................................................................. 38 Field Setup .......................................................................................................... 40 Research Design ? Laboratory Studies ................................................................... 44 Calorimetric Analysis ......................................................................................... 44 Tempe Cell Analysis ........................................................................................... 46 Data Analysis ...................................................................................................... 47 Economic Analysis ............................................................................................. 47 Context of Anticipated Results ........................................................................... 49 CHAPTER 4: RESULTS ............................................................................................ 51 Soil Test Results ..................................................................................................... 52 CHAPTER 5: DISCUSSION ...................................................................................... 72 Agricultural Implications ........................................................................................ 73 Field Variables ........................................................................................................ 74 M. x giganteus as a Commercial Enterprise ....................................................... 76 CHAPTER 6: CONCLUSIONS ................................................................................. 80 APPENDICES ............................................................................................................ 82 Appendix A: Histograms ............................................................................................ 83 Appendix B: Economic Analysis Data ....................................................................... 92 Works Cited .............................................................................................................. 123 Bibliography ............................................................................................................. 133 6 List of Tables Table 1. Historical U.S. Energy Consumption by Source. ................................... 25 Table 2. Projected U.S. Energy Consumption by Source. .................................... 26 Table 3. U.S. Coal Production by Type. ............................................................... 29 Table 4. Maryland state energy consumption by type. ......................................... 34 Table 5. Maryland state renewable energy consumption by type. ........................ 35 Table 6. Values and univariate statistics for selected soil test parameters. Brandy: Brandywine site samples. Wood: Woodstock site samples. .................. 53 Table 7. Values and univariate statistics for selected soil test chemical parameters. ................................................................................................................. 55 Table 8. Univariate statistics for selected soil test chemical parameters. ............. 56 Table 9. A comparison of the p-values from analysis of the Brandywine biomass yield data and the Woodstock biomass yield data from the 3 years of harvesting. ? (significance level)=0.05 ................................................... 58 Table 10. The p-values from analysis of biomass yield data from Brandywine in 2010 as compared to 2011, and similarly, Woodstock in 2010 as compared to 2011. ?=0.05 ...................................................................... 59 Table 11. A comparison of the p-values of polymer versus nonpolymer plant biomass yields within each plot during one year of harvest. ?=0.05 ...... 59 Table 12. Mean mass per plant and standard deviation of plants at both Woodstock and Brandywine small plots, separated by polymer treatment. .............. 61 Table 13. Mean energy content and standard deviation of plants at both Woodstock and Brandywine, separated by polymer treatment. ................................. 61 Table 14. Mean energy content and standard deviation at both Woodstock and Brandywine, neglecting polymer treatment ............................................ 62 Table 15. The p-values of the statistical analysis of calorimetry mean energy contents, ignoring application of polymer. ?=0.05 ................................. 62 Table 16. Comparison of statistical test results of calorimetry data for plants with and without polymer within each plot for a given year. ?=0.05 ............. 63 Table 17. Comparison of statistical test results of calorimetry data for plants with and without polymer within each plot for a given year. ?=0.05 ............. 63 Table 18. Case one profitability calculations .......................................................... 68 Table 19. Case two profitability calculations. ......................................................... 70 Table 20. Case three profitability calculations ........................................................ 70 Table 21. Viable land IRR heat map (scenario three). ............................................ 71 Table 22. Marginal land IRR heat map (scenario three). ........................................ 71 Table 23. Hypothetical increase in yield per hectare and resulting profitability metrics. .................................................................................................... 78 7 List of Figures Figure 1. Rhizome of M. x giganteus (Christian et al., 2009). ............................... 14 Figure 2. 3-year-old M. x giganteus planted in Woodstock, MD. The man is 1.8 m tall. .......................................................................................................... 15 Figure 3. Electric Power Energy Consumption. .................................................... 25 Figure 4. Historical & Projected U.S. Energy Consumption by source. ................ 27 Figure 5. U.S. Coal Prices by Class. ...................................................................... 28 Figure 6. U.S. Domestic coal production ............................................................... 29 Figure 7. Total U.S. proved natural gas reserves. .................................................. 30 Figure 8. U.S. Natural gas electric power price ..................................................... 31 Figure 9. Henry Hub natural gas futures prices. ..................................................... 32 Figure 10. Global oil production ............................................................................. 33 Figure 11. Coal rail transport prices. ........................................................................ 34 Figure 12. ERCO study site, located in Prince George?s County, MD within the Washington, D.C. metro area. ................................................................ 38 Figure 13. Checkerboard layout of both the Woodstock and Brandywine plots. .... 42 Figure 14. Mean mass per plant versus harvest year at Woodstock (blue) and Brandywine (red), along with error bars representing one standard deviation ................................................................................................. 57 Figure 15. Mean mass per plant versus harvest year at Woodstock, along with error bars as well as the results of the Tukey range test (represented by the lettering above the error bars). ............................................................... 57 Figure 16. Mean mass per plant versus harvest year at Brandywine, along with error bars as well as the results of the Tukey range test (represented by the lettering above the error bars). ............................................................... 58 Figure 17. Mean plant energy content versus harvest year at Woodstock (W) and Brandywine (B), along with error bars as well as the results of the Tukey range test (represented by the lettering above the error bars). ............... 62 Figure 18. Mean plant height versus harvest year at Woodstock (blue) and Brandywine (red), along with error bars representing one standard deviation. ................................................................................................ 65 Figure 19. Average plant height versus harvest year at Woodstock, along with error bars as well as the results of the Tukey range test (represented by the lettering above the error bars).. .............................................................. 65 Figure 20. Average plant height versus harvest year at Brandywine, along with error bars as well as the results of the Tukey range test (represented by the lettering above the error bars).. .............................................................. 66 Figure 21. Percent plant survival at each plot (Woodstock: W, Brandywine: B) for each polymer treatment (with polymer: P, without polymer: NP) and for each harvest year. ................................................................................... 67 Figure 22. Hypothetical increase in yield per hectare and resulting profitability metrics. ................................................................................................... 79 8 CHAPTER 1: INTRODUCTION 9 Introduction The global economy faces the mounting problem of rising energy prices and shrinking fossil fuel supplies, brought into the spotlight of public policy by increasing awareness of the environmental consequences of fossil fuel use. Due to the decreasing suitability of traditional fuels, increased funding and research is being applied to alternative energy. Of these, biofuels are one of the most promising and currently researched types of alternative fuels (Hill et al., 2006). In the United States, the government has become more committed to increasing the use of biomass-based fuels in order to reduce the need for petroleum. To accomplish this, the U.S. Department of Energy and the U.S. Department of Agriculture have recommended that 30% of the country?s petroleum use be replaced with renewable biofuels by 2030 (Perlack et al., 2005). It is estimated that nearly one billion tons of biomass annually will be needed to achieve this goal, with 998 million dry tons coming from agricultural lands (Perlack et al., 2005). Producing this amount of biomass annually is not possible without disrupting the food supply because land will be converted from food production to producing bioenergy crops (Perlack et al., 2005). One possible solution to this problem would be to grow bioenergy crops on marginal land, land not suitable for the cultivation of food stock, which is widely available in western and northwestern United States and the Midwest (Cassel-Gintz et al., 1997). The reduction in cost of land acquisition may be able to offset the reductions in biomass yield due to growing on marginal lands, if a suitably robust plant can be found. Additionally, marginal land is often located in drought areas. Cross-linked polyacrylamide (CLP) is a superabsorbent, water-absorbing polymer that has been 10 shown to increase the growth and survival of plants under water stress conditions when it is incorporated in the soil (Abd El-Rehim et al., 2004). This product may aid in the establishment and production of biomass biofuels on less than ideal lands. Moreover, alternatives to conventional biofuels, mainly corn ethanol, will need to be found. With corn ethanol production expected to plateau at 15 billion gallons by 2015, the Energy Independence and Security Act of 2007 states that 21 billion gallons of additional renewable biofuel must be produced annually from lignocellulosic ethanol and other biofuels derived from feedstock other than corn starch by 2022 (Sissine, 2007). Additionally, there is room for novel biofuels in areas outside of liquid transportation fuel, such as biomass used to supplement coal as a combustion fuel for electricity production. One such alternative is Miscanthus x giganteus. M. x giganteus is a perennial grass native to East Asia and is a naturally-occurring sterile hybrid of M. sinensis and M. sacchariflorus, which indicates that there is no risk of the species becoming invasive. It has high nitrogen-use efficiency (Beale et al., 1996), and low water-usage requirements, making it a hardy plant even on poor land. It contains a high degree of cellulosic biomass, making it suitable as a potential biomass source for second generation biofuels, which produce liquid fuel from cellulose rather than starch. Although M. x giganteus has been extensively grown in Europe, few studies have examined the bioenergy crop in the United States and none have studied the plant?s growth on marginal land or with CLP, the polymer, in the soil. Therefore, to fill this gap, this study will examine the effect of marginal land, with and without the polymer incorporated into the soil, on the productiveness and energy content of M. x 11 giganteus. The following questions will be addressed: how do the biomass yields of M. x giganteus compare with respect to the agricultural viability of the land and the presence of CLP in the soil? Is it economically feasible to produce M. x giganteus as a biofuel crop, as either a source of cellulosic biomass or as a solid combustible fuel? In order to answer these questions, one-year-old M. x giganteus were planted at two locations in Maryland: Woodstock, in a plot of arable land, and Brandywine, in a plot of marginal land. The plants were planted in 18 and 16 rows, respectively, of ten plants each, with the application of the polymer to every other plant. The aboveground biomass was harvested in the winter of every year of growth. Literature shows that early winter is a suitable time to harvest because less energy is needed to dry the plants and fallen leaves provide more nutrients to the soil the following spring (Amougou et al., 2011). The dry mass of the plants was measured in addition to the energy content, which was found using calorimetry. Soil tests were also performed to quantitatively determine the quality of the soil at each plot. A two-way ANOVA determined the statistical significance of differences between the dry weights and energy contents of the four levels of the independent variables. Our data were compared to existing calorimetric analyses, and evaluated with a cost-benefit analysis of M. x giganteus production on the different land types and with and without CLP. The analysis examined the economic feasibility of using M. x giganteus as an alternative bioenergy crop. It was anticipated that the plants with polymer in their soil would produce more biomass than those without. Moreover, it was hypothesized that the biomass production of M. x giganteus would be more than that of maize. 12 CHAPTER 2: LITERATURE REVIEW 13 Literature Review Miscanthus x giganteus Miscanthus is a genus of perennial C4 plants that have undergone extensive testing as potential biomass crops in European field trials. C4 plants, which use a four- carbon molecule as a shuttle to concentrate CO2 during photosynthesis, are considered to have the highest theoretical photosynthetic efficiency and potential productivity of all plants due to significant suppression of photorespiration (Naidu et al., 2003). This suppression leads C4 plants to exhibit higher nitrogen use efficiency and thus require lower nitrogen inputs (Beale et al., 1996). C4 plants make up 5% of the world?s plant life and are mostly grasses native to hot, arid climates, while the remaining 95% of the world?s plant life is composed of C3 plants (Lambers et al., 2008). During C3 photosynthesis, three carbon dioxide molecules are concentrated typically by a diffusion mechanism and converted to 3-phosphogylcerate by the Calvin-Benson cycle. However, the photosynthetic enzyme RuBisCO (ribulose-1,5- bisphosphate carboxylase oxygenase) is also capable of catalyzing a breakdown of ribuolose-1,5-bisphosphate (RuBP) in the presence of significant oxygen by its oxygenase activity. The destruction of RuBP, which is the product of photosynthesis, degrades it into a recycled phosphogylcerate and a metabolically expensive phosphoglycolate. This phosphoglycolate undergoes an extensive series of transport reactions to the peroxisome and the mitochondria to be recycled, which requires a net loss of carbon and ammonia. Suppression of this ammonia loss is the source of higher nitrogen use efficiency in C4 plants. Photorespiration occurs most when plants have difficulty sequestering CO2 away from O2 effectively. C4 plants solve this by 14 incorporating CO2 into another molecule, such as oxaloacetate, and shuttle it across a membrane into another compartment or neighboring cell, which is impervious to CO2 and O2. This saturates RuBisCO with CO2 and effectively prevents it from catalyzing the oxygenase reaction, which requires elevated levels of O2. Miscanthus x giganteus is a perennial naturally occurring, sterile allotriploid hybrid of the grasses M. sinensis and M. sacchariflorus (Nishiwaki et al., 2011). All three species are found in Southeast Asia, with natural populations of M. x giganteus being found in Japan. Because M. x giganteus is sterile, it propagates via rhizome (Lewandoswki et al., 2000). Between 86% and 90% of the belowground biomass is in the rhizome (Amougou et al., 2011) (See Figure 1; Christian et al., 2009). The rhizome of the plant stores nutrients, such as nitrogen, during the winter when the plant becomes dormant. In the spring, nitrogen and other nutrients move out of the rhizome and into the shoot of the plant; at the end of the growing season, nutrients move back to the rhizome. This ability of M. x giganteus allows the plant to use Figure 1. Rhizome of M. x giganteus (Christian et al., 2009). 15 nitrogen and other nutrients more efficiently, giving the plant low nitrogen- fertilization requirements (Amougou et al., 2011). The root density decreases dramatically after 30 cm of soil depth, although roots can reach depths of up to 250 cm (Neukirchen et al., 1999). The tremendous depth of the roots could allow for the plant being able to uptake more nutrients and water in soils that contain low concentrations of these resources. Reaching maturity in approximately 3 to 5 years, M. x giganteus can reach stem heights of up to 3.50 meters (Greef and Deuter, 1993) (Figure 2). Previous studies of M. x giganteus in Europe have shown yields above 30 t ha-1 year-1 with irrigation and 10-25 t ha-1 year-1 without irrigation (Lewandowski et al., 2000). Most of these studies included nitrogen fertilizer, although not all of them observed an effect on the yield due to the fertilizer. Adding to the benefits of M. x giganteus as a potential biofuel crop is that its profitable lifetime may be up to 15 to 20 years Figure 2. 3-year-old M. x giganteus planted in Woodstock, MD. The man is 1.8 m tall. 16 (Lewandowski et al., 2000). As opposed to other biomass crops like maize and switchgrass, M. x giganteus has a much higher biomass yield, lower costs and maintenance, and fewer fertilizer and chemical requirements (Khanna et al., 2008). In side-by-side field trials conducted in Illinois, M. x giganteus had twice the average leaf area and was 59% more productive than grain maize (Dohleman et al., 2009). Also according to this field trial, M. x giganteus yields were three to four times higher than those of switchgrass, and the breakeven cost of M. x giganteus was less than two-thirds the breakeven cost of switchgrass. This was hypothesized to be due to the fact that leaf photosynthesis in M. x giganteus was almost 40% higher than in switchgrass, and that M. x giganteus had higher nitrogen and water use efficiencies (Dohleman et al., 2009). M. x giganteus has been shown to have low soil nitrogen requirements. Based on field studies from across Europe, the optimal nitrogen fertilizer application amount was found to be 60 kg ha-1 year-1 (Lewandowski et al., 2000). However, some studies also observed that nitrogen fertilizer had no significant effect on biomass yield after the first year of growth (Himken et al., 1997; Lewandowski et al., 2000). Most of the nutrients, including nitrogen, remobilize to the rhizome after senescence. However, between 46 and 85 kg ha-1 year-1 of nitrogen remains in the aboveground biomass and does not make it back to the rhizome by mid- to late winter (i.e. the time of most harvests) (Cadoux et al., 2012). 60 kg ha-1 year-1 is the approximate amount needed to replenish the nitrogen lost in the late winter harvest of the aboveground biomass and to maintain the productivity of the rhizome. Additionally, due to the large leaf area of 17 M. x giganteus, water interception values are quite high for the crop, at approximately 25% of rainfall (Finch and Riche, 2010). As an additional consequence of the large leaf area, the plant has higher transpiration rates, which correlates to a higher soil water usage by M. x giganteus relative to corn-soybean rotation and switchgrass (McIsaac et al., 2010). It has been recommended that harvesting M. x giganteus be delayed until late winter. This allows more time for the remobilization of nutrients to the rhizome. Furthermore, the additional time is correlated with lower ash and moisture contents in the aboveground biomass (Lewandowski et al., 2003). An unfortunate consequence of delaying harvest is that the yield tends to decrease by 35% (Lewandowski et al., 2003). This is due to leaves and upper stems falling from the plants over time. M. x giganteus contains a higher lignin and cellulose fraction per unit mass during the winter harvest than other genotypes of the plant genus (Hodgson et al., 2010). Higher lignin correlates to a higher heating value of the plant (which is congruous to energy content), particularly as it relates to thermo-chemical conversion to biofuel. The energy content of M. x giganteus has been found to be 4238.1cal/g (Collura et al., 2006). As of the year 2000, uses of M. x giganteus biomass have largely been confined to either 50% co-firing or 20% co-firing with coal in combustors in Europe (Lewandowski et al., 2000). M. x giganteus has been shown to be a very hardy plant in terms of resisting cold weather by maintaining photosynthetic capacity by dint of its specialized gene expression pathways (Wang et al., 2008). Moreover, plants that had overwintered in the field showed better frost tolerance than plants of the same age that had not been in 18 the field during winter (Plazek et al., 2011). Of the non-overwintered plants, those that had been cold acclimated were more frost tolerant than those that were not. Additionally, frost tolerance increases with every successive exposure to cold temperatures (below 12?C). Soil temperatures below -3.5?C have been seen to cause rhizome death in an artificial freeze experiment conducted in Germany (Lewandowski et al., 2000). Selectively breeding for higher frost tolerance may improve the ability of the rhizome to overwintering. Furthermore, a long first growing season allows for enough development of the rhizome for it to have a better chance of surviving the first winter. In addition to M. x giganteus being a robust plant, it is readily adaptable to current agricultural methods, such as herbicide application. Weed control is essential for plant establishment, and herbicides are a common method of removing competing plants. Herbicides with broadleaf specific activity do not produce significant injury to M. x giganteus plants (Anderson et al.,2010). For the most part, herbicides that are currently used on corn can be used safely on M. x giganteus, especially at lower application rates. Agriculturally Marginal Land The 1 billion tons of agricultural biomass that will be needed each year to meet annual needs cannot be produced currently without agitating the processes of food production (Heaton et al., 2008). Nearly 1.366 billion tons of biomass could be produced annually by the year 2030. The use of perennial groups of plants could be produced in the amount of 377 million tons of biomass on only 24 million hectares of 19 inactive and unused agricultural land. This correlates to only 13% of the agricultural land producing 38% of the necessary biomass (Heaton et al., 2008). This further exemplifies why being able to prove the use of marginal land for the growth of biofuels in an economic and sustainable fashion is so beneficial for the future of the bioenergy movement. The ability of M. x giganteus to grow on agriculturally marginal land would help prove this point if significant results can be measured. Currently, there is a very large amount of agriculturally marginal land. This is land not suitable for use in the production of food, due to factors such as low nutrient levels and low water access. There are seven general classifications of land. The marginal land that is being used for this study is classified as Class 7 with ?no capability of arable culture or permanent pasture? (Ministry of Agriculture, Food and Rural Affairs, 2009). The pedological descriptions of this site and the arable soil site are given in the Methodology section. This land may be made useful by increasing water content through the addition of relatively inexpensive CLP. According to Abd El-Rehim et al., water- absorbing polymers increases soil water retention which can lead to better plant growth (2004). If this land can become productive and produce biofuels, then available land currently used for biofuel production can be diverted into producing food stock. A few studies have attempted to test the effect of CLP on plants in poor soil with mixed results. A study in Germany tested the effect of CLP on Pinus halepensis subjected to drought, finding that applying the polymer to seedlings caused them to survive twice as long and grow up to three times larger than untreated plants 20 (Huttermann et al., 1999). Another study in Europe found that CLP did not increase the survivability of trees planted in dry, low-quality soil, but did increase their growth rates (Rowe et al., 2005). The same study suggested that adding nutrients such as nitrogen in addition to CLP could heighten the benefits of the polymer. A study done in the southeastern coastal plains of the United States tested CLP on sandy soils and found that their effect diminished with time and that CLP did not significantly improve the yields of maize (Busscher et al., 2009). A study specifically looked at the water holding capacity of CLP across time and subjected it to a variety of conditions. The researchers found that UV exposure and freeze/thaw cycles produced the greatest loss in water-holding capacity (Holliman et al., 2005). Furthermore, the water holding capacity decreased sharply within 18 months (Holliman et al., 2005). Land currently used for agricultural production for food is decreasing as more usage of maize-based biofuels places significant strain on the availability of arable land. If this harsh land, with or without CLP, can produce significant lignocellulosic plant growth, then arable land can be used for creating food while marginal land can be used for producing biofuels. Biofuel Conversion Currently, the main types of biomass processing are gasification/pyrolysis and hydrolysis and enzymatic digestion. Neither has seen industry application as of yet, but they are upcoming methods for using lignocellulosic biomass as a novel source of liquid fuel. Gasification and pyrolysis make use of the fact that plant material, when 21 heated to certain temperatures under controlled conditions, will degrade into simpler organic compounds (Carroll and Somerville, 2009). Gasification produces a mixture of gases, called syngas, by heating plant material in the presence of a catalyst to high temperatures (900-1000?C), which are then catalytically converted into hydrocarbons that are then refined into substitutes for conventional fuel (Carroll and Somerville, 2009). Fast pyrolysis involves quickly heating the biomass to 350-600?C or higher in the absence of oxygen (Melligan et al., 2011). The benefit of pyrolysis is that it produces a liquid fuel, called bio-oil, that is easier to transport than biomass or syngas (Melligan et al., 2011). Pyrolysis typically has liquid yields of 70-75% for wood and 55-65% for grasses based on the dry weight of biomass converted, though the yield can vary widely for different feedstocks (Hodgson et al., 2010). Hodgson et al. also found that the application of nitrogen fertilizer on M. x giganteus had a negative effect on feedstock quality and the resulting pyrolysis liquid (2010). The main advantage of gasification processes is that relatively high yields of syngas can be obtained (Digman et al., 2009). Gasification is one of the most efficient methods of energy extraction, and it has the benefit of being insensitive to the composition of the starting material as well, making many kinds of biomass acceptable for use (Digman et al., 2009). Syngas is also readily converted into gasoline and diesel fuel (Carroll and Somerville, 2009). However, this method is not without problems ? gasification reactor design is costly and complicated. Byproducts of the gasification reaction, which include sulfur, mineral ash, and tars, do accumulate rapidly and constant maintenance of the reactor is necessary in order to keep it in 22 working condition, which increases costs (Digman et al., 2009). Pyrolysis functions similarly to gasification in terms of efficiency ? however, it yields a mixture of complex organic liquids similar to crude petroleum. This is very difficult to process, but the raw energy content of this material is high (Digman et al., 2009). Additionally, if the water content of the liquid is high, it limits the usefulness of the bio-oil as a fuel (Melligan et al., 2011). Hydrolysis and enzymatic digestion use an extensive pre-treatment process and synthetic catalysts in order to process biomass. Biomass is ground into small particles and then soaked in moderate temperature dilute acid, which causes much of the normally sequestered sugars (such as xylans) to become soluble and more of the plant material to become accessible to enzymatic treatment (Digman et al., 2009). Enzymatic hydrolysis then breaks most of the polysaccharide components of the plant into simpler free sugars, which are then easily processed into fuel (Digman et al., 2009). This is not as efficient as gasification but does have the benefit of being a relatively low-maintenance process. Experimental conversion of M. x giganteus into a usable liquid fuel is beyond the scope of this study. However, as the conversion technologies progress and become more cost effective, the possibility of widely using cellulose to create biofuels becomes more feasible. Furthermore, these technologies are evolving and being optimized independent of agricultural studies involving energy crops. 23 Economic Factors Several regions of the world hold the potential to supply energy crops because of surplus arable land. These regions include North America, Europe, Oceania and Latin America. However, this supply potential is limited by the demand for food, both for human and animal consumption. Because of population growth and an increase in demand for lumber in developing areas, 24% of the global mature forest area will be converted to arable farmland from 1990 to 2100. In certain developing regions in Asia and Africa, the mature forest will disappear altogether by 2100 (Yamamoto et al., 2001). The depletion of forest area for the sake of farming will work against the goal of alternative fuel development. For this reason, among others, it is important to make use of currently existing marginal land for biofuel production. The major economic aspects of commercially producing biofuels like M. x giganteus include the logistical decisions made by producers regarding elements of the supply chain. Transportation and storage present examples of some of these supply chain elements. The cheapest method of transporting a biofuel like cotton- stalk, for example, requires that the farmers are included in the supply chain?s logistical model. As transport vehicles? capacities rise, different farmers and producers are more likely to achieve economies of scale within the cotton-stalk industry. This model can be applied to other biofuels besides cotton-stalk as well (Tatsiopoulos et al., 2003). Another element of the supply chain that is important to analyze for biofuel production is storage. Storage is often determined by seasonal availability. The lowest cost storage methods generally provide the most efficiency to producers. However, 24 these methods may present health, safety and technological risks that should be considered (Rentizelas et al., 2009). Because M. x giganteus currently lends itself best to use as a solid fuel, the costs of pelletization are important in economic analysis. Pelletization operations include drying, densifying, screening and warehousing, among other processes. Raw material presents the largest cost of pelletization. Other major costs include personnel costs, drying costs and pelleting mill costs. For a baseline plant of 6 t per hectare, the pelletization costs were $51 per ton of pellets (Mani et al., 2006). Economic Implications A top down approach was use to evaluate M. x giganteus? potential commercial applications. This began with an analysis of the market for energy in the United States. Specifically, the market for electric power as M. x giganteus in the form this study evaluated would primarily be used to generate electricity. Special attention was paid to the retail electricity market in the state of Maryland as well as the use of renewable energy sources, including biofuels such as M. x giganteus, in these regions. U.S. Energy Consumption The following values were developed from data found in U.S. Energy Information Administration Annual Energy Review (Adler et al., 2011). Over the past 60 years electric power energy consumption in the United States has increased by over 775.9% at a compound annual growth rate of 3.7%. Population 25 and per capita income are major drivers of electric power consumption and as these factors grow the increase in energy usage is expected to continue. Figure 3. Electric Power Energy Consumption. This trend is coupled with decreasing reserves of traditional energy sources. Currently, electricity is produced primarily by coal, natural gas, and nuclear energy. Natural gas as a percentage of total energy consumption is growing has grown at a compound annual growth rate of 0.5%, the second largest of any energy class over the 6 years from 2005 to 2010. Renewable energy sources however, are the fastest growing source of energy in the U.S. with a compound annual growth rate of 5.6% for liquid biofuels and 1.1% for other renewables over the same time period. Table 1. Historical U.S. Energy Consumption by Source. - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 45,000,000 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 B ill io n BT U s Electric Power Energy Consumption (Billion BTUs) Electric Power Energy Consumption (Billion BTUs) Historical U.S. Energy Consumption by Source (% Total Consumption) Energy Source 2005 2006 2007 2008 2009 2010 2011 Change CAGR Oil and other liquids 40.3% 40.1% 39.3% 37.6% 37.5% 36.7% 36.0% (10.6)% (0.5)% Coal 22.8% 22.6% 22.5% 22.6% 20.8% 21.3% 21.0% (7.8)% (0.3)% Nuclear 8.1% 8.3% 8.4% 8.5% 8.9% 8.6% 8.4% 3.0% 0.1% Natural gas 22.5% 22.3% 23.4% 24.0% 24.7% 25.2% 25.6% 13.9% 0.5% Liquid biofuels 0.3% 0.5% 0.6% 0.8% 1.0% 1.1% 1.3% 272.1% 5.6% Renewables (excluding liquid biofuels) 5.9% 6.2% 5.9% 6.4% 7.1% 7.1% 7.7% 30.2% 1.1% 26 Energy consumption by type is expected to shift away from existing sources, like coal and petroleum, and towards renewables. These shifts will create opportunities for new commercial energy production enterprises. Public policy is pushing for faster integration of renewable energy sources, such as solar, wind, and biofuels, into the energy production mix of the United States. This will result in a sizable increase in the use of renewable energy sources over the coming 20 years. As Table 16 suggests, liquid biofuels can expect to see a 191.2% increase in usage and other renewables a 41.7% increase in usage by 2035. Indeed by that time renewable energies are expected to account for as much as 15% of the primary energy consumption in the United States. Table 2. Projected U.S. Energy Consumption by Source. Projected U.S. Energy Consumption by Source (% Total Consumption) Energy Source 2011 2012 2015 2020 2025 2030 2035 Change CAGR Oil and other liquids 36.0% 36.1% 36.4% 35.1% 33.9% 32.5% 31.6% (12.3)% (0.5)% Coal 21.0% 20.0% 18.5% 19.3% 20.1% 20.0% 20.0% (4.7)% (0.2)% Nuclear 8.4% 8.7% 8.9% 9.2% 9.3% 9.1% 8.7% 3.5% 0.1% Natural gas 25.6% 26.6% 26.7% 26.0% 25.1% 25.2% 25.2% (1.9)% (0.1)% Liquid biofuels 1.3% 1.3% 1.5% 1.8% 2.2% 3.0% 3.7% 191.2% 4.6% Renewables (excluding liquid biofuels) 7.7% 7.3% 8.0% 8.6% 9.4% 10.1% 10.9% 41.7% 1.5% 27 Given the trajectory of renewable energy sources ? especially that of biofuels ? it is likely that there will be a significant market for biofuel production. Figure 4. Historical & Projected U.S. Energy Consumption by source. 0 20 40 60 80 100 120 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Historical & Projected U.S. Energy Consumption by Source Oil and Other Liquids Coal Nuclear Natural Gas Renewables (No Liquids) Liquid Biofuels 7% 1% 25% 9% 21% 37% 11% 4% 25% 9% 20% 32% 28 U.S. Energy Production (Excluding Renewable Energy) To fully understand M. x giganteus? potential as a commercial enterprise, it is important to see how the demand energy is produced. Coal U.S. production of coal has increased over the past 60 years, and despite periods of significant volatility, real prices have remained stable. With that said, coal production by type and quality has changed significantly. Coal quality is determined according to response to increasing heat and pressure as well as carbon content, and lower quality coal has a lower energy content as measured by million BTU /ton. This means that as the quality of coal in use decreases, the amount required to produce the same amount of energy increases. Today the coal used in the U.S. is predominantly bituminous coal, however an increasing percentage is made up of lower quality lignite and sub-bituminous coal and almost none is high quality anthracite coal. Figure 5. U.S. Coal Prices by Class. - 20.0 40.0 60.0 80.0 100.0 120.0 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 P ri ce ( R ea l U SD ) U.S. Coal Prices by Class Bituminous Subbituminous Lignate Anthricite 29 Anthracite coal has seen a 98% reduction in U.S. production since 1949, compared to sub-bituminous coal use, which grew over 3,000% over the same time period. Therefore notwithstanding price stability overall expense associated with coal use has increased as a result of reduced quality. This trend is expected to continue as the U.S. further depletes higher quality coal reserves. Table 3. U.S. Coal Production by Type. Figure 6. U.S. Domestic coal production 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 U.S. Domestic Coal Production Anthracite Lignite Subbituminous Bituminous U.S. Coal Production by Type (Summary Years) Year Bituminous Subbituminous Lignite Anthracite 1949 91.1% 0.0% 0.0% 8.9% 1969 95.8% 1.5% 0.9% 1.8% 2000 53.5% 38.1% 8.0% 0.4% 2009 46.9% 46.2% 6.7% 0.2% Change (48.5)% 3,069.0% 668.1% (98.0)% CAGR (1.1)% 5.9% 3.5% (6.3)% 30 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1925 1929 1933 1937 1941 1945 1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 Total U.S. Proved Natural Gas Reserves Total U.S. Proved Natural Gas Reserves Natural Gas Natural gas is the second fastest growing energy class in the United States with an estimated compound annual growth rate of 0.5% over the past six years from 2005 to 2010. Advances in technology have led to significant increases available natural gas reserves and this has helped to fuel its increasing usage. Figure 7. Total U.S. proved natural gas reserves. 31 0 2 4 6 8 10 12 14 Ja n-2002 Jun-2002 N ov-2002 A pr -2003 Se p-2003 Fe b-2004 Ju l-2004 D ec -2004 M ay-2005 O ct -2005 M ar -2006 A ug-2006 Ja n-2007 Jun-2007 N ov-2007 A pr -2008 Se p-2008 Fe b-2009 Ju l-2009 D ec -2009 M ay-2010 O ct -2010 M ar -20 11 P ri ce ($ / M ill io n BT U ) U.S. Natural Gas Electric Power Price Price per Million BTU Natural gas is widely traded in commodity markets and, as a result, sometimes experiences significant price volatility. However, as part of the large market for natural gas, a vibrant futures market exists. This provides a means of projecting price in future periods based on current futures contract prices. Figure 8 displays U.S. natural gas prices for use in electricity production from January 2002 to December 2011. Figure 9 shows futures prices for natural gas through 2020. Figure 8. U.S. Natural gas electric power price 32 0 2 4 6 8 10 12 14 A pr -12 A ug-12 D ec -12 A pr -13 A ug-13 D ec -13 A pr -14 A ug-14 D ec -14 A pr -15 A ug-15 D ec -15 A pr -16 A ug-16 D ec -16 A pr -17 A ug-17 D ec -17 A pr -18 A ug-18 D ec -18 A pr -19 A ug-19 D ec -19 A pr -20 A ug-20 D ec -20 P ri ce ($ / M ill io n BT U ) Henry Hub Natural Gas Futures Prices Price per Million BTU Figure 9. Henry Hub natural gas futures prices. Notwithstanding volatility throughout the period, natural gas prices are roughly where they were in 2002. Short-term futures prices are significantly lower than current natural gas prices and this suggests a decrease in prices moving forward. The upward trend in Figure 9 is the result of premiums paid by purchasers of longer term futures contracts to lock in their price now. Futures prices are quoted in terms of cost including physical delivery to a particular location, referred to as a pricing point. Frequently that is the Henry Hub located in Louisiana. Nevertheless, the futures prices in Figure 9 remain well below existing natural gas prices. Due to the increase in reserves, advances in technology, and widespread support, low prices will likely persist and, as a result, natural gas is expected to play a large role in U.S. energy consumption going forward. 33 Nuclear Nuclear energy is expected to remain a relatively constant portion of U.S. energy production as a result of the high fixed cost, regulatory hurdles, and long construction time associated with establishing a nuclear power plant. Petroleum Petroleum is an important source of energy production for the U.S. and will remain a sizable portion of U.S. energy production for the foreseeable future. With that said, increased regulatory burden and decreasing reserves will continue to put upward pressure on the expenses of upstream, midstream, and downstream oil and gas production companies. This will be reflected in higher prices for the consumer. Moreover, the U.S. imports a significant amount of petroleum products and as global oil production moves more towards offshore and unconventional sources, price increases will be more dramatic. Figure 10. Global oil production 34 $0.0000 $0.0050 $0.0100 $0.0150 $0.0200 $0.0250 $0.0300 $0.0350 $0.0400 2001 2002 2003 2004 2005 2006 2007 2008 R ea l $ P er T on M ile Coal Rail Transport Prices West Virginia Pennsylvania Energy In Maryland Maryland has limited energy resources apart from the potential for wind power on the Chesapeake Bay and minor coal reserves in the Appalachian Mountains. As a result Maryland relies on energy source deliveries from other areas. Table 4. Maryland state energy consumption by type. Over 50% of the electric power in Maryland is produced using coal, which comes primarily from Pennsylvania and West Virginia. Coal transportation costs have recently increased 54.1% and 37.5% from both states respectively. Another third of the electric power consumed in Maryland is provided by its only nuclear power plant at Calvert Cliffs. Figure 11. Coal rail transport prices. Maryland State Energy Consumption By Type Maryland State Renewable Energy Consumption By Type Energy Source 2006 2007 2008 2009 2010 Change CAGR Coal 60.1% 59.2% 57.5% 55.2% 54.3% (9.6)% (2.0)% Petroleum 1.2% 2.0% 0.9% 0.8% 0.7% (37.8)% (9.1)% Natural Gas 3.6% 4.5% 3.9% 4.0% 6.6% 83.7% 12.9% Other Gases 0.7% 0.8% 0.7% 0.6% 0.5% (27.3)% (6.2)% Nuclear 28.2% 28.6% 31.0% 33.2% 32.1% 13.6% 2.6% Renewables 5.6% 4.5% 5.5% 5.6% 5.1% (7.8)% (1.6)% Pumped Storage 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Other 0.6% 0.6% 0.6% 0.6% 0.6% (0.6)% (0.1)% 35 Trends suggest that as a percentage of total energy consumed, coal will decrease and be replaced increasingly by natural gas and nuclear power. Interestingly, Maryland lies behind the curve in adoption of renewable energy sources having seen a 7.8% decrease in renewables usage from 2006 through 2010. Table 5. Maryland state renewable energy consumption by type. It is expected that this trend will reverse in light of a greater push for renewable energy sources at the federal level and increasing costs of other sources of energy, most notably coal. Indeed, given Maryland?s current reliance on coal firing plants for energy production, there could be a significant opportunity to leverage the existing infrastructure to burn dry biomass pellets, such as M. x giganteus. Maryland State Renewable Energy Consumption By Type Energy Source 2006 2007 2008 2009 2010 Change CAGR Geothermal 0.0% 0.0% 0.0% 0.0% 0.0% N/A N/A Hydro Conventional 77.1% 73.3% 76.3% 77.4% 74.4% (3.5)% (0.7)% Solar 0.0% 0.0% 0.0% 0.0% 0.02% N/A N/A Wind 0.0% 0.0% 0.0% 0.0% 0.04% N/A N/A Wood / Wood Waste 8.0% 9.0% 7.7% 7.2% 7.4% (7.8)% (1.6)% MSW Biogenic / Landfill Gas 14.9% 17.7% 16.0% 15.4% 18.2% 21.5% 4.0% Other Biomass 0.0% 0.0% 0.0% 0.0% 0.02% N/A N/A 36 CHAPTER 3: METHODOLOGY 37 Methodology Research Design ? Field Aspect Woodstock Site Description In 1928, the Affeldt family of Woodstock, Maryland acquired a 21.45-hectare (53-acre) farm, located 0.09 miles from the western border of Ellicott City (Google Earth, Inc.) and immediately east of the Howard County Conservancy. The Woodstock plot was a personal garden until twenty years ago, and has lain fallow since. The area used for this study, about 0.162 hectare (0.4 acre), was used as a private garden, growing corn, tomatoes, string beans, white potatoes, sweet potatoes, peas, watermelon, cantaloupe, asparagus, strawberries, and okra on rotation for 35 years. No fertilizer was ever applied. From 1995 to 2009, the plot laid fallow with only various small weedy grasses growing on it. On June 2, 2009, the plot was cleared of all weeds and was thoroughly tilled. The soil is composed primarily of good dirt, clay, and moderately-sized rock. The northern, upper part of the plot has an 8-15% slope. However, the plants were grown on the southern, lower part of the plot, which is relatively flat. There are lines of trees to the north, east, and south sides, and a home to the west. Sparse trees surround the plot, usually occurring in a single-file manner. For example, a row of 75-foot tall pine trees lies 50 feet west of the plot. The plot receives full sun for most of the day; however, the 75-foot tall pine trees shade the plot near sunset. According to the USDA Natural Resources Conservation Service Web Soil Survey, the soil in the plot is Glenville silt loam, containing silt loam soil to a depth of 30 inches. 38 Brandywine Site Description The ERCO Beneficial Reuse Tree Farm site is a privately owned 49.4 ha. (122 acres) sand and gravel mine spoil in Prince George?s County, MD. The site is in the coastal plains physiographic region, approximately 32 kilometers (20 miles) east of the escarpment region that identifies the piedmont physiographic region, and it is approximately three miles north of Waldorf, MD (Figure 3). The site consists of a plateau with steep banks that fall away to incised streams. The edges of the plateau are bermed and runoff is routed to one of seven detention ponds. All steep banks are covered with permanent forest cover. The plateau has an upper area (two sections) near the entrance on a 0-2% slope. The remaining seven sections have an elevation drop of between 1.5 and 3 m (5-10 ft.), followed by a level section (0-2% slope) to the edge of the plateau. Fig. 1-ERCO study site marked with star is located in Prince George?sCount , MD; within the Washington, D.C. metro ar a.. Figure 12. ERCO study site, located in Prince George?s County, MD within the Washington, D.C. metro area. 39 The research site is an existing portion of the plateau that was part of the office area. The research plots are on a bare parking area that has been compacted by the movement of heavy equipment. The Brandywine plot is level, and composed primarily of clay, rock, and poor dirt, though it is slightly sandier to the south portion. There are conventional soils on the steep side slopes that were not disturbed by sand and gravel mining, but there are no soils, as is the normal convention, on the plateau surface. In 1983, following cessation of the sand and gravel mining activity, the soil consisted of a clay layer with occasional remnants of sand and gravel and some gullies that were filled with soil during the re-grading process in 1983. The clay layer was 1.5 m to 21.3 m (5? ? 70?) or more thick. The following description of soils and geology at the ERCO site was derived from Wilson and Fleck (1990) and, to a lesser extent, Tompkins (1983) and begins with the deeper deposit first and concludes with the surface deposit that was removed in the mining operations (Wilson and Fleck, 1990; Tompkins, 1983). The lower formation is the Marlboro Clay (late Paleocene), a leaky confining unit of dense, reddish silty clay between 4.6 m and 7.2 m (15? ? 30?) in thickness. The lower Eocene Nanjemoy formation overlies the Marlboro Clay, and predominantly consists of beds of dark green, fine to medium, glauconite-bearing sands in the upper part of the formation and is a water-supply aquifer in many parts of southern Maryland. The thickness of the Nanjemoy at Waldorf ranges from 27.4 m to 38.1 m (90? ? 125?). Overlying the Nanjemoy is the lower Miocene Calvert Formation. The Calvert is a light to medium, olive gray to olive green, micaceous, clayey silt that acts 40 as a hydrologic confining unit. The thickness of the Calvert in the Waldorf area is 27.4 m to 30.5 m (90? ? 100?). The formation is the basal unit of the Chesapeake Group and it represents deposition in a marine shelf environment. The Calvert is overlain by the Pliocene Upland Deposits. The Upland Deposits consist of orange-tan, silty, fine to very course sands and gravels, and yellowish to orange, silty clays. The Upland Deposits range from 6.1 m to 15.2 m (20? ? 50?) thick and crop out throughout the Waldorf area. These materials were removed in the sand and gravel mining process. Hence, the ERCO site has very slight remnants of the Pliocene Upland Deposits over the Calvert clayey silt, over the Nanjemoy. Field Setup Four hundred forty M. x giganteus plants were purchased from Kurt Bluemel in Baldwin, MD, on May 20, 2009. They were transplanted and stored in Scott's potting soil in wide, flat bins containing 80-100 plants each, until planted at either the Woodstock or the Brandywine plot. The polymer, CLP, was purchased from Water- Keep. The M. x giganteus was planted in rows of ten plants each, eighteen rows total. Each row of ten plants runs north to south, and the eighteen rows are spaced east-to-west. Crimp fishing weights were attached to a piece of twine at three-foot intervals. The strings were laid on the plot in straight lines, north-south, and were spray-painted at each crimp weight. Each dot of spray paint represented the location where a plant would be placed. 41 At Woodstock, plants were planted using two shovels, one hand trowel, and a rotary tiller to mix polymer. Every other plant received 12.25g of polymer mixed into the soil by shovel or rotary tiller. Plants were deposited in 3-4 inch holes deep enough to cover the rhizome but not the plant stalk, and then watered generously. On June 9, 2009, 121 plants were planted, and the remaining 60 plants were planted on June 14, 2009. At Brandywine, plants were planted using an auger, two shovels on the first day, four shovels on the second day, and one hand shovel. The ground was soaked with water in order to soften the earth to allow digging with auger. Every other plant received 12.25g of polymer mixed into the soil by hand. Plants were deposited into holes deep enough to cover the rhizome but not plant stalk, and then watered generously. On June 27, 2009, 110 plants were planted, and the remaining 54 plants were planted on August 16th. On August 30, 2009 and September 7, 2009, the Woodstock location was visited in order to remove weeds. This was only conducted in the first year of planting ? during later years the M. x giganteus was tall and hardy enough to generally ignore the effects of weeds. Because of concerns identified by our experts over statistical validity, it was necessary to determine if growth was independent of adjacent plants in the original plant layout. Therefore, small plots were planted to compare growth with and without polymer. 42 On May 20, 2010, six small plots, each consisting of 16 plants arranged in a 4 by 4 pattern, were planted at Brandywine. The plants were again three feet apart. Each small plot was six feet away from any other small plot and at least nine feet away from the large plot. Three small plots contained polymer for all of the plants and three contained no polymer. The previous procedure for polymer addition was followed. The assignment of polymer treatment was random. The same procedure was followed at Woodstock on June 13 and 19, 2010 for the six small plots at this site. Woodstock plants are watered by hand, using buckets of water carried from a neighboring home during the establishment year, and Brandywine plants are watered by a sprinkler system. The frequency of watering is directed by Dr. Gary Felton. Each plot's harvested biomass was separated on the basis of polymer presence. The edge plants were discarded. Plants from two consecutive rows were combined to make one sample, which will also be known as a bag from this point onward. For the Figure 13. Checkerboard layout of both the Woodstock and Brandywine plots. 43 small plots, the edge plants were also discarded. The remaining plants in each small plot were bagged as one sample for a total of six samples per site. Each sample was dried for 2 weeks at 35 ?C in a drying chamber at the University of Maryland. Grinding was performed using an electric belt-driven Wiley? Mill. The grinder consisted of a rotating drum with four blades and a 1mm sieve screen. The main grinding compartment has an entry funnel and sliding door to control the rate of entry of samples into the main grinding barrel. Samples were taken from labeled bags and cut into one-inch to two-inch pieces to facilitate entering the funnel of the machine. Plain scissors were used to cut these pieces to size over a tarp to reduce to the loss of a part of each given sample. The tarp was cleaned using pressurized air between samples. The main door of the grinding barrel allowed for access to sample pieces that did not pass through the screen. The collection chute, at the base of the grinding barrel and under the screen, allowed for collection of finer pieces of the ground sample. Samples were collected in bags at the base of the chute. (Note: The minimum size of samples for calorimetric analysis was 10g. Some samples were combined to meet this requirement and larger pieces left in the grinding barrel were collected to achieve this minimum mass.) After each composite sample was ground, the grinder was cleared of all debris using pressurized air in order to prevent cross-contamination of samples with previous samples. The duration of the grinding process was 11 hours and 45 minutes over six days for the first harvest material. For the grinding of the material from the second harvest, as second belt-grinder was used. This allowed the grinding to be completed within 8 hours. 44 Differences in soil quality were determined by differences in the presence of certain nutrients. Total phosphorous content of soil was determined by a Mehlich 1 extraction (Knudsen and Beegle, 1996) followed by an inductively coupled plasma (ICP) measurement. Soil calcium, magnesium, and potassium contents were determined by a Mehlich 3 extraction (Knudsen and Beegle, 1996) followed by an inductively coupled plasma (ICP) measurement. Soil texture was determined via the hydrometer method (Gee and Bauder, 1986), and soil pH was measured potentiometrically in a slurry system using an electronic pH meter (McLean, 1982). These procedures were conducted at facilities at the University of Delaware Soils Lab and documented in NEC-1012, 2011. Research Design ? Laboratory Studies Calorimetric Analysis The Parr 1261 bomb calorimeter was used to determine the total energy content of the M. x giganteus. Benzoic acid was used to standardize the calorimeter and the Parr 1108 pressure bomb. The bomb was pressurized to 400 psi with oxygen for each run; the bombs were not purged. Each run used 10 cm (23 cal) of Parr ignition wire to start the combustion reaction. The calories contained in the unburned wire after each run were recorded. However, three calories of unburned wire was set as the default for the calorimeter to take into account when computing the energy content of each run. It was assumed that any deviation from three calories did not cause a significant change in the final energy content of that run. 45 Initially, 0.8-0.9 g of loose ground M. x giganteus was burned per run. However, the rapid combustion of the loose material produced a swift increase in pressure inside the bomb. The pressure rise caused the O-ring, which created the seal between the bomb head and the bomb cylinder, to be pushed back from the walls of the bomb cylinder. This allowed hot gas to reach under the O-ring and partially burn it, causing the O-ring to become progressively more flat on its inner surface. Furthermore, splatter from the reaction was seen on the underside of the bomb head, which indicated that the reaction was progressing too rapidly. After six to eight runs of this, the O-ring was no longer able to hold its seal and it had to be replaced. Overall, this problem resulted in incorrect energy content values; the reported values were the combination of the combustion energy from the M. x giganteus and that from the O-ring. To obtain more accurate energy content values, the ground M. x giganteus was pelletized using a Parr Instruments Pellet Press. Pelletizing the M. x giganteus slowed the combustion reaction and, thus, reduced the rapid increase in pressure, which prevented the O-ring from burning. Additionally, no splatter was observed on the underside of the bomb head. Pellets were limited to 0.56-0.65 g due to the size of the press. In every run, complete combustion was observed and O-ring damage no longer occurred. For each polymer treatment at each plot, six bags were chosen at random for analysis. The exception to this was with the Brandywine polymer plants for the 2011 harvest in which there were only five bags total. Three trials were run for each bag. The plants from all small plots for all harvest years were not analyzed for energy 46 content. The biomass was not ground as finely as the plants from the large plots due to the low biomass yields from the small plots. The differences in plant particle size could result in different and non-comparable calorimetry values. Therefore, the biomass from the small plots was not analyzed via calorimetry. Furthermore, the purpose of these plots was only to verify plant independence in the larger plots. For the 2012 harvest, only three bags for each polymer treatment at Brandywine were analyzed. Analyses were not performed on the Woodstock harvest because the energy contents from the previous harvests were consistent with each other. Furthermore, the 2012 harvests from all small plots were not analyzed for the same reasons as previously stated. Tempe Cell Analysis Soil water is retained by the capillary pressure that results from the geometry of the individual soil particles. As roots exert a suction on the soil water, more water is removed from the soil and the capillary pressure acting on the soil water increases. The relationship between the capillary pressure and the volume of water retained in the soil is called the soil water retention curve. The addition of polymer to the soil should shift the soil water retention curve. By measuring this curve for soil samples with and without polymer, the change should be at least qualitatively apparent and possibly could be quantified. Tempe Cell analysis was attempted for soil from Woodstock and Brandywine, with and without the polymer. Unfortunately, severe mechanical problems were encountered and data were unable to be collected. 47 Data Analysis A factorial 2x2 ANOVA test was used to analyze the resulting biomass data. The two treatments administered in the study, soil quality and the presence of CLP, were be crossed with each other to determine if they made significant differences in mean biomass yield. The test can statistically compare the variance of the means between the two treatments to the variance of the means within each type of treatment. Assuming the null hypothesis to be that neither treatment had any significant effect on the biomass yields of the plants, the hypothesis tests determined whether or not the null hypothesis should be rejected by quantifying the likelihood of a significant difference between the samples (Gelman, 2005). The ANOVA was run with a 95% level of confidence. Economic Analysis After the overall plot yield data was collected economic analysis was performed to determine if M. x giganteus could be used on a commercial scale as a biofuel substitute. The analysis centered on cash flow projections for the entire M. x giganteus supply chain. Plot size and acquisition cost were estimated based on U.S. Department of Agriculture data. Acquisition cost and useful lives were estimated for planting, harvesting, storage, processing, and transport machinery. Together these data provided for annual expense and debt service data on both a cash flow and accrual basis. 48 Straight line depreciation was used in the projection of depreciation expense for commercial machinery. Useful lives were estimated at 15 years and based on data from the University of Illinois at Urbana-Champaign. Interest rate and loan-to-value assumptions were based on current market conditions for the state of Maryland. Transportation variable costs were based on current market conditions as well as prices currently available in futures markets. Plant acquisition expense was estimated based on market costs. Annual revenue was determined by estimating price based on existing fuel prices across a variety of fuel sources. This was used in conjunction with existing yield data to project annual revenue for a commercial enterprise of 64.75 hectares (160 acres) on both agriculturally viable and agriculturally marginal land. Operating margins were expected to increase marginally over a 15 year period based on increased efficiencies of scale. General Economic Assumptions Acquisition cost for agriculturally viable land was estimated at $7,000 per acre and acquisition cost for agriculturally marginal land was estimated at $1762 per acre. Based on the average Maryland farm size of 160 acres this implied a $1,120,000 total cost for a plot of agriculturally viable land, and a $281,920 total cost for agriculturally marginal land. Based on current market conditions it was assumed that the acquisition loan would have a loan-to-value of 80%, and be amortized over 30 years at an interested rate of 5.2%. 49 Processing equipment, which included a dryer, pellet mill, pellet cooler, and other miscellaneous equipment was estimated to have an aggregate cost of $797,000. Variable processing costs of $11.30 per ton were estimated based on prevailing hourly wage rates and fuel price projections. These costs remained the same for both agriculturally viable and marginal land. Transportation equipment was also estimated at current fair market value. A loader was estimated at $82,000 and a truck at $100,000. Additional fixed transportation costs were estimated at $13,148 and variable costs were estimated based on projected travel distance at $0.70 per mile. Revenue was projected using a cross-section of fuel source prices over a 40 year period and averaging data qualifying the quantitative estimates with particular attention to biomass fuel price behavior. This analysis led us to a range of illustrative prices for M. x giganteus. These prices help to drive the different projection scenarios. Context of Anticipated Results It is anticipated that M. x giganteus planted with the polymer on the fertile soil will yield more biomass than those planted without the polymer in the fertile soil, and that those planted with polymer in the agriculturally marginal land will have greater biomass yield than those planted without (Abd El-Rehim et al., 2004). It is also predicted that the M. x giganteus planted on fertile soil will generate more biomass per unit area than the marginal land, but it is hypothesized that that this lower amount of debt service will compensate for the reduced yield. If this is the case, then M. x giganteus can be grown on land that is otherwise 50 considered unusable, which would leave fertile land available for other crops. M. x giganteus could thus provide a practical and efficient means to produce biofuel without further decreasing land resources. A study examining the viability of M. x giganteus in agriculturally marginal land in Maryland, and more generally, eastern United States, using water absorbent polymer has not been done before; in fact, a study taking into consideration Maryland climate on any aspect of growing M. x giganteus is not found in current scientific literature. Many studies in the literature were performed in Europe, while the number of North American studies is relatively small. The results of this data may support the theory that the climate differences between the two continents are not significant and thus allow European data to be applied to America. Previous literature has pointed out the inefficiency of using ethanol-based fuels. If experimental results suggest that M. x giganteus is a viable and more energy- saving alternative, it may replace energy maize as the crop of choice to grow for the alternative-fuel industry. Demand for petroleum products is projected to increase from 85.7 million barrels per day in 2008 to 112.2 million barrels per day in 2035 (Conti and Holtberg, 2011). Since petroleum fuels are non-renewable, increasing demand and decreasing supply will be unsustainable. Even with the help of alternative fuel and energy sources such as energy maize, projected energy goals will not be met. It is anticipated that M. x giganteus will show itself as a viable and possibly superior alternative to energy maize and other current energy crops by being more suitable to unutilized land and being capable of producing more energy. 51 CHAPTER 4: RESULTS 52 Results Soil Test Results Soil tests measure soil pH and nutrient levels. A basic soil test that gives values for soil pH, phosphate, potassium and magnesium levels (Clement and Traunfeld, 1996) was run by the University of Delaware soil test laboratory. Soil texture is based on the percentage of sand, silt and clay particles in the soil. The largest particles are classified as sand, intermediate particles are classified as silt, and the smallest particles as clay. Soil texture influences the amount of pore space, which in turn influences the amount of water and air in the soil. Soil texture also influences the nutrient holding capacity and the amount of lime needed to correct soil acidity. Soils with high percentage of clay have smaller pore spaces, and hold water and nutrients more tightly than sandy soils. Organic matter is a vital contributor to soil aggregation. Organic matter also slowly releases nutrients, and increases microbial activity in the soil. Soil pH is a measure of how acidic (sour) or basic (sweet) the soil is. Soil pH directly affects nutrient availability. The pH scale ranges from 0-14 with 7 as neutral. Numbers less than 7 indicate acidity, while numbers greater than 7 are basic. Nutrients for healthy plant growth are divided into three categories: primary, secondary, and micronutrients. Nitrogen (N), phosphorus (P), and potassium (K) are primary nutrients that are needed in fairly large quantities. Calcium (Ca), magnesium (Mg), and sulfur (S) are secondary nutrients that are used in lesser quantities. Micronutrients are required in very low amounts and include copper (Cu), iron (Fe), boron (B), manganese (Mn), zinc (Zn), molybdenum (Mo), and chlorine (Cl). 53 The Brandywine soils (poor soil site) are soils from sand and gravel mining activity in the 1980s. The site on which the M. x giganteus was planted was used as a heavy equipment parking area. As such, it is expected that soil compaction is significant. The Woodstock soil is an abandoned garden area with relatively well- developed soil. Six samples were collected from each of the two sites. One Brandywine sample was too full of stones to be useful and was discarded. Table 1 presents the soil test results for each sample and the aggregated values for each site. Table 6. Values and univariate statistics for selected soil test parameters. Brandy: Brandywine site samples. Wood: Woodstock site samples. Sample ID pH OM (%) by LOI Est. CEC (meq/100g) Sample ID pH OM (%) by LOI Est. CEC (meq/100g) Wood 1 5.6 2.4 6.8 Brandy 1 6.9 1.0 6.7 Wood 2 5.3 2.8 7.8 Brandy 2 7.5 1.2 11.6 Wood 3 5.8 2.7 8.8 Brandy 3 7.3 1.4 10.1 Wood 4 5.6 2.5 7.2 Brandy 4 7.9 1.0 16.8 Wood 5 5.4 2.4 7.1 Brandy 5 7.3 1.2 9.1 Wood 6 5.6 2.4 7.6 Average 7.4 1.2 10.9 Average 5.6 2.5 7.6 S.D. 0.3 0.1 3.4 S.D. 0.2 0.2 0.6 Min 6.9 1.0 6.7 Min 5.3 2.4 6.8 Max 7.9 1.4 16.8 Max 5.8 2.8 8.8 CV 0.04 0.13 0.31 CV 0.03 0.06 0.09 Brandywine soils are only approximately 30-40 years old and were originally formed on marine sediments. There were some shell fragments in some samples. The pH is above neutral (7.0), which is somewhat unusual for soils in the humid region, but is probably due to the marine formation and the calcium content associated with the shells. The organic matter content is low by agricultural soil 54 standards. Because no long history of plant growth exists above and near this material and there has never been any organic matter added, a low organic matter content is reasonable. The organic matter content of the Woodstock site is typical of many Maryland soils. Both soils have relatively low cation exchange capacities (CEC). The average values are normally associated with sands and are associated with lower fertility and/or lower organic matter content. Though neither soil has a particularly high CEC, the Brandywine site seems a little better off, which is a bit odd because the Woodstock site is the abandoned agricultural soil, thought to be better for plant growth. The variation in CEC at the Brandywine site is much higher than at the Woodstock site (see coefficient of variation (CV) in table above) The soil test results provided values for phosphorus, potassium, calcium, magnesium, manganese, zinc, copper, iron, boron, sulfur, and aluminum. Soil tests do not provide measurements of nitrogen. The chemical concentrations in the samples are presented in the table below. 55 Table 7. Values and univariate statistics for selected soil test chemical parameters. Brandy: Brandywine site samples. Wood: Woodstock site samples. M3-P (mg/kg) M3-K (mg/kg) M3-Ca (mg/kg) Brandy 1 14.05 31.94 843.61 Brandy 2 8.51 30.28 1841.94 Brandy 3 11.53 36.40 1449.01 Brandy 4 11.14 40.67 3019.77 Brandy 5 7.11 32.17 1324.85 Average 10.5 34.3 1695.8 SD 2.4 3.8 734.7 Minimum 7.1 30.3 843.6 Maximum 14.1 40.7 3019.8 CV 0.23 0.11 0.43 Wood 1 15.80 171.54 506.18 Wood 2 31.78 255.38 535.17 Wood 3 99.93 264.47 809.58 Wood 4 31.22 202.59 583.41 Wood 5 42.05 220.42 482.36 Wood 6 96.30 271.09 607.08 Average 52.8 230.9 587.3 SD 32.9 36.0 108.1 Minimum 15.8 171.5 482.4 Maximum 99.9 271.1 809.6 CV 0.62 0.16 0.18 The phosphorus values were considerable lower for the Brandywine site. The potassium values were also considerably lower for Brandywine than for the Woodstock site. These two nutrients are two of the three major nutrients needed for plant growth, with nitrogen being the third. Based only on these nutrient values, we expect to see better plant growth at the Woodstock site than at the Brandywine site. Other nutrients were also determined and univariate statistics are in the table below without including all sample values. 56 Table 8. Univariate statistics for selected soil test chemical parameters. Brandywine M3-B M3-S M3-Al M3-Mg M3-Mn M3-Zn M3-Cu M3-Fe (mg/k g) (mg/k g) (mg/k g) (mg/kg ) (mg/kg) (mg/k g) (mg/kg) (mg/k g) Average 0.6 38.3 853.4 163.9 68.4 1.0 1.4 184.1 SD 0.1 9.7 27.9 15.8 21.1 0.1 0.2 53.0 Min 0.5 23.0 825.2 141.9 35.7 0.8 1.3 130.7 Max 0.8 50.9 893.3 190.7 95.6 1.1 1.7 275.3 CV 0.21 0.25 0.03 0.10 0.31 0.10 0.12 0.29 Woodstock Average 0.5 18.1 975.2 84.6 126.6 2.3 2.0 152.4 SD 0.1 1.1 29.5 23.1 20.2 0.3 0.6 17.3 Min 0.5 16.0 930.7 63.9 105.6 1.8 1.6 126.0 Max 0.7 19.4 1010.5 132.4 165.9 2.9 3.2 182.8 CV 0.11 0.06 0.03 0.27 0.16 0.14 0.28 0.11 The nutrients in the table above are more minor in their impact on plant health. Boron, aluminum, and iron were not remarkably different between the two sites. The Brandywine site was higher in sulfur and magnesium. The Woodstock site was higher in manganese, zinc, and copper. The subtleties of the impact of each nutrient on M. x giganteus growth and development are beyond the scope of this study. 57 Mass Yields Per Plant Figure 14. Mean mass per plant versus harvest year at Woodstock (blue) and Brandywine (red), along with error bars representing one standard deviation Figure 15. Mean mass per plant versus harvest year at Woodstock, along with error bars as well as the results of the Tukey range test (represented by the lettering above the error bars). Since all three letters are different, it signifies that all three mass per plant means are significantly different. 58 Figure 16. Mean mass per plant versus harvest year at Brandywine, along with error bars as well as the results of the Tukey range test (represented by the lettering above the error bars). Since all three letters are different, it signifies that all three mass per plant means are significantly different. There are multiple ways that the viability of M. x giganteus is judged, both by the presence of polymer in the soil and the soil quality itself. Firstly, since the masses of each row?s plants were obtained (separating out the masses of polymer and non- polymer plants), it is a simple comparison to see whether the presence of polymer boosted the mass yield of M. x giganteus. Two types of statistical tests were conducted: 2-sample t-tests and ANOVAs, on the data. A test was initially conducted to see if over the two initial years of data, the mass data from Woodstock was indeed different from the mass data from Brandywine. Table 9. A comparison of the p-values from analysis of the Brandywine biomass yield data and the Woodstock biomass yield data from the 3 years of harvesting. ? (significance level)=0.05 Plot P-value Woodstock v Brandywine (2010) 5.62x10-6 Woodstock v Brandywine (2011) 1.04x10-6 Woodstock v Brandywine (2012) 2.73x10-6 59 Indeed, it is clear from the p-value, multiple orders of magnitude smaller than the significance level, that the null hypothesis of there being no difference between Brandywine and Woodstock plant masses, is rejected. Even assuming infinite degrees of freedom, the t-value is also much larger than the threshold value for the differences in the means to not be attributed to simply randomness. Table 10. The p-values from analysis of biomass yield data from Brandywine in 2010 as compared to 2011, and similarly, Woodstock in 2010 as compared to 2011. ?=0.05 Plot P-value Brandywine (2010) v Brandywine (2011) 1.23x10-4 Woodstock (2010) v Woodstock (2011) 2.69x10-7 Similarly, it is clear that there are clear differences within the data for each plot compared to previous years, which means that the mass differences from year to year within each plot was not due to chance. Now that it is clear that there are statistically significant differences in mass within a plot from year to year, and in a single year from plot to plot, establishing whether this difference could be due to the presence of polymer is important to answering the research question. Table 11. A comparison of the p-values of polymer versus nonpolymer plant biomass yields within each plot during one year of harvest. ?=0.05 Plot (year): Polymer v Nonpolymer P-value Woodstock (2010): P v NP 0.398 Brandywine (2010): P v NP 0.819 Woodstock (2011): P v NP 0.132 Brandywine (2011): P v NP 0.995 Woodstock (2012): P v NP 0.219 Brandywine (2012): P v NP 0.548 60 The results of the t-tests displayed in Table 5 do not lend much credence to the notion that the null hypothesis of there not being non-random differences in polymer plants and nonpolymer plants? biomass yields. In fact, for Brandywine in 2011, it is almost 99.5% likely that the same, if not more extreme, results obtained for the biomass yields for polymer and nonpolymer plants could be obtained assuming the null hypothesis were true. For the other years and other plots, the p-value falls above the set significance level, which means that the null hypothesis cannot be rejected. Therefore, there are statistically significant differences in biomass yields between Woodstock and Brandywine, and between 2010 and 2011. However, there are no statistically significant differences between the use of polymer and the non-use of polymer. Hence, the application of polymer likely has no significant difference on the biomass yield of M. x giganteus. However, it is clear that Woodstock yields much more biomass than Brandywine. Assuming 12100 plants per hectare, the yield for the Woodstock plot would be 4.77 x 106 g. For Brandywine, this value is 1.47 x 106 g. With respect to the small plots that were planted in the spring of 2010, mass yield data from the 2011 harvest revealed that there was no statistically significant difference between polymer treatments at both plots, nor was there a statistically significant difference between the overall mass at the Woodstock plot and the overall mass at the Brandywine plot. 61 Table 12. Mean mass per plant and standard deviation of plants at both Woodstock and Brandywine small plots, separated by polymer treatment. Plot Polymer Treatment Average mass per plant (g) Standard Deviation (g) Woodstock polymer 2.3 0.7 nonpolymer 3.6 2.5 Brandywine polymer 2.5 1.6 nonpolymer 3.1 1.7 It should be noted that much biomass could fall off the main stems of the plants prior to harvesting. This is illustrated by the Woodstock 2012 harvest. In one 3 foot by 3 foot square, 151 g of M. x giganteus biomass was collected from the ground at the time of harvest. Scaled up to one hectare, the amount lost becomes 1.81 x 106 g. These losses are generally unavoidable as harvesting earlier results in less nutrients being sequestered back into the rhizome. Energy Content Per Unit Mass Table 13 Mean energy content and standard deviation of plants at both Woodstock and Brandywine, separated by polymer treatment. Year Plot Mean energy content (cal/g) Standard Deviation (cal/g) 2010 Woodstock polymer 4250 125.2 Brandywine polymer 4350 60.0 Woodstock nonpolymer 4276 123.1 Brandywine nonpolymer 4313 95.4 2011 Woodstock polymer 4308 106.7 Brandywine polymer 4264 84.1 Woodstock nonpolymer 4309 68.0 Brandywine nonpolymer 4231 51.4 2012 Brandywine polymer 4458 174.3 Brandywine nonpolymer 4425 48.7 62 Table 14. Mean energy content and standard deviation at both Woodstock and Brandywine, neglecting polymer treatment Year Plot Mean energy content (cal/g) Standard Deviation (cal/g) 2010 Woodstock 4264 123.1 Brandywine 4329 83.5 2011 Woodstock 4309 88.2 Brandywine 4246 69.1 2012 Brandywine 4442 125.3 The energy content of the plants, determined through calorimetry, was first used to see if there was any statistical significance between harvests. Table 15. The p-values of the statistical analysis of calorimetry mean energy contents, ignoring application of polymer. ?=0.05 Plot P-value Brandywine v Woodstock (2010) 0.0087 Brandywine v Woodstock (2011) 0.00156 Figure 17. Mean plant energy content versus harvest year at Woodstock (W) and Brandywine (B), along with error bars as well as the results of the Tukey range test (represented by the lettering above the error bars). Since there is statistical significance between Brandywine and Woodstock plots in terms of the energy content of plants, it can conjectured that there is some 63 physiological difference between Brandywine and Woodstock plants that can be the root cause. Since the plants are genetically very similar, coming from the same nursery, genetic causes seem less likely than differences in soil quality leading to different growth of the plants. To investigate whether or not the application of the polymer could result in this difference (i.e. if the polymer?s application could mean a plant could have a higher or lower energy per unit mass), the same statistical tests were conducted comparing polymer and nonpolymer plants within each plot. Table 16. Comparison of statistical test results of calorimetry data for plants with and without polymer within each plot for a given year. ?=0.05 Plot (year): Polymer v Nonpolymer P-value Woodstock (2010): P v NP 0.515 Brandywine (2010): P v NP 0.166 Woodstock (2011): P v NP 0.987 Brandywine (2011): P v NP 0.197 Brandywine (2012): P v NP 0.60 From this analysis, the null hypothesis that there is no difference in the energetics of polymer plants as opposed to nonpolymer plants cannot be rejected, since the significance level threshold was not achieved. Therefore, the application of polymer did not change the energy yield of a plant by any statistically significant margin. Additionally, to see if there was significance in the calorimetric data from year to year within a plot was investigated. Table 17. Comparison of statistical test results of calorimetry data for plants with and without polymer within each plot for a given year. ?=0.05 Plot P-value Brandywine (2010) v Brandywine (2011) 2.86x10-5 Woodstock (2010) v Woodstock (2011) 0.0717 Brandywine (2010) v Brandywine (2012) 0.0019 Brandywine (2011) v Brandywine (2012) 3.00x10-6 64 Interestingly, it seems that there was a statistically significant difference between all calorimetric data from Brandywine. However, this difference was not present in the Woodstock data, although the p-value is very close to the significance level. The reasoning behind this will be presented in the discussion chapter. Based on the assumption of 12100 plants per hectare, the annual energy content per hectare that can be expected is 2.04 x 107 kcal for the Woodstock plot. For the Brandywine site, this value is 6.55 x 106 kcal. This projection uses the 2012 harvest average energy content of 4441.81 cal/g. Height Results In order to analyze height data from year to year and from plot to plot, the Tukey range test was used to analyze statistical significance. However, 2-sample t- tests were used to determine whether or not application of polymer had a significant difference on the height of plants. It was found that the null hypothesis of height not being affected by the polymer could not be rejected for polymer versus nonpolymer plants for any year in any plot. However, there was strong significance in data showing that there were height differences between Woodstock plants and Brandywine plants. 65 Figure 18. Mean plant height versus harvest year at Woodstock (blue) and Brandywine (red), along with error bars representing one standard deviation. Figure 19. Average plant height versus harvest year at Woodstock, along with error bars as well as the results of the Tukey range test (represented by the lettering above the error bars). Since all three letters are different, it signifies that all three height mean differences are significant. 66 Figure 20. Average plant height versus harvest year at Brandywine, along with error bars as well as the results of the Tukey range test (represented by the lettering above the error bars). Since all three letters are different, it signifies that all three height mean differences are significant. The data also shows that on average, Woodstock plants are taller than Brandywine plants. Plant Survivability The survival of the inner plants of the each plot (i.e. those plants that did not reside on an edge of the plot) was recorded for each year, plot, and polymer treatment (Figure 21). 67 Figure 21. Percent plant survival at each plot (Woodstock: W, Brandywine: B) for each polymer treatment (with polymer: P, without polymer: NP) and for each harvest year. The Woodstock plot showed the best overall survival percentage, never dipping below 95%. On the other hand, Brandywine showed more considerable losses with up to 23.3% plant death over three years. It appears, based on the figure, that the presence of CLP is correlated with greater percent survival of the plants receiving this treatment compared to those that did not receive the polymer. On a side note, the slight increase in plant survival percentage for the Brandywine plants that received CLP is attributed to the possibility that some plants were mistakenly counted as being dead in 2011, when in fact they were not. 68 Economic Results Scenario One (Existing Price): $56.02/ton Based on current market prices for biofuel sources an existing price that M. x giganteus could be sold for today is $56.02/ton. This was used as a base case in estimating crop profitability. In addition, multiple expense scenarios were considered that ranged from full acquisition of the land and all necessary equipment to a 100% land subsidy and the assumption that all machinery was already owned. The resulting profitability calculations were as follows. A detailed income statement and cash flow statement are included in the appendix to this section. Table 18. Case one profitability calculations IRR, or internal rate of return, is a profitability measure that calculates the discount rate at which the net present value of all cash flows associated with the project is zero. NPV, or net present value, is a summation of the total discounted value of all cash flows that the project will generate over its life. An IRR value of ?N/A? in the table suggests that the project never reached positive cash flow. IRR and NPV are used as common decision making tools when evaluating capital projects. In Case One Profitability Calculations Existing Price Viable Land Worst Case Base Case Best Case IRR N/A N/A (5.7)% NPV $ (1,886,270) $ (974,218) $ (56,776) Marginal Land IRR N/A N/A N/A NPV $ (1,580,209) $ (907,279) $ (234,348) Assumptions Discount Rate 5.0% 5.0% 5.0% Land Subsidy 0.0% 50.0% 100.0% Equipment Purchase 100.0% 50.0% 0.0% $ / Ton $ 56.02 $ 56.02 $ 56.02 69 order to accept a project its IRR should be higher than the discount rate, and the net present value of the cash flows should be positive. Case One resulted in a project with severely negative NPV under all expense assumptions for both agriculturally marginal and viable land, and only achieved positive cash flow under the assumptions of 100% land subsidy and 0% equipment acquisition for agriculturally viable land. It is unlikely that a project with these return characteristics would be accepted. Scenario Two (Approximate Doubling of the Price): $160.07/ton Given the poor results of case one, it was important to sensitize the projections to see at what point a commercial M. x giganteus project would become viable. To that end, a price based on more expensive fuel sources that was approximately two times the projected existing market price for M. x giganteus was used in the calculations. The results were more encouraging, but the project was still unable to achieve positive cash flows under all expense assumptions for marginal land. For the viable land plot under full expense assumptions as well as half-expense assumptions, the project did achieve positive cash flows but had a severely negative IRR and NPV, suggesting that similar to the existing price scenario this project would not be accepted. If, however, the most favorable expense assumptions were used (100% land subsidy, 0% equipment acquisition) the project became extremely profitable. Under these assumptions the project produced a 49.6% IRR which was well above the 5.0% discount rate assumption for this endeavor. Likewise the project?s NPV was $485,749. 70 Case Three Profitability Calculations Approx. Triple Existing Price Viable Land Worst Case Base Case Best Case IRR (7.4)% 2.7% 82.1% NPV $ (1,091,173) $ (141,544) $ 971,728 Marginal Land IRR (22.5)% (15.5)% 12.7% NPV $ (1,315,557) $ (642,626) $ 62,233 Assumptions Discount Rate 5.0% 5.0% 5.0% Land Subsidy 0.0% 50.0% 100.0% Equipment Purchase 100.0% 50.0% 0.0% $ / Ton $ 240.10 $ 240.10 $ 240.10 Case Two Profitability Calculations Approx. Double Existing Price Viable Land Worst Case Base Case Best Case IRR (16.7)% (6.7)% 49.6% NPV $ (1,465,035) $ (552,983) $ 485,749 Marginal Land IRR N/A N/A N/A NPV $ (1,478,741) $ (805,810) $ (132,879) Assumptions Discount Rate 5.0% 5.0% 5.0% Land Subsidy 0.0% 50.0% 100.0% Equipment Purchase 100.0% 50.0% 0.0% $ / Ton $ 160.07 $ 160.07 $ 160.07 Despite these encouraging results, it is unlikely that such expense conditions would be achievable and, therefore, under this scenario the project would again likely be rejected. Scenario Three (Approximate Tripling of the Price): $240.10/ton Further sensitivity analysis was performed using still more expensive fuel sources as proxies for M. x giganteus to find a projected sale price of approximately three times the existing price for the crop. Table 19. Case two profitability calculations. Table 20. Case three profitability calculations 71 Viable Land IRR Heat Map (Scenario Three) % Land Purchased 82.1% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 0.0% 82.1% 60.0% 46.9% 38.0% 31.5% 26.3% 22.0% 18.4% 15.3% 12.5% 10.0% 10.0% 36.5% 31.0% 26.5% 22.7% 19.3% 16.4% 13.8% 11.5% 9.3% 7.3% 5.5% 20.0% 23.9% 20.8% 18.1% 15.6% 13.3% 11.2% 9.3% 7.5% 5.8% 4.2% 2.6% 30.0% 17.1% 14.9% 12.9% 11.0% 9.2% 7.6% 6.0% 4.5% 3.1% 1.8% 0.5% 40.0% 12.6% 10.9% 9.2% 7.7% 6.3% 4.9% 3.5% 2.3% 1.0% (0.1)% (1.3)% 50.0% 9.2% 7.8% 6.5% 5.1% 3.9% 2.7% 1.5% 0.4% (0.7)% (1.7)% (2.8)% 60.0% 6.6% 5.4% 4.2% 3.1% 2.0% 0.9% (0.1)% (1.1)% (2.1)% (3.0)% (4.0)% 70.0% 4.5% 3.4% 2.4% 1.4% 0.4% (0.6)% (1.5)% (2.4)% (3.3)% (4.2)% (5.0)% 80.0% 2.7% 1.8% 0.8% (0.1)% (1.0)% (1.8)% (2.7)% (3.5)% (4.4)% (5.2)% (5.9)% 90.0% 1.2% 0.4% (0.5)% (1.3)% (2.2)% (3.0)% (3.7)% (4.5)% (5.3)% (6.0)% (6.7)% 100.0% (0.1)% (0.9)% (1.7)% (2.4)% (3.2)% (3.9)% (4.6)% (5.4)% (6.1)% (6.7)% (7.4)% % E qu ip m en t P ur ch as ed Marginal Land IRR Heat Map (Scenario Three) % Land Purchased 12.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 0.0% 12.7% 10.0% 7.6% 5.3% 3.2% 1.2% (0.7)% (2.5)% (4.2)% (5.9)% (7.6)% 10.0% (1.5)% (2.6)% (3.7)% (4.8)% (5.9)% (7.0)% (8.0)% (9.1)% (10.2)% (11.3)% (12.4)% 20.0% (6.1)% (7.0)% (7.8)% (8.6)% (9.4)% (10.3)% (11.1)% (12.0)% (12.9)% (13.8)% (14.8)% 30.0% (9.0)% (9.7)% (10.4)% (11.1)% (11.8)% (12.5)% (13.3)% (14.0)% (14.8)% (15.7)% (16.5)% 40.0% (11.0)% (11.6)% (12.2)% (12.9)% (13.5)% (14.2)% (14.9)% (15.6)% (16.3)% (17.1)% (17.9)% 50.0% (12.6)% (13.1)% (13.7)% (14.3)% (14.9)% (15.5)% (16.2)% (16.8)% (17.5)% (18.2)% (19.0)% 60.0% (13.9)% (14.4)% (14.9)% (15.5)% (16.0)% (16.6)% (17.2)% (17.8)% (18.5)% (19.2)% (19.9)% 70.0% (14.9)% (15.4)% (15.9)% (16.5)% (17.0)% (17.6)% (18.1)% (18.7)% (19.3)% (20.0)% (20.7)% 80.0% (15.9)% (16.3)% (16.8)% (17.3)% (17.8)% (18.4)% (18.9)% (19.5)% (20.1)% (20.7)% (21.4)% 90.0% (16.7)% (17.1)% (17.6)% (18.1)% (18.6)% (19.1)% (19.6)% (20.2)% (20.8)% (21.4)% (22.0)% 100.0% (17.4)% (17.8)% (18.3)% (18.8)% (19.2)% (19.7)% (20.2)% (20.8)% (21.3)% (21.9)% (22.5)% % E qu ip m en t P ur ch as ed This scenario showed still more encouraging results achieving a positive IRR under base case expense assumptions for viable land and best case expense assumptions for marginal land. The following table summarizes IRR at varying levels of land subsidy and equipment acquisition. Table 21. Viable land IRR heat map (scenario three). Table 22. Marginal land IRR heat map (scenario three). 72 CHAPTER 5: DISCUSSION 73 Discussion Agricultural Implications The results show that the arable plot (Woodstock) was far more productive compared to the agriculturally marginal plot (Brandywine). The yield per hectare of the Woodstock plot (4.77 x 106 g) was 3.24 times greater than the yield per hectare of the Brandywine plot (1.47 x 106 g). This suggests that arable land is better for growing more M. x giganteus with more mass per plant. In addition, 57.6% of plants at Woodstock reached the mature height of 3 m or more whereas only 2 plants reached close to that height (2.95 m) on the Brandywine plot. The Woodstock plants were clearly taller and more robust with the sprouting of many more stalks in a given plot area. A contributor to the drastic difference in productivity is the quality of the soil. In addition to the clay and packed soil, stones and sand were evident at the Brandywine plot. With such obvious differences in productivity, agriculturally marginal land would have to be augmented in some way to even approach the levels of productivity from arable land. Due to the fact that there was no statistically significant difference between the mass per plant values for the polymer treatments at each site, it can be concluded that the spacing of the plants in the larger plots was adequate to prevent one plant without CLP from drawing benefits from the CLP around a neighboring plant. This demonstrates that the design of the larger plot is valid and that the polymer around one plant does not affect the nearby plant that lacks polymer. Conclusions concerning the effect of the CLP in the larger plot are thus still valid. As the results indicate, no statistically significant difference was found 74 between the means for height, mass per plant, or calorimetry for the polymer and nonpolymer plants for the respective plot and year. This suggests that there is no advantage to using polymer in non-water limiting conditions. The Maryland climate is not dry enough to justify the use of CLP. The plots were irrigated during the transplantation process (first season) and watering was subsequently left to natural precipitation. The energy content values of the Woodstock plants were statistically consistent across two years. However, at Brandywine, no mean values for each harvest year were consistent. This could be due to the fact that as the plant grows taller, the plant produces more lignin to strengthen each stalk to allow it to grow taller. Between the 2011 and 2012 harvests at Brandywine, the mean height of the plants nearly doubled. As such, this explanation for the increase in energy content is plausible. Field Variables Both the Brandywine and Woodstock sites contain several confounding variables. The amount of light that the plants received was different at each plot. At Brandywine, the plot receives full sun with no shade from trees at any point in the day. In contrast, the western side of the Woodstock plot has a row of 75-foot tall pine trees roughly fifteen feet from the nearest M. x giganteus plant, which cast shadows over the plot of M. x giganteus around sunset. The Woodstock plot also has a slight incline. Most of the plants were planted at the flattest part of the area, but some of the plants were placed on a section of the 75 plot that slopes upward. This could have allowed the plants at the bottom of the incline to receive more rainwater, since the water will run down the slope to the flatter area. The plot at Brandywine, however, is completely level, allowing for even reception of rainwater. Since Brandywine and Woodstock are about 67.6 km apart, the daily temperature and precipitation at both sites differed. Differences in the amount of water received by the plants was not a variable in this experiment since as much water as was needed was given, assuming that a similar quantity will be given in industrial production. Finally, the soil composition within each plot differed. At Woodstock, the soil composition is uniform throughout the plot. At the Brandywine plot, the soil on the southern side of the plot is sandier than the soil on the northern side. During the planting process, the plants were planted at differing depths and with different tools. In Brandywine, about half the plants were planted in holes dug with an auger, which produced three-inch diameter vertical shafts. The other plants were planted in holes dug with shovels, which created a paraboloid-like depression in the ground. The auger-produced holes were deeper than the holes created with the shovels. In Woodstock, all of the holes were dug with shovels and at more consistent depths. Some of the plants with polymer had some of the polymer exposed on the surface. Ten plants at the Woodstock plot and at least one plant at Brandywine had exposed polymer. UV light has been demonstrated to increase the rate of cross-linked polyacrylamide degradation, thereby decreasing the water-absorbing capacity of the 76 UV-damaged polymer (Holliman et al., 2005). In this study, exposed polymer was not re-covered because in large-scale productions, any exposed polymer would not be re- covered by the operator (Felton, Personal communication). Two months after the plants were planted in Woodstock, the plot was overgrown with weeds. Some of the weeds included Artemisia vulgaris, common wormwood; Polygonum perfoliatum, mile-a-minute weed; Cyperus esculentus, yellow nutsedge; and Setaria faberi, giant foxtail, which was the most prevalent. S. faberi is an annual grass native to Asia that grows to a maximum height of seven feet (Lanini and Wertz, 1980). These plants grew to a comparable height to the M. x giganteus present at the Woodstock plot at the time. The S. faberi and the M. x giganteus probably competed for light, water, and soil nutrients. This competition was most likely not significant enough to harm the M. x giganteus, but the plants in Brandywine did not experience a similar competition with weeds. In Brandywine, the weeds were minor, small grasses that were not substantial enough to provide heavy competition with the M. x giganteus. Competition with weeds was not a problem in the second growing season. From the second growing season onward, the canopy of M. x giganteus prevented the growth of most weeds by blocking sunlight from reaching the ground. M. x giganteus as a Commercial Enterprise To evaluate M. x giganteus? potential to participate in a burgeoning biofuels production industry it was important to analyze the crop from a commercial standpoint. It was reviewed in terms of profitability and potential cash flow for a 77 production facility in Maryland on both agriculturally viable land and agriculturally marginal land. M. x giganteus was evaluated under three scenarios with different revenue and expense assumptions. Implications Interestingly, in Scenario One (Existing Price Revenue Calculation), the marginal land plot preforms better than the agriculturally viable land. This speaks to the significance of the debt service in the profitability of a commercial M. x giganteus enterprise. The only significantly different input for the marginal land plot is acquisition cost of land. The total acquisition cost for 160 acres of marginal land was only 25.1% the cost of the same amount of agriculturally viable land. Despite significantly lower overall revenue, the marginal land plot has a lower net operating loss and a lower cash balance reduction than the agriculturally viable land on a yearly basis. This suggests that with lower land acquisition costs the enterprise could potentially become commercially viable. As Scenario One is the most probable given current market conditions, additional analysis was performed to determine the level of subsidization or reduction in land acquisition cost that would be required to make a commercial operation cash flow positive under these revenue assumptions. Current acquisition costs would have to be reduced by 83% to make an agriculturally viable land plot cash flow positive within 15 years. A 100% reduction in acquisition cost results in cash flow positive operations within 9 years. No level of subsidization results in cash flow positive operations over 15 years for agriculturally marginal land. 78 Without substantial reduction in cost or similar increase in sale price large scale commercial viability of M. x giganteus is unlikely. It is likely that over time market prices for biofuels will increase, especially as production costs for other fuel sources continue to grow. However, given current market conditions, it is unlikely that the required increase in market price will occur to make a commercial M. x giganteus production enterprise viable in the near future. In addition, land acquisition costs are projected to increase in the coming years, which would provide a further impediment to profitable operations. Unless the proposed land is currently fully owned, or the government provides significant subsidies, land acquisition cost and a low price point will continue to be prohibitive to a successful M. x giganteus enterprise. With that said, it is important to note that no commercial fertilizers were used in this study and, as a result, there is the possibility that application of such fertilizer would significantly increase yield, which would increase overall profitability. The following table and accompanying chart present hypothetical increases in yield per hectare for both viable and marginal plots, and the resulting profitability metrics. Plot Yield Sensitivity Viable Land Marginal Land IRR NPV IRR NPV 2 N/A $ (138,068) 2 N/A $ (201,799) 4 (14.4)% (82,089) 4 N/A (109,287) 6 2.5% (16,348) 6 5.2% 1,208 8 11.8% 53,552 8 18.3% 121,088 10 19.0% 123,822 10 28.2% 240,968 15 33.1% 299,495 15 47.7% 540,669 20 44.6% 475,169 20 63.7% 840,370 25 54.7% 650,843 25 77.7% 1,140,071 30 63.8% 826,517 30 90.4% 1,439,772 Y ie ld P er H ec ta re Y ie ld P er H ec ta re Table 23. Hypothetical increase in yield per hectare and resulting profitability metrics. 79 Indeed, even marginal increases in yield result in substantially increased profitability at the existing price level. As yield increases, the Brandywine plot (marginal land) outpaces Woodstock (viable land) in terms of profitability due to its lower cost structure. This suggests that with the application of commercial fertilizer, and a low acquisition cost of marginal land, a M. x giganteus operation could be economically viable and quite profitable. y = 12023x2 + 1207.7x - 143105 R? = 0.99693 y = 20646x2 + 411.38x - 209950 R? = 0.99697 $ (400,000) $ (200,000) $ - $ 200,000 $ 400,000 $ 600,000 $ 800,000 $ 1,000,000 $ 1,200,000 $ 1,400,000 $ 1,600,000 2 4 6 8 10 15 20 25 30 N et P re se nt V al ue Yeild Per Hectare (Tons) Plot Yield Sensitivity Viable Land Marginal Land Poly. (Viable Land) Poly. (Marginal Land) Figure 22. Hypothetical increase in yield per hectare and resulting profitability metrics. 80 CHAPTER 6: CONCLUSIONS 81 Conclusions After completing these analyses, the following can be concluded: ? M. x giganteus grows better in agriculturally viable soil than in agriculturally marginal soil, based on the height and mass data. ? In non-water limiting conditions, polymer produces no difference in M. x giganteus growth. ? M. x giganteus is not an economically viable option for biofuel production on agriculturally marginal lands with the following caveats: o The study did not make use of a commercial fertilizer. o This conclusion covers only existing price and expense scenarios. 82 APPENDICES 83 Appendix A: Histograms Note: ?W? indicates values from the Woodstock viable land plot. ?B? indicates values from the Brandywine marginal land plot. 84 85 86 87 88 89 90 91 92 Appendix B: Economic Analysis Data Cropland, Average Value per Acre ? Region, State, and United States: 2007-2011 Processing Equipment Depreciation Schedule Region and state 2007 2008 2009 2010 2011 Region Average Northeast 5,350$ 5,590$ 5,340$ 5,260$ 5,190$ Delaware 10,200 9,800 8,500 7,900 7,800 Maryland 8,400 7,800 7,300 7,000 7,000 New Jersey 16,000 15,600 14,000 13,300 12,800 New York 1,900 2,150 2,200 2,400 2,400 Pennsylvania 5,330 6,000 5,700 5,650 5,550 Other States 7,690 7,930 7,570 7,150 7,040 6,826$ Processing Cost Schedule ($ / Ton) Lake 2,830 3,080 3,020 3,120 3,450 Michigan 3,280 3,480 3,370 3,300 3,500 Minnesota 2,420 2,700 2,610 2,820 3,200 Wisconsin 3,370 3,600 3,650 3,650 3,950 3,525$ Corn Belt 3,530 4,030 3,910 4,240 4,920 Transportation Equipment Depreciation Schedule Illinois 4,150 4,850 4,670 4,900 5,800 Indiana 3,640 4,140 3,950 4,400 4,800 4,710 Iowa 3,600 4,260 4,050 4,600 5,700 Missouri 2,330 2,500 2,540 2,690 2,850 Ohio 3,820 4,140 3,900 4,050 4,400 4,745$ Harvesting and Planting Equipment Depreciation Schedule Northern Plains 1,090 1,280 1,300 1,450 1,700 Kansas 914 1,020 1,050 1,150 1,300 Nebraska 1,760 2,050 2,180 2,510 2,960 North Dakota 670 810 800 870 1,040 South Dakota 1,180 1,400 1,400 1,560 1,810 1,762$ Appalachian 3,570 3,730 3,600 3,590 3,590 Kentucky 2,930 3,100 3,150 3,180 3,250 North Carolina 3,720 3,850 3,770 3,720 3,720 Tennessee 3,200 3,400 3,270 3,400 3,400 Virginia 5,250 5,350 5,000 4,700 4,500 West Virginia 3,600 3,800 3,500 3,400 3,500 3,660$ Yearly National Average 4,133$ 4,337$ 4,118$ 4,141$ 4,326$ 93 C onsum er P rice Estim ates for Energy by S ource P rices ($ per M illion B TU ) P rim ary Energy P etroleum D escriptive S tatistics Y ear C oal N atural G as D istillate Fuel O il Jet Fuel LP G M otor G asoline R esidential Fuel O il N uclear Fuel B iom ass E lectric P ow er R etail E lectricity H igh 75th P ercentile M edian A verage 25th P ercentile Low 1970 0.38 $ 0.59 $ 1.16 $ 0.73 $ 1.43 $ 2.85 $ 0.42 $ 0.18 $ 1.29 $ 0.32 $ 4.98 $ 4.98 $ 1.36 $ 0.73 $ 1.30 $ 0.40 $ 0.18 $ 1971 0.42 0.63 1.22 0.77 1.46 2.90 0.58 0.18 1.31 0.38 5.30 5.30 1.39 0.77 1.38 0.50 0.18 1972 0.45 0.68 1.22 0.79 1.49 2.88 0.62 0.18 1.33 0.42 5.54 5.54 1.41 0.79 1.42 0.54 0.18 1973 0.48 0.73 1.46 0.92 1.97 3.10 0.75 0.19 1.39 0.47 5.86 5.86 1.72 0.92 1.57 0.61 0.19 1974 0.88 0.89 2.44 1.58 2.77 4.32 1.82 0.20 1.50 0.87 7.42 7.42 2.61 1.58 2.24 0.89 0.20 1975 1.03 1.18 2.60 2.05 2.93 4.65 1.93 0.24 1.50 0.97 8.61 8.61 2.77 1.93 2.52 1.11 0.24 1976 1.04 1.46 2.77 2.25 3.16 4.84 1.90 0.25 1.53 1.03 9.13 9.13 2.97 1.90 2.67 1.25 0.25 1977 1.11 1.76 3.11 2.59 3.61 5.13 2.14 0.27 1.58 1.17 10.11 10.11 3.36 2.14 2.96 1.38 0.27 1978 1.27 1.95 3.26 2.87 3.56 5.24 2.08 0.30 1.61 1.27 10.92 10.92 3.41 2.08 3.12 1.44 0.30 1979 1.36 2.31 4.69 3.90 4.46 7.11 2.83 0.34 1.88 1.50 11.78 11.78 4.58 2.83 3.83 1.69 0.34 1980 1.46 2.86 6.70 6.36 5.59 9.84 3.88 0.43 2.26 1.77 13.95 13.95 6.53 3.88 5.01 2.02 0.43 1981 1.64 3.43 8.03 7.57 6.13 10.94 4.91 0.48 2.52 2.04 16.14 16.14 7.80 4.91 5.80 2.28 0.48 1982 1.73 4.23 7.78 7.23 6.60 10.39 4.65 0.54 2.60 2.05 18.16 18.16 7.51 4.65 6.00 2.33 0.54 1983 1.70 4.72 7.32 6.53 7.11 9.12 4.50 0.58 2.44 2.02 18.62 18.62 7.22 4.72 5.88 2.23 0.58 1984 1.71 4.75 7.37 6.25 6.88 8.89 4.75 0.67 2.53 2.02 18.50 18.50 7.13 4.75 5.85 2.28 0.67 1985 1.69 4.61 7.22 5.91 6.55 9.01 4.30 0.71 2.47 1.91 19.05 19.05 6.89 4.61 5.77 2.19 0.71 1986 1.62 4.07 5.68 3.92 6.43 6.79 2.37 0.70 2.12 1.60 19.05 19.05 6.06 3.92 4.94 1.87 0.70 1987 1.53 3.77 5.97 4.03 6.05 7.23 2.86 0.71 2.07 1.57 18.74 18.74 6.01 3.77 4.96 1.82 0.71 1988 1.50 3.78 5.83 3.80 5.86 7.33 2.35 0.73 2.09 1.49 18.68 18.68 5.85 3.78 4.86 1.80 0.73 1989 1.48 3.82 6.43 4.39 5.51 8.02 2.72 0.70 1.42 1.51 18.98 18.98 5.97 3.82 5.00 1.50 0.70 1990 1.49 3.82 7.68 5.68 6.72 9.12 3.17 0.67 1.32 1.48 19.32 19.32 7.20 3.82 5.50 1.49 0.67 1991 1.48 3.74 7.29 4.83 6.77 8.93 2.62 0.63 1.39 1.40 19.84 19.84 7.03 3.74 5.36 1.44 0.63 1992 1.45 3.83 7.09 4.52 6.16 8.96 2.28 0.59 1.32 1.38 20.06 20.06 6.63 3.83 5.24 1.42 0.59 1993 1.42 4.10 7.08 4.29 6.17 8.83 2.26 0.56 1.28 1.40 20.38 20.38 6.63 4.10 5.25 1.41 0.56 1994 1.39 4.08 6.99 3.95 6.61 8.96 2.32 0.56 1.39 1.36 20.33 20.33 6.80 3.95 5.27 1.39 0.56 1995 1.37 3.73 6.98 4.00 6.51 9.22 2.46 0.54 1.40 1.29 20.29 20.29 6.75 3.73 5.25 1.39 0.54 1996 1.33 4.25 7.87 4.82 7.98 9.85 2.80 0.51 1.25 1.35 20.16 20.16 7.93 4.25 5.65 1.34 0.51 1997 1.32 4.53 7.66 4.53 7.39 9.81 2.93 0.51 1.15 1.38 20.13 20.13 7.53 4.53 5.58 1.35 0.51 1998 1.29 4.13 6.57 3.35 5.95 8.45 2.15 0.50 1.27 1.32 19.80 19.80 6.26 3.35 4.98 1.31 0.50 1999 1.27 4.16 7.19 4.01 6.60 9.31 2.51 0.48 1.34 1.33 19.52 19.52 6.90 4.01 5.25 1.34 0.48 2000 1.24 5.62 9.86 6.64 9.55 11.89 4.32 0.46 1.58 1.71 20.03 20.03 9.71 5.62 6.63 1.65 0.46 2001 1.29 6.87 9.18 5.72 9.54 11.34 3.99 0.44 2.08 1.85 21.41 21.41 9.36 5.72 6.70 1.97 0.44 2002 1.30 5.31 8.64 5.33 8.09 10.69 3.91 0.43 2.19 1.54 21.15 21.15 8.37 5.31 6.23 1.87 0.43 2003 1.32 7.08 10.05 6.46 10.32 12.34 4.75 0.42 1.98 1.84 21.85 21.85 10.19 6.46 7.13 1.91 0.42 2004 1.41 7.91 12.23 8.93 12.24 14.67 4.92 0.42 2.17 2.00 22.38 22.38 12.24 7.91 8.12 2.09 0.42 2005 1.62 9.92 16.41 12.86 14.58 17.89 6.65 0.43 3.10 2.61 23.92 23.92 15.50 9.92 10.00 2.86 0.43 2006 1.78 9.62 18.55 14.80 16.85 20.27 7.93 0.44 3.15 2.48 26.15 26.15 17.70 9.62 11.09 2.82 0.44 2007 1.88 9.31 19.87 16.01 18.76 22.01 8.57 0.46 3.36 2.68 26.84 26.84 19.32 9.31 11.80 3.02 0.46 2008 2.21 10.83 26.33 22.56 23.35 25.53 12.64 0.47 3.71 3.21 28.64 28.64 24.44 12.64 14.50 3.46 0.47 2009 2.33 7.66 16.98 12.61 16.38 18.51 9.69 0.55 3.30 2.44 28.90 28.90 16.68 9.69 10.85 2.87 0.55 H igh 2.33 $ 10.83 $ 26.33 $ 22.56 $ 23.35 $ 25.53 $ 12.64 $ 0.73 $ 3.71 $ 3.21 $ 28.90 $ 75th P ercentile 1.62 4.89 8.18 6.48 8.01 10.75 4.54 0.57 2.31 1.93 20.34 M edian 1.40 4.08 7.14 4.53 6.53 8.99 2.82 0.48 1.60 1.50 19.19 A verage 1.37 4.32 7.82 5.76 7.40 9.68 3.63 0.47 1.93 1.56 17.52 25th P ercentile 1.27 2.72 5.43 3.69 5.25 7.03 2.23 0.40 1.38 1.31 13.41 M in 0.38 0.59 1.16 0.73 1.43 2.85 0.42 0.18 1.15 0.32 4.98 1.7937E +10 Illustrative M iscanthus S ales P rice Illustrative $ / M . B TU 0.50 $ 1.00 $ 1.50 $ 1.60 $ 1.93 $ 2.50 $ 3.00 $ 3.50 $ 5.00 $ 10.00 $ 15.00 $ M . B TU / Ton 16.01 16.01 16.01 16.01 16.01 16.01 16.01 16.01 16.01 16.01 16.01 $ / Ton 8.00 $ 16.01 $ 24.01 $ 25.61 $ 30.89 $ 40.02 $ 48.02 $ 56.02 $ 80.03 $ 160.07 $ 240.10 $ 94 Scenario One Revenue & Worst Case Expenses P rocessing Equipm ent D epreciation S chedule Facility Inform ation P rofitability C alculations Item Purchase Price Installation U seful Life A nnual D epreciation H ectares A cres A ssum ptions D ryer 350,000 $ 71,000 $ 15 $ 28,067 $ A verage M D Farm 64.75 160 Land Price (% ) 100.0% Pellet M ill 315,000 71,000 15 25,733 M D Price Per A cre 7,000 $ Subsidy A m ount 0.0% Pellet C ooler 32,000 24,000 15 3,733 Land Purchase Price 1,120,000 $ M iscellaneous Equipm ent 100,000 - 15 6,667 Equipm ent Purchased 100.0% A nnual D epreciation 64,200 $ M arginal Land Price Per A cre 1,762 $ Equipm ent O w ned 0.0% Land A cquisition Price 281,920 $ C hoose 8 P rocessing C ost S chedule ($ / T on) T ons P roduced M iscanthus Price 56.02 $ D rying 7.84 $ Y ear 1 9.66 Price Per M iscanthus R hizom e 2.25 $ Pelletizing 2.09 Y ear 2 110.64 Packaging 1.37 Y ear 3 328.20 A cres Per H ectare 2.4710538 T otal $ / T on 11.30 $ T ransportation Fixed C osts T ransportation Equipm ent D epreciation S chedule R egistration, Perm its & Fees 6,970 $ Item Purchase Price U seful Life A nnual D epreciation Insurance (V ehicle) 3,290 Loader 82,000 $ 15 $ 5,467 $ Insurance (G oods-in-T ransit) 500 T ruck 100,000 15 6,667 Insurance (Personal Sickness) 450 T otal 12,133 $ Insurance (Public Liability) 405 Insurance (W orkers' C om p) 1,533 H arvesting and P lanting Equipm ent D epreciation S chedule T otal 13,148 $ Item Purchase Price U seful Life A nnual D epreciation Forage H arvester 29,000 $ 15 1,933.33 $ T ransportation V ariable C osts P er M ile Potato Planter 86,000 15 5,733.33 Fuel (3.872 Per G allon) 0.55 $ T ractor 150,000 15 10,000.00 T ires 0.03 T otal 17,666.67 $ Servicing & M aintenance 0.12 T otal 0.70 $ 95 G E M S T O N E T E A M B IO FU E LS Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 541 $ 6,198 $ 18,387 $ 22,064 $ 23,167 $ 24,325 $ 25,542 $ 26,819 $ 28,160 $ 29,568 $ 31,046 $ 32,598 $ 34,228 $ 35,940 $ 37,737 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 541 $ 6,198 $ 18,387 $ 22,064 $ 23,167 $ 24,325 $ 25,542 $ 26,819 $ 28,160 $ 29,568 $ 31,046 $ 32,598 $ 34,228 $ 35,940 $ 37,737 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (40,767) (10,313) (3,354) (1,255) (625) 60 804 1,613 2,491 3,444 4,475 5,589 6,791 8,084 9,473 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) S traight line D epreciation (P rocessing E quipm ent) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) S traight line D epreciation (Transportation E quipm ent) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) S traight line A m ortization (Land) (12,749) (13,428) (14,144) (14,897) (15,690) (16,526) (17,406) (18,333) (19,309) (20,338) (21,421) (22,562) (23,763) (25,029) (26,362) S ee am ortization table O perating Incom e (147,516) $ (117,741) $ (111,498) $ (110,152) $ (110,315) $ (110,466) $ (110,602) $ (110,720) $ (110,818) $ (110,894) $ (110,946) $ (110,972) $ (110,972) $ (110,945) $ (110,889) $ Interest E xpense (Land) (46,291) (45,612) (44,897) (44,144) (43,350) (42,515) (41,634) (40,707) (39,731) (38,703) (36,479) (36,479) (35,277) (34,012) (32,679) P re-Tax Incom e (193,807) $ (163,353) $ (156,395) $ (154,295) $ (153,666) $ (152,981) $ (152,237) $ (151,428) $ (150,549) $ (149,597) $ (147,425) $ (147,451) $ (146,249) $ (144,956) $ (143,568) $ Incom e Taxes - - - - - - - - - - - - - - - N et Incom e (193,807) $ (163,353) $ (156,395) $ (154,295) $ (153,666) $ (152,981) $ (152,237) $ (151,428) $ (150,549) $ (149,597) $ (147,425) $ (147,451) $ (146,249) $ (144,956) $ (143,568) $ R evenue G row th R ate 1,045.1% 196.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (193,807) $ (163,353) $ (156,395) $ (154,295) $ (153,666) $ (152,981) $ (152,237) $ (151,428) $ (150,549) $ (149,597) $ (147,425) $ (147,451) $ (146,249) $ (144,956) $ (143,568) $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 D epreciation (P rocessing E quipm ent) 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 D epreciation (Transportation E quipm ent) 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 A m ortization (Land) 12,749 13,428 14,144 14,897 15,690 16,526 17,406 18,333 19,309 20,338 21,421 22,562 23,763 25,029 26,362 C hange in W orking C apital (27,225) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities 79,524 $ 107,428 $ 108,144 $ 108,897 $ 109,690 $ 110,526 $ 111,406 $ 112,333 $ 113,309 $ 114,338 $ 115,421 $ 116,562 $ 117,763 $ 119,029 $ 120,362 $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent (265,000) - - - - - - - - - - - - - - P rocessing E quipm ent (797,000) - - - - - - - - - - - - - - Land A cquisition (1,120,000) - - - - - - - - - - - - - - Transportation E quipm ent (182,000) - - - - - - - - - - - - - - C ash Flow From Investing A ctivities (2,364,000) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan 896,000 - - - - - - - - - - - - - - C ash flow from Financing A ctivities 896,000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (1,582,283) $ (55,925) $ (48,251) $ (45,399) $ (43,975) $ (42,455) $ (40,831) $ (39,095) $ (37,240) $ (35,259) $ (32,004) $ (30,890) $ (28,486) $ (25,927) $ (23,206) $ 96 G E M S T O N E T E A M B IO F U E L S Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 73.42 $ 983.18 $ 5,895.57 $ 7,074.68 $ 7,428.42 $ 7,799.84 $ 8,189.83 $ 8,599.32 $ 9,029.29 $ 9,480.75 $ 9,954.79 $ 10,452.53 $ 10,975.16 $ 11,523.91 $ 12,100.11 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 73.42 $ 983.18 $ 5,895.57 $ 7,074.68 $ 7,428.42 $ 7,799.84 $ 8,189.83 $ 8,599.32 $ 9,029.29 $ 9,480.75 $ 9,954.79 $ 10,452.53 $ 10,975.16 $ 11,523.91 $ 12,100.11 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (41,235) (15,528) (15,845) (16,244) (16,364) (16,466) (16,548) (16,607) (16,639) (16,643) (16,617) (16,557) (16,462) (16,332) (16,164) O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ S traight line D epreciation (P rocessing E quipm ent) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) S traight line D epreciation (Transportation E quipm ent) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) S traight line A m ortization (Land) (3,209) (3,380) (3,560) (3,750) (3,949) (4,160) (4,381) (4,615) (4,860) (5,119) (5,392) (5,679) (5,982) (6,300) (6,636) S ee am ortization table O perating Incom e (138,444) $ (112,908) $ (113,405) $ (113,994) $ (114,313) $ (114,626) $ (114,929) $ (115,221) $ (115,500) $ (115,763) $ (116,008) $ (116,236) $ (116,444) $ (116,632) $ (116,800) $ Interest E xpense (Land) (11,652) (11,481) (11,301) (11,112) (10,912) (10,702) (10,480) (10,247) (10,001) (9,742) (9,469) (9,182) (8,880) (8,561) (8,226) P re-Tax Incom e (150,096) $ (124,389) $ (124,707) $ (125,105) $ (125,225) $ (125,327) $ (125,409) $ (125,468) $ (125,501) $ (125,505) $ (125,478) $ (125,418) $ (125,324) $ (125,193) $ (125,025) $ Incom e Taxes - - - - - - - - - - - - - - - N et Incom e (150,096) $ (124,389) $ (124,707) $ (125,105) $ (125,225) $ (125,327) $ (125,409) $ (125,468) $ (125,501) $ (125,505) $ (125,478) $ (125,418) $ (125,324) $ (125,193) $ (125,025) $ R evenue G row th R ate 1,239.1% 499.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (150,096) $ (124,389) $ (124,707) $ (125,105) $ (125,225) $ (125,327) $ (125,409) $ (125,468) $ (125,501) $ (125,505) $ (125,478) $ (125,418) $ (125,324) $ (125,193) $ (125,025) $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 D epreciation (P rocessing E quipm ent) 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 D epreciation (Transportation E quipm ent) 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 A m ortization (Land) 3,209 3,380 3,560 3,750 3,949 4,160 4,381 4,615 4,860 5,119 5,392 5,679 5,982 6,300 6,636 C hange in W orking C apital (27,225.00) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities 69,984.21 $ 97,380.12 $ 97,560.14 $ 97,749.75 $ 97,949.45 $ 98,159.78 $ 98,381.32 $ 98,614.66 $ 98,860.43 $ 99,119.28 $ 99,391.92 $ 99,679.08 $ 99,981.53 $ 100,300.09 $ 100,635.62 $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent (265,000) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ P rocessing E quipm ent (797,000) - - - - - - - - - - - - - - Land A cquisition (281,920) - - - - - - - - - - - - - - Transportation E quipm ent (182,000) - - - - - - - - - - - - - - C ash Flow From Investing A ctivities (1,525,920) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan 225,536 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities 225,536 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (1,380,496) $ (27,009) $ (27,146) $ (27,356) $ (27,276) $ (27,168) $ (27,028) $ (26,853) $ (26,640) $ (26,385) $ (26,086) $ (25,739) $ (25,342) $ (24,893) $ (24,390) $ 97 Scenario One Revenue & Base Case Expenses P rocessing Equipm ent D epreciation S chedule Facility Inform ation P rofitability C alculations Item Purchase Price Installation U seful Life A nnual D epreciation H ectares A cres A ssum ptions D ryer 175,000 $ 71,000 $ 15 $ 16,400 $ A verage M D Farm 64.75 160 Land Price (% ) 50.0% Pellet M ill 157,500 71,000 15 15,233 M D Price Per A cre 3,500 $ Subsidy A m ount 50.0% Pellet C ooler 16,000 24,000 15 2,667 Land Purchase Price 560,000 $ M iscellaneous Equipm ent 50,000 - 15 3,333 Equipm ent Purchased 50.0% A nnual D epreciation 37,633 $ M arginal Land Price Per A cre 881 $ Equipm ent O w ned 50.0% Land A cquisition Price 140,960 $ C hoose 8 P rocessing C ost S chedule ($ / T on) T ons P roduced M iscanthus Price 56.02 $ D rying 7.84 $ Y ear 1 9.66 Price Per M iscanthus R hizom e 2.25 $ Pelletizing 2.09 Y ear 2 110.64 Packaging 1.37 Y ear 3 328.20 A cres Per H ectare 2.4710538 T otal $ / T on 11.30 $ T ransportation Fixed C osts T ransportation Equipm ent D epreciation S chedule R egistration, Perm its & Fees 6,970 $ Item Purchase Price U seful Life A nnual D epreciation Insurance (V ehicle) 3,290 Loader 41,000 $ 15 $ 2,733 $ Insurance (G oods-in-T ransit) 500 T ruck 50,000 15 3,333 Insurance (Personal Sickness) 450 T otal 6,067 $ Insurance (Public Liability) 405 Insurance (W orkers' C om p) 1,533 H arvesting and P lanting Equipm ent D epreciation S chedule T otal 13,148 $ Item Purchase Price U seful Life A nnual D epreciation Forage H arvester 14,500 $ 15 966.67 $ T ransportation V ariable C osts P er M ile Potato Planter 43,000 15 2,866.67 Fuel (3.872 Per G allon) 0.55 $ T ractor 75,000 15 5,000.00 T ires 0.03 T otal 8,833.33 $ Servicing & M aintenance 0.12 T otal 0.70 $ 98 G E M S T O N E T E A M B IO F U E L S Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 541 $ 6,198 $ 18,387 $ 22,064 $ 23,167 $ 24,325 $ 25,542 $ 26,819 $ 28,160 $ 29,568 $ 31,046 $ 32,598 $ 34,228 $ 35,940 $ 37,737 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 541 $ 6,198 $ 18,387 $ 22,064 $ 23,167 $ 24,325 $ 25,542 $ 26,819 $ 28,160 $ 29,568 $ 31,046 $ 32,598 $ 34,228 $ 35,940 $ 37,737 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (40,767) (10,313) (3,354) (1,255) (625) 60 804 1,613 2,491 3,444 4,475 5,589 6,791 8,084 9,473 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) S traight line D epreciation (P rocessing E quipm ent) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) S traight line D epreciation (Transportation E quipm ent) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) S traight line A m ortization (Land) (6,375) (6,714) (7,072) (7,448) (7,845) (8,263) (8,703) (9,166) (9,655) (10,169) (10,710) (11,281) (11,882) (12,514) (13,181) S ee am ortization table O perating Incom e (141,142) $ (111,027) $ (104,426) $ (102,703) $ (102,470) $ (102,203) $ (101,899) $ (101,554) $ (101,164) $ (100,725) $ (100,236) $ (99,692) $ (99,091) $ (98,430) $ (97,708) $ Interest E xpense (Land) (23,145) (22,806) (22,448) (22,072) (21,675) (21,257) (20,817) (20,354) (19,866) (19,351) (18,239) (18,239) (17,639) (17,006) (16,339) P re-Tax Incom e (164,287) $ (133,833) $ (126,874) $ (124,775) $ (124,145) $ (123,461) $ (122,716) $ (121,907) $ (121,029) $ (120,077) $ (118,475) $ (117,931) $ (116,729) $ (115,436) $ (114,048) $ Incom e Taxes - - - - - - - - - - - - - - - N et Incom e (164,287) $ (133,833) $ (126,874) $ (124,775) $ (124,145) $ (123,461) $ (122,716) $ (121,907) $ (121,029) $ (120,077) $ (118,475) $ (117,931) $ (116,729) $ (115,436) $ (114,048) $ R evenue G row th R ate 1,045.1% 196.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (164,287) $ (133,833) $ (126,874) $ (124,775) $ (124,145) $ (123,461) $ (122,716) $ (121,907) $ (121,029) $ (120,077) $ (118,475) $ (117,931) $ (116,729) $ (115,436) $ (114,048) $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 D epreciation (P rocessing E quipm ent) 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 D epreciation (Transportation E quipm ent) 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 A m ortization (Land) 6,375 6,714 7,072 7,448 7,845 8,263 8,703 9,166 9,655 10,169 10,710 11,281 11,882 12,514 13,181 C hange in W orking C apital (27,225) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities 73,150 $ 100,714 $ 101,072 $ 101,448 $ 101,845 $ 102,263 $ 102,703 $ 103,166 $ 103,655 $ 104,169 $ 104,710 $ 105,281 $ 105,882 $ 106,514 $ 107,181 $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent (265,000) - - - - - - - - - - - - - - P rocessing E quipm ent (797,000) - - - - - - - - - - - - - - Land A cquisition (560,000) - - - - - - - - - - - - - - Transportation E quipm ent (182,000) - - - - - - - - - - - - - - C ash Flow From Investing A ctivities (1,804,000) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan 448,000 - - - - - - - - - - - - - - C ash flow from Financing A ctivities 448,000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (1,447,137) $ (33,119) $ (25,803) $ (23,327) $ (22,300) $ (21,198) $ (20,013) $ (18,741) $ (17,374) $ (15,908) $ (13,765) $ (12,650) $ (10,848) $ (8,922) $ (6,867) $ 99 G E M S T O N E T E A M B IO FU E LS Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 73.42 $ 983.18 $ 5,895.57 $ 7,074.68 $ 7,428.42 $ 7,799.84 $ 8,189.83 $ 8,599.32 $ 9,029.29 $ 9,480.75 $ 9,954.79 $ 10,452.53 $ 10,975.16 $ 11,523.91 $ 12,100.11 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 73.42 $ 983.18 $ 5,895.57 $ 7,074.68 $ 7,428.42 $ 7,799.84 $ 8,189.83 $ 8,599.32 $ 9,029.29 $ 9,480.75 $ 9,954.79 $ 10,452.53 $ 10,975.16 $ 11,523.91 $ 12,100.11 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (41,235) (15,528) (15,845) (16,244) (16,364) (16,466) (16,548) (16,607) (16,639) (16,643) (16,617) (16,557) (16,462) (16,332) (16,164) O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ S traight line D epreciation (P rocessing E quipm ent) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) S traight line D epreciation (Transportation E quipm ent) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) S traight line A m ortization (Land) (1,605) (1,690) (1,780) (1,875) (1,975) (2,080) (2,191) (2,307) (2,430) (2,560) (2,696) (2,840) (2,991) (3,150) (3,318) S ee am ortization table O perating Incom e (136,839) $ (111,218) $ (111,625) $ (112,119) $ (112,339) $ (112,546) $ (112,739) $ (112,914) $ (113,070) $ (113,203) $ (113,313) $ (113,396) $ (113,453) $ (113,482) $ (113,482) $ Interest E xpense (Land) (5,826) (5,741) (5,651) (5,556) (5,456) (5,351) (5,240) (5,123) (5,000) (4,871) (4,735) (4,591) (4,440) (4,281) (4,113) P re-Tax Incom e (142,665) $ (116,958) $ (117,276) $ (117,675) $ (117,794) $ (117,897) $ (117,979) $ (118,037) $ (118,070) $ (118,074) $ (118,047) $ (117,987) $ (117,893) $ (117,762) $ (117,595) $ Incom e Taxes - - - - - - - - - - - - - - - N et Incom e (142,665) $ (116,958) $ (117,276) $ (117,675) $ (117,794) $ (117,897) $ (117,979) $ (118,037) $ (118,070) $ (118,074) $ (118,047) $ (117,987) $ (117,893) $ (117,762) $ (117,595) $ R evenue G row th R ate 1,239.1% 499.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (142,665) $ (116,958) $ (117,276) $ (117,675) $ (117,794) $ (117,897) $ (117,979) $ (118,037) $ (118,070) $ (118,074) $ (118,047) $ (117,987) $ (117,893) $ (117,762) $ (117,595) $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 D epreciation (P rocessing E quipm ent) 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 D epreciation (Transportation E quipm ent) 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 A m ortization (Land) 1,605 1,690 1,780 1,875 1,975 2,080 2,191 2,307 2,430 2,560 2,696 2,840 2,991 3,150 3,318 C hange in W orking C apital (27,225.00) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities 68,379.61 $ 95,690.06 $ 95,780.07 $ 95,874.87 $ 95,974.72 $ 96,079.89 $ 96,190.66 $ 96,307.33 $ 96,430.21 $ 96,559.64 $ 96,695.96 $ 96,839.54 $ 96,990.77 $ 97,150.05 $ 97,317.81 $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent (265,000) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ P rocessing E quipm ent (797,000) - - - - - - - - - - - - - - Land A cquisition (140,960) - - - - - - - - - - - - - - Transportation E quipm ent (182,000) - - - - - - - - - - - - - - C ash Flow From Investing A ctivities (1,384,960) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan 112,768 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities 112,768 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (1,346,478) $ (21,268) $ (21,496) $ (21,800) $ (21,820) $ (21,817) $ (21,788) $ (21,730) $ (21,640) $ (21,514) $ (21,351) $ (21,148) $ (20,902) $ (20,612) $ (20,277) $ 100 P rocessing Equipm ent D epreciation S chedule Facility Inform ation P rofitability C alculations Item Purchase Price Installation U seful Life A nnual D epreciation H ectares A cres A ssum ptions D ryer - $ - $ 15 $ - $ A verage M D Farm 64.75 160 Land Price (% ) 0.0% Pellet M ill - - 15 - M D Price Per A cre - $ Subsidy A m ount 100.0% Pellet C ooler - - 15 - Land Purchase Price - $ M iscellaneous Equipm ent - - 15 - Equipm ent Purchased 0.0% A nnual D epreciation - $ M arginal Land Price Per A cre - $ Equipm ent O w ned 100.0% Land A cquisition Price - $ C hoose 8 P rocessing C ost S chedule ($ / T on) T ons P roduced M iscanthus Price 56.02 $ D rying 7.84 $ Y ear 1 9.66 Price Per M iscanthus R hizom e 2.25 $ Pelletizing 2.09 Y ear 2 110.64 Packaging 1.37 Y ear 3 328.20 A cres Per H ectare 2.4710538 T otal $ / T on 11.30 $ T ransportation Fixed C osts T ransportation Equipm ent D epreciation S chedule R egistration, Perm its & Fees 6,970 $ Item Purchase Price U seful Life A nnual D epreciation Insurance (V ehicle) 3,290 Loader - $ 15 $ - $ Insurance (G oods-in-T ransit) 500 T ruck - 15 - Insurance (Personal Sickness) 450 T otal - $ Insurance (Public Liability) 405 Insurance (W orkers' C om p) 1,533 H arvesting and P lanting Equipm ent D epreciation S chedule T otal 13,148 $ Item Purchase Price U seful Life A nnual D epreciation Forage H arvester - $ 15 - $ T ransportation V ariable C osts P er M ile Potato Planter - 15 - Fuel (3.872 Per G allon) 0.55 $ T ractor - 15 - T ires 0.03 T otal - $ Servicing & M aintenance 0.12 T otal 0.70 $ 101 G E M S T O N E T E A M B IO FU E LS Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 541 $ 6,198 $ 18,387 $ 22,064 $ 23,167 $ 24,325 $ 25,542 $ 26,819 $ 28,160 $ 29,568 $ 31,046 $ 32,598 $ 34,228 $ 35,940 $ 37,737 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 541 $ 6,198 $ 18,387 $ 22,064 $ 23,167 $ 24,325 $ 25,542 $ 26,819 $ 28,160 $ 29,568 $ 31,046 $ 32,598 $ 34,228 $ 35,940 $ 37,737 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (40,767) (10,313) (3,354) (1,255) (625) 60 804 1,613 2,491 3,444 4,475 5,589 6,791 8,084 9,473 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) - - - - - - - - - - - - - - - S traight line D epreciation (P rocessing E quipm ent) - - - - - - - - - - - - - - - S traight line D epreciation (Transportation E quipm ent) - - - - - - - - - - - - - - - S traight line A m ortization (Land) - - - - - - - - - - - - - - - S ee am ortization table O perating Incom e (40,767) $ (10,313) $ (3,354) $ (1,255) $ (625) $ 60 $ 804 $ 1,613 $ 2,491 $ 3,444 $ 4,475 $ 5,589 $ 6,791 $ 8,084 $ 9,473 $ Interest E xpense (Land) - - - - - - - - - - - - - - - P re-Tax Incom e (40,767) $ (10,313) $ (3,354) $ (1,255) $ (625) $ 60 $ 804 $ 1,613 $ 2,491 $ 3,444 $ 4,475 $ 5,589 $ 6,791 $ 8,084 $ 9,473 $ Incom e Taxes - - - - - 17.9 241.2 483.8 747.3 1,033.1 1,342.4 1,676.8 2,037.3 2,425.3 2,841.8 N et Incom e (40,767) $ (10,313) $ (3,354) $ (1,255) $ (625) $ 77 $ 1,045 $ 2,097 $ 3,238 $ 4,477 $ 5,817 $ 7,266 $ 8,828 $ 10,509 $ 12,314 $ R evenue G row th R ate 1,045.1% 196.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (40,767) $ (10,313) $ (3,354) $ (1,255) $ (625) $ 77 $ 1,045 $ 2,097 $ 3,238 $ 4,477 $ 5,817 $ 7,266 $ 8,828 $ 10,509 $ 12,314 $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) - - - - - - - - - - - - - - - D epreciation (P rocessing E quipm ent) - - - - - - - - - - - - - - - D epreciation (Transportation E quipm ent) - - - - - - - - - - - - - - - A m ortization (Land) - - - - - - - - - - - - - - - C hange in W orking C apital (27,225) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities (27,225) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent - - - - - - - - - - - - - - - P rocessing E quipm ent - - - - - - - - - - - - - - - Land A cquisition - - - - - - - - - - - - - - - Transportation E quipm ent - - - - - - - - - - - - - - - C ash Flow From Investing A ctivities - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan - - - - - - - - - - - - - - - C ash flow from Financing A ctivities - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (67,992) $ (10,313) $ (3,354) $ (1,255) $ (625) $ 77 $ 1,045 $ 2,097 $ 3,238 $ 4,477 $ 5,817 $ 7,266 $ 8,828 $ 10,509 $ 12,314 $ 102 G E M S T O N E T E A M B IO FU E LS Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 73.42 $ 983.18 $ 5,895.57 $ 7,074.68 $ 7,428.42 $ 7,799.84 $ 8,189.83 $ 8,599.32 $ 9,029.29 $ 9,480.75 $ 9,954.79 $ 10,452.53 $ 10,975.16 $ 11,523.91 $ 12,100.11 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 73.42 $ 983.18 $ 5,895.57 $ 7,074.68 $ 7,428.42 $ 7,799.84 $ 8,189.83 $ 8,599.32 $ 9,029.29 $ 9,480.75 $ 9,954.79 $ 10,452.53 $ 10,975.16 $ 11,523.91 $ 12,100.11 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (41,235) (15,528) (15,845) (16,244) (16,364) (16,466) (16,548) (16,607) (16,639) (16,643) (16,617) (16,557) (16,462) (16,332) (16,164) O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ S traight line D epreciation (P rocessing E quipm ent) - - - - - - - - - - - - - - - S traight line D epreciation (Transportation E quipm ent) - - - - - - - - - - - - - - - S traight line A m ortization (Land) - - - - - - - - - - - - - - - S ee am ortization table O perating Incom e (41,235) $ (15,528) $ (15,845) $ (16,244) $ (16,364) $ (16,466) $ (16,548) $ (16,607) $ (16,639) $ (16,643) $ (16,617) $ (16,557) $ (16,462) $ (16,332) $ (16,164) $ Interest E xpense (Land) - - - - - - - - - - - - - - - P re-Tax Incom e (41,235) $ (15,528) $ (15,845) $ (16,244) $ (16,364) $ (16,466) $ (16,548) $ (16,607) $ (16,639) $ (16,643) $ (16,617) $ (16,557) $ (16,462) $ (16,332) $ (16,164) $ Incom e Taxes - - - - - - - - - - - - - - - N et Incom e (41,235) $ (15,528) $ (15,845) $ (16,244) $ (16,364) $ (16,466) $ (16,548) $ (16,607) $ (16,639) $ (16,643) $ (16,617) $ (16,557) $ (16,462) $ (16,332) $ (16,164) $ R evenue G row th R ate 1,239.1% 499.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (41,235) $ (15,528) $ (15,845) $ (16,244) $ (16,364) $ (16,466) $ (16,548) $ (16,607) $ (16,639) $ (16,643) $ (16,617) $ (16,557) $ (16,462) $ (16,332) $ (16,164) $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) - - - - - - - - - - - - - - - D epreciation (P rocessing E quipm ent) - - - - - - - - - - - - - - - D epreciation (Transportation E quipm ent) - - - - - - - - - - - - - - - A m ortization (Land) - - - - - - - - - - - - - - - C hange in W orking C apital (27,225.00) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities (27,225.00) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ P rocessing E quipm ent - - - - - - - - - - - - - - - Land A cquisition - - - - - - - - - - - - - - - Transportation E quipm ent - - - - - - - - - - - - - - - C ash Flow From Investing A ctivities - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (68,460) $ (15,528) $ (15,845) $ (16,244) $ (16,364) $ (16,466) $ (16,548) $ (16,607) $ (16,639) $ (16,643) $ (16,617) $ (16,557) $ (16,462) $ (16,332) $ (16,164) $ 103 Scenario Two Revenue & Worst Case Expenses P rocessing Equipm ent D epreciation S chedule Facility Inform ation P rofitability C alculations Item Purchase Price Installation U seful Life A nnual D epreciation H ectares A cres A ssum ptions D ryer 350,000 $ 71,000 $ 15 $ 28,067 $ A verage M D Farm 64.75 160 Land Price (% ) 100.0% Pellet M ill 315,000 71,000 15 25,733 M D Price Per A cre 7,000 $ Subsidy A m ount 0.0% Pellet C ooler 32,000 24,000 15 3,733 Land Purchase Price 1,120,000 $ M iscellaneous Equipm ent 100,000 - 15 6,667 Equipm ent Purchased 100.0% A nnual D epreciation 64,200 $ M arginal Land Price Per A cre 1,762 $ Equipm ent O w ned 0.0% Land A cquisition Price 281,920 $ C hoose 10 P rocessing C ost S chedule ($ / T on) T ons P roduced M iscanthus Price 160.07 $ D rying 7.84 $ Y ear 1 9.66 Price Per M iscanthus R hizom e 2.25 $ Pelletizing 2.09 Y ear 2 110.64 Packaging 1.37 Y ear 3 328.20 A cres Per H ectare 2.4710538 T otal $ / T on 11.30 $ T ransportation Fixed C osts T ransportation Equipm ent D epreciation S chedule R egistration, Perm its & Fees 6,970 $ Item Purchase Price U seful Life A nnual D epreciation Insurance (V ehicle) 3,290 Loader 82,000 $ 15 $ 5,467 $ Insurance (G oods-in-T ransit) 500 T ruck 100,000 15 6,667 Insurance (Personal Sickness) 450 T otal 12,133 $ Insurance (Public Liability) 405 Insurance (W orkers' C om p) 1,533 H arvesting and P lanting Equipm ent D epreciation S chedule T otal 13,148 $ Item Purchase Price U seful Life A nnual D epreciation Forage H arvester 29,000 $ 15 1,933.33 $ T ransportation V ariable C osts P er M ile Potato Planter 86,000 15 5,733.33 Fuel (3.872 Per G allon) 0.55 $ T ractor 150,000 15 10,000.00 T ires 0.03 T otal 17,666.67 $ Servicing & M aintenance 0.12 T otal 0.70 $ 104 G E M S T O N E T E A M B IO F U E L S Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 1,546 $ 17,709 $ 52,533 $ 63,040 $ 66,192 $ 69,501 $ 72,976 $ 76,625 $ 80,456 $ 84,479 $ 88,703 $ 93,138 $ 97,795 $ 102,685 $ 107,819 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 1,546 $ 17,709 $ 52,533 $ 63,040 $ 66,192 $ 69,501 $ 72,976 $ 76,625 $ 80,456 $ 84,479 $ 88,703 $ 93,138 $ 97,795 $ 102,685 $ 107,819 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (39,762) 1,198 30,792 39,721 42,399 45,235 48,239 51,419 54,788 58,355 62,132 66,129 70,358 74,830 79,555 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) S traight line D epreciation (P rocessing E quipm ent) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) S traight line D epreciation (Transportation E quipm ent) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) S traight line A m ortization (Land) (12,749) (13,428) (14,144) (14,897) (15,690) (16,526) (17,406) (18,333) (19,309) (20,338) (21,421) (22,562) (23,763) (25,029) (26,362) S ee am ortization table O perating Incom e (146,511) $ (106,230) $ (77,351) $ (69,176) $ (67,291) $ (65,290) $ (63,167) $ (60,914) $ (58,521) $ (55,983) $ (53,289) $ (50,432) $ (47,405) $ (44,199) $ (40,807) $ Interest E xpense (Land) (46,291) (45,612) (44,897) (44,144) (43,350) (42,515) (41,634) (40,707) (39,731) (38,703) (36,479) (36,479) (35,277) (34,012) (32,679) P re-Tax Incom e (192,802) $ (151,842) $ (122,248) $ (113,320) $ (110,641) $ (107,805) $ (104,802) $ (101,621) $ (98,253) $ (94,685) $ (89,768) $ (86,911) $ (82,682) $ (78,211) $ (73,485) $ Incom e Taxes - - - - - - - - - - - - - - - N et Incom e (192,802) $ (151,842) $ (122,248) $ (113,320) $ (110,641) $ (107,805) $ (104,802) $ (101,621) $ (98,253) $ (94,685) $ (89,768) $ (86,911) $ (82,682) $ (78,211) $ (73,485) $ R evenue G row th R ate 1,045.1% 196.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (192,802) $ (151,842) $ (122,248) $ (113,320) $ (110,641) $ (107,805) $ (104,802) $ (101,621) $ (98,253) $ (94,685) $ (89,768) $ (86,911) $ (82,682) $ (78,211) $ (73,485) $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 D epreciation (P rocessing E quipm ent) 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 D epreciation (Transportation E quipm ent) 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 A m ortization (Land) 12,749 13,428 14,144 14,897 15,690 16,526 17,406 18,333 19,309 20,338 21,421 22,562 23,763 25,029 26,362 C hange in W orking C apital (27,225) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities 79,524 $ 107,428 $ 108,144 $ 108,897 $ 109,690 $ 110,526 $ 111,406 $ 112,333 $ 113,309 $ 114,338 $ 115,421 $ 116,562 $ 117,763 $ 119,029 $ 120,362 $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent (265,000) - - - - - - - - - - - - - - P rocessing E quipm ent (797,000) - - - - - - - - - - - - - - Land A cquisition (1,120,000) - - - - - - - - - - - - - - Transportation E quipm ent (182,000) - - - - - - - - - - - - - - C ash Flow From Investing A ctivities (2,364,000) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan 896,000 - - - - - - - - - - - - - - C ash flow from Financing A ctivities 896,000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (1,581,278) $ (44,414) $ (14,105) $ (4,423) $ (951) $ 2,721 $ 6,604 $ 10,712 $ 15,057 $ 19,652 $ 25,653 $ 29,650 $ 35,081 $ 40,818 $ 46,876 $ 105 G E M S T O N E T E A M B IO F U E L S Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 209.78 $ 2,809.09 $ 16,844.49 $ 20,213.38 $ 21,224.05 $ 22,285.25 $ 23,399.52 $ 24,569.49 $ 25,797.97 $ 27,087.87 $ 28,442.26 $ 29,864.37 $ 31,357.59 $ 32,925.47 $ 34,571.74 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 209.78 $ 2,809.09 $ 16,844.49 $ 20,213.38 $ 21,224.05 $ 22,285.25 $ 23,399.52 $ 24,569.49 $ 25,797.97 $ 27,087.87 $ 28,442.26 $ 29,864.37 $ 31,357.59 $ 32,925.47 $ 34,571.74 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (41,098) (13,702) (4,896) (3,105) (2,568) (1,981) (1,338) (637) 129 964 1,871 2,855 3,920 5,070 6,308 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ S traight line D epreciation (P rocessing E quipm ent) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) S traight line D epreciation (Transportation E quipm ent) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) S traight line A m ortization (Land) (3,209) (3,380) (3,560) (3,750) (3,949) (4,160) (4,381) (4,615) (4,860) (5,119) (5,392) (5,679) (5,982) (6,300) (6,636) S ee am ortization table O perating Incom e (138,308) $ (111,082) $ (102,457) $ (100,855) $ (100,518) $ (100,140) $ (99,720) $ (99,251) $ (98,731) $ (98,156) $ (97,521) $ (96,824) $ (96,061) $ (95,230) $ (94,328) $ Interest E xpense (Land) (11,652) (11,481) (11,301) (11,112) (10,912) (10,702) (10,480) (10,247) (10,001) (9,742) (9,469) (9,182) (8,880) (8,561) (8,226) P re-Tax Incom e (149,960) $ (122,563) $ (113,758) $ (111,967) $ (111,430) $ (110,842) $ (110,200) $ (109,498) $ (108,732) $ (107,898) $ (106,990) $ (106,006) $ (104,941) $ (103,791) $ (102,554) $ Incom e Taxes - - - - - - - - - - - - - - - N et Incom e (149,960) $ (122,563) $ (113,758) $ (111,967) $ (111,430) $ (110,842) $ (110,200) $ (109,498) $ (108,732) $ (107,898) $ (106,990) $ (106,006) $ (104,941) $ (103,791) $ (102,554) $ R evenue G row th R ate 1,239.1% 499.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (149,960) $ (122,563) $ (113,758) $ (111,967) $ (111,430) $ (110,842) $ (110,200) $ (109,498) $ (108,732) $ (107,898) $ (106,990) $ (106,006) $ (104,941) $ (103,791) $ (102,554) $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 D epreciation (P rocessing E quipm ent) 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 D epreciation (Transportation E quipm ent) 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 A m ortization (Land) 3,209 3,380 3,560 3,750 3,949 4,160 4,381 4,615 4,860 5,119 5,392 5,679 5,982 6,300 6,636 C hange in W orking C apital (27,225.00) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities 69,984.21 $ 97,380.12 $ 97,560.14 $ 97,749.75 $ 97,949.45 $ 98,159.78 $ 98,381.32 $ 98,614.66 $ 98,860.43 $ 99,119.28 $ 99,391.92 $ 99,679.08 $ 99,981.53 $ 100,300.09 $ 100,635.62 $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent (265,000) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ P rocessing E quipm ent (797,000) - - - - - - - - - - - - - - Land A cquisition (281,920) - - - - - - - - - - - - - - Transportation E quipm ent (182,000) - - - - - - - - - - - - - - C ash Flow From Investing A ctivities (1,525,920) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan 225,536 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities 225,536 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (1,380,360) $ (25,183) $ (16,198) $ (14,217) $ (13,480) $ (12,682) $ (11,818) $ (10,883) $ (9,872) $ (8,778) $ (7,598) $ (6,327) $ (4,960) $ (3,491) $ (1,918) $ 106 Scenario Two Revenue & Base Case Expenses Processing Equipm ent D epreciation S chedule Facility Inform ation P rofitability C alculations Item Purchase Price Installation U seful Life A nnual D epreciation H ectares A cres A ssum ptions D ryer 175,000 $ 71,000 $ 15 $ 16,400 $ A verage M D Farm 64.75 160 Land Price (% ) 50.0% Pellet M ill 157,500 71,000 15 15,233 M D Price Per A cre 3,500 $ Subsidy A m ount 50.0% Pellet C ooler 16,000 24,000 15 2,667 Land Purchase Price 560,000 $ M iscellaneous Equipm ent 50,000 - 15 3,333 Equipm ent Purchased 50.0% A nnual D epreciation 37,633 $ M arginal Land Price Per A cre 881 $ Equipm ent O w ned 50.0% Land A cquisition Price 140,960 $ C hoose 10 P rocessing C ost S chedule ($ / T on) T ons P roduced M iscanthus Price 160.07 $ D rying 7.84 $ Y ear 1 9.66 Price Per M iscanthus R hizom e 2.25 $ Pelletizing 2.09 Y ear 2 110.64 Packaging 1.37 Y ear 3 328.20 A cres Per H ectare 2.4710538 T otal $ / T on 11.30 $ T ransportation Fixed C osts T ransportation Equipm ent D epreciation S chedule R egistration, Perm its & Fees 6,970 $ Item Purchase Price U seful Life A nnual D epreciation Insurance (V ehicle) 3,290 Loader 41,000 $ 15 $ 2,733 $ Insurance (G oods-in-T ransit) 500 T ruck 50,000 15 3,333 Insurance (Personal Sickness) 450 T otal 6,067 $ Insurance (Public Liability) 405 Insurance (W orkers' C om p) 1,533 H arvesting and P lanting Equipm ent D epreciation S chedule T otal 13,148 $ Item Purchase Price U seful Life A nnual D epreciation Forage H arvester 14,500 $ 15 966.67 $ T ransportation V ariable C osts P er M ile Potato Planter 43,000 15 2,866.67 Fuel (3.872 Per G allon) 0.55 $ T ractor 75,000 15 5,000.00 T ires 0.03 T otal 8,833.33 $ Servicing & M aintenance 0.12 T otal 0.70 $ 107 G E M S T O N E T E A M B IO FU E LS Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 1,546 $ 17,709 $ 52,533 $ 63,040 $ 66,192 $ 69,501 $ 72,976 $ 76,625 $ 80,456 $ 84,479 $ 88,703 $ 93,138 $ 97,795 $ 102,685 $ 107,819 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 1,546 $ 17,709 $ 52,533 $ 63,040 $ 66,192 $ 69,501 $ 72,976 $ 76,625 $ 80,456 $ 84,479 $ 88,703 $ 93,138 $ 97,795 $ 102,685 $ 107,819 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (39,762) 1,198 30,792 39,721 42,399 45,235 48,239 51,419 54,788 58,355 62,132 66,129 70,358 74,830 79,555 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) S traight line D epreciation (P rocessing E quipm ent) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) S traight line D epreciation (Transportation E quipm ent) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) S traight line A m ortization (Land) (6,375) (6,714) (7,072) (7,448) (7,845) (8,263) (8,703) (9,166) (9,655) (10,169) (10,710) (11,281) (11,882) (12,514) (13,181) S ee am ortization table O perating Incom e (98,670) $ (58,049) $ (28,813) $ (20,261) $ (17,979) $ (15,561) $ (12,998) $ (10,281) $ (7,400) $ (4,347) $ (1,112) $ 2,315 $ 5,943 $ 9,782 $ 13,841 $ Interest E xpense (Land) (23,145) (22,806) (22,448) (22,072) (21,675) (21,257) (20,817) (20,354) (19,866) (19,351) (18,239) (18,239) (17,639) (17,006) (16,339) P re-Tax Incom e (121,815) $ (80,855) $ (51,261) $ (42,333) $ (39,654) $ (36,818) $ (33,815) $ (30,634) $ (27,266) $ (23,698) $ (19,351) $ (15,924) $ (11,696) $ (7,224) $ (2,498) $ Incom e Taxes - - - - - - - - - - - - - - - N et Incom e (121,815) $ (80,855) $ (51,261) $ (42,333) $ (39,654) $ (36,818) $ (33,815) $ (30,634) $ (27,266) $ (23,698) $ (19,351) $ (15,924) $ (11,696) $ (7,224) $ (2,498) $ R evenue G row th R ate 1,045.1% 196.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (121,815) $ (80,855) $ (51,261) $ (42,333) $ (39,654) $ (36,818) $ (33,815) $ (30,634) $ (27,266) $ (23,698) $ (19,351) $ (15,924) $ (11,696) $ (7,224) $ (2,498) $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 D epreciation (P rocessing E quipm ent) 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 D epreciation (Transportation E quipm ent) 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 A m ortization (Land) 6,375 6,714 7,072 7,448 7,845 8,263 8,703 9,166 9,655 10,169 10,710 11,281 11,882 12,514 13,181 C hange in W orking C apital (27,225) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities 31,683 $ 59,248 $ 59,605 $ 59,982 $ 60,378 $ 60,796 $ 61,236 $ 61,700 $ 62,188 $ 62,702 $ 63,244 $ 63,814 $ 64,415 $ 65,048 $ 65,714 $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent (132,500) - - - - - - - - - - - - - - P rocessing E quipm ent (398,500) - - - - - - - - - - - - - - Land A cquisition (560,000) - - - - - - - - - - - - - - Transportation E quipm ent (91,000) - - - - - - - - - - - - - - C ash Flow From Investing A ctivities (1,182,000) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan 448,000 - - - - - - - - - - - - - - C ash flow from Financing A ctivities 448,000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (824,132) $ (21,608) $ 8,344 $ 17,649 $ 20,724 $ 23,978 $ 27,421 $ 31,065 $ 34,922 $ 39,004 $ 43,892 $ 47,890 $ 52,719 $ 57,824 $ 63,216 $ 108 G E M S T O N E T E A M B IO F U E L S Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 209.78 $ 2,809.09 $ 16,844.49 $ 20,213.38 $ 21,224.05 $ 22,285.25 $ 23,399.52 $ 24,569.49 $ 25,797.97 $ 27,087.87 $ 28,442.26 $ 29,864.37 $ 31,357.59 $ 32,925.47 $ 34,571.74 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 209.78 $ 2,809.09 $ 16,844.49 $ 20,213.38 $ 21,224.05 $ 22,285.25 $ 23,399.52 $ 24,569.49 $ 25,797.97 $ 27,087.87 $ 28,442.26 $ 29,864.37 $ 31,357.59 $ 32,925.47 $ 34,571.74 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (41,098) (13,702) (4,896) (3,105) (2,568) (1,981) (1,338) (637) 129 964 1,871 2,855 3,920 5,070 6,308 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ S traight line D epreciation (P rocessing E quipm ent) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) S traight line D epreciation (Transportation E quipm ent) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) S traight line A m ortization (Land) (1,605) (1,690) (1,780) (1,875) (1,975) (2,080) (2,191) (2,307) (2,430) (2,560) (2,696) (2,840) (2,991) (3,150) (3,318) S ee am ortization table O perating Incom e (95,236) $ (67,925) $ (59,210) $ (57,514) $ (57,076) $ (56,594) $ (56,062) $ (55,477) $ (54,834) $ (54,129) $ (53,358) $ (52,518) $ (51,604) $ (50,613) $ (49,544) $ Interest E xpense (Land) (5,826) (5,741) (5,651) (5,556) (5,456) (5,351) (5,240) (5,123) (5,000) (4,871) (4,735) (4,591) (4,440) (4,281) (4,113) P re-Tax Incom e (101,062) $ (73,666) $ (64,860) $ (63,069) $ (62,532) $ (61,945) $ (61,302) $ (60,601) $ (59,835) $ (59,000) $ (58,093) $ (57,109) $ (56,044) $ (54,894) $ (53,656) $ Incom e Taxes - - - - - - - - - - - - - - - N et Incom e (101,062) $ (73,666) $ (64,860) $ (63,069) $ (62,532) $ (61,945) $ (61,302) $ (60,601) $ (59,835) $ (59,000) $ (58,093) $ (57,109) $ (56,044) $ (54,894) $ (53,656) $ R evenue G row th R ate 1,239.1% 499.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (101,062) $ (73,666) $ (64,860) $ (63,069) $ (62,532) $ (61,945) $ (61,302) $ (60,601) $ (59,835) $ (59,000) $ (58,093) $ (57,109) $ (56,044) $ (54,894) $ (53,656) $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 D epreciation (P rocessing E quipm ent) 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 D epreciation (Transportation E quipm ent) 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 A m ortization (Land) 1,605 1,690 1,780 1,875 1,975 2,080 2,191 2,307 2,430 2,560 2,696 2,840 2,991 3,150 3,318 C hange in W orking C apital (27,225.00) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities 26,912.94 $ 54,223.40 $ 54,313.40 $ 54,408.21 $ 54,508.06 $ 54,613.23 $ 54,724.00 $ 54,840.66 $ 54,963.55 $ 55,092.97 $ 55,229.29 $ 55,372.87 $ 55,524.10 $ 55,683.38 $ 55,851.14 $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent (132,500) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ P rocessing E quipm ent (398,500) - - - - - - - - - - - - - - Land A cquisition (140,960) - - - - - - - - - - - - - - Transportation E quipm ent (91,000) - - - - - - - - - - - - - - C ash Flow From Investing A ctivities (762,960) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan 112,768 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities 112,768 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (724,342) $ (19,442) $ (10,547) $ (8,661) $ (8,024) $ (7,331) $ (6,578) $ (5,760) $ (4,871) $ (3,907) $ (2,864) $ (1,736) $ (520) $ 789 $ 2,195 $ 109 Scenario Two Revenue & Best Case Expenses Processing Equipm ent D epreciation S chedule Facility Inform ation P rofitability C alculations Item Purchase Price Installation U seful Life A nnual D epreciation H ectares A cres A ssum ptions D ryer - $ - $ 15 $ - $ A verage M D Farm 64.75 160 Land Price (% ) 0.0% Pellet M ill - - 15 - M D Price Per A cre - $ Subsidy A m ount 100.0% Pellet C ooler - - 15 - Land Purchase Price - $ M iscellaneous Equipm ent - - 15 - Equipm ent Purchased 0.0% A nnual D epreciation - $ M arginal Land Price Per A cre - $ Equipm ent O w ned 100.0% Land A cquisition Price - $ C hoose 10 P rocessing C ost S chedule ($ / T on) T ons P roduced M iscanthus Price 160.07 $ D rying 7.84 $ Y ear 1 9.66 Price Per M iscanthus R hizom e 2.25 $ Pelletizing 2.09 Y ear 2 110.64 Packaging 1.37 Y ear 3 328.20 A cres Per H ectare 2.4710538 T otal $ / T on 11.30 $ T ransportation Fixed C osts T ransportation Equipm ent D epreciation S chedule R egistration, Perm its & Fees 6,970 $ Item Purchase Price U seful Life A nnual D epreciation Insurance (V ehicle) 3,290 Loader - $ 15 $ - $ Insurance (G oods-in-T ransit) 500 T ruck - 15 - Insurance (Personal Sickness) 450 T otal - $ Insurance (Public Liability) 405 Insurance (W orkers' C om p) 1,533 H arvesting and P lanting Equipm ent D epreciation S chedule T otal 13,148 $ Item Purchase Price U seful Life A nnual D epreciation Forage H arvester - $ 15 - $ T ransportation V ariable C osts P er M ile Potato Planter - 15 - Fuel (3.872 Per G allon) 0.55 $ T ractor - 15 - T ires 0.03 T otal - $ Servicing & M aintenance 0.12 T otal 0.70 $ 110 G E M S T O N E T E A M B IO F U E L S Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 1,546 $ 17,709 $ 52,533 $ 63,040 $ 66,192 $ 69,501 $ 72,976 $ 76,625 $ 80,456 $ 84,479 $ 88,703 $ 93,138 $ 97,795 $ 102,685 $ 107,819 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 1,546 $ 17,709 $ 52,533 $ 63,040 $ 66,192 $ 69,501 $ 72,976 $ 76,625 $ 80,456 $ 84,479 $ 88,703 $ 93,138 $ 97,795 $ 102,685 $ 107,819 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (39,762) 1,198 30,792 39,721 42,399 45,235 48,239 51,419 54,788 58,355 62,132 66,129 70,358 74,830 79,555 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) - - - - - - - - - - - - - - - S traight line D epreciation (P rocessing E quipm ent) - - - - - - - - - - - - - - - S traight line D epreciation (Transportation E quipm ent) - - - - - - - - - - - - - - - S traight line A m ortization (Land) - - - - - - - - - - - - - - - S ee am ortization table O perating Incom e (39,762) $ 1,198 $ 30,792 $ 39,721 $ 42,399 $ 45,235 $ 48,239 $ 51,419 $ 54,788 $ 58,355 $ 62,132 $ 66,129 $ 70,358 $ 74,830 $ 79,555 $ Interest E xpense (Land) - - - - - - - - - - - - - - - P re-Tax Incom e (39,762) $ 1,198 $ 30,792 $ 39,721 $ 42,399 $ 45,235 $ 48,239 $ 51,419 $ 54,788 $ 58,355 $ 62,132 $ 66,129 $ 70,358 $ 74,830 $ 79,555 $ Incom e Taxes - 359.5 9,237.7 11,916.3 12,719.8 13,570.6 14,471.6 15,425.8 16,436.3 17,506.5 18,639.6 19,838.7 21,107.4 22,448.9 23,866.5 N et Incom e (39,762) $ 1,558 $ 40,030 $ 51,637 $ 55,119 $ 58,806 $ 62,710 $ 66,845 $ 71,224 $ 75,862 $ 80,771 $ 85,968 $ 91,465 $ 97,278 $ 103,422 $ R evenue G row th R ate 1,045.1% 196.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (39,762) $ 1,558 $ 40,030 $ 51,637 $ 55,119 $ 58,806 $ 62,710 $ 66,845 $ 71,224 $ 75,862 $ 80,771 $ 85,968 $ 91,465 $ 97,278 $ 103,422 $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) - - - - - - - - - - - - - - - D epreciation (P rocessing E quipm ent) - - - - - - - - - - - - - - - D epreciation (Transportation E quipm ent) - - - - - - - - - - - - - - - A m ortization (Land) - - - - - - - - - - - - - - - C hange in W orking C apital (27,225) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities (27,225) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent - - - - - - - - - - - - - - - P rocessing E quipm ent - - - - - - - - - - - - - - - Land A cquisition - - - - - - - - - - - - - - - Transportation E quipm ent - - - - - - - - - - - - - - - C ash Flow From Investing A ctivities - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan - - - - - - - - - - - - - - - C ash flow from Financing A ctivities - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (66,987) $ 1,558 $ 40,030 $ 51,637 $ 55,119 $ 58,806 $ 62,710 $ 66,845 $ 71,224 $ 75,862 $ 80,771 $ 85,968 $ 91,465 $ 97,278 $ 103,422 $ 111 G E M S T O N E T E A M B IO F U E L S Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 209.78 $ 2,809.09 $ 16,844.49 $ 20,213.38 $ 21,224.05 $ 22,285.25 $ 23,399.52 $ 24,569.49 $ 25,797.97 $ 27,087.87 $ 28,442.26 $ 29,864.37 $ 31,357.59 $ 32,925.47 $ 34,571.74 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 209.78 $ 2,809.09 $ 16,844.49 $ 20,213.38 $ 21,224.05 $ 22,285.25 $ 23,399.52 $ 24,569.49 $ 25,797.97 $ 27,087.87 $ 28,442.26 $ 29,864.37 $ 31,357.59 $ 32,925.47 $ 34,571.74 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (41,098) (13,702) (4,896) (3,105) (2,568) (1,981) (1,338) (637) 129 964 1,871 2,855 3,920 5,070 6,308 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ S traight line D epreciation (P rocessing E quipm ent) - - - - - - - - - - - - - - - S traight line D epreciation (Transportation E quipm ent) - - - - - - - - - - - - - - - S traight line A m ortization (Land) - - - - - - - - - - - - - - - S ee am ortization table O perating Incom e (41,098) $ (13,702) $ (4,896) $ (3,105) $ (2,568) $ (1,981) $ (1,338) $ (637) $ 129 $ 964 $ 1,871 $ 2,855 $ 3,920 $ 5,070 $ 6,308 $ Interest E xpense (Land) - - - - - - - - - - - - - - - P re-Tax Incom e (41,098) $ (13,702) $ (4,896) $ (3,105) $ (2,568) $ (1,981) $ (1,338) $ (637) $ 129 $ 964 $ 1,871 $ 2,855 $ 3,920 $ 5,070 $ 6,308 $ Incom e Taxes - - - - - - - - 39 289 561 857 1,176 1,521 1,892 N et Incom e (41,098) $ (13,702) $ (4,896) $ (3,105) $ (2,568) $ (1,981) $ (1,338) $ (637) $ 168 $ 1,253 $ 2,432 $ 3,712 $ 5,096 $ 6,591 $ 8,200 $ R evenue G row th R ate 1,239.1% 499.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (41,098) $ (13,702) $ (4,896) $ (3,105) $ (2,568) $ (1,981) $ (1,338) $ (637) $ 168 $ 1,253 $ 2,432 $ 3,712 $ 5,096 $ 6,591 $ 8,200 $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) - - - - - - - - - - - - - - - D epreciation (P rocessing E quipm ent) - - - - - - - - - - - - - - - D epreciation (Transportation E quipm ent) - - - - - - - - - - - - - - - A m ortization (Land) - - - - - - - - - - - - - - - C hange in W orking C apital (27,225.00) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities (27,225.00) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ P rocessing E quipm ent - - - - - - - - - - - - - - - Land A cquisition - - - - - - - - - - - - - - - Transportation E quipm ent - - - - - - - - - - - - - - - C ash Flow From Investing A ctivities - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (68,323) $ (13,702) $ (4,896) $ (3,105) $ (2,568) $ (1,981) $ (1,338) $ (637) $ 168 $ 1,253 $ 2,432 $ 3,712 $ 5,096 $ 6,591 $ 8,200 $ 112 Scenario Three Revenue & Worst Case Expenses Processing Equipm ent D epreciation S chedule Facility Inform ation P rofitability C alculations Item Purchase Price Installation U seful Life A nnual D epreciation H ectares A cres A ssum ptions D ryer 350,000 $ 71,000 $ 15 $ 28,067 $ A verage M D Farm 64.75 160 Land Price (% ) 100.0% Pellet M ill 315,000 71,000 15 25,733 M D Price Per A cre 7,000 $ Subsidy A m ount 0.0% Pellet C ooler 32,000 24,000 15 3,733 Land Purchase Price 1,120,000 $ M iscellaneous Equipm ent 100,000 - 15 6,667 Equipm ent Purchased 100.0% A nnual D epreciation 64,200 $ M arginal Land Price Per A cre 1,762 $ Equipm ent O w ned 0.0% Land A cquisition Price 281,920 $ C hoose 11 P rocessing C ost S chedule ($ / T on) T ons P roduced M iscanthus Price 240.10 $ D rying 7.84 $ Y ear 1 9.66 Price Per M iscanthus R hizom e 2.25 $ Pelletizing 2.09 Y ear 2 110.64 Packaging 1.37 Y ear 3 328.20 A cres Per H ectare 2.4710538 T otal $ / T on 11.30 $ T ransportation Fixed C osts T ransportation Equipm ent D epreciation S chedule R egistration, Perm its & Fees 6,970 $ Item Purchase Price U seful Life A nnual D epreciation Insurance (V ehicle) 3,290 Loader 82,000 $ 15 $ 5,467 $ Insurance (G oods-in-T ransit) 500 T ruck 100,000 15 6,667 Insurance (Personal Sickness) 450 T otal 12,133 $ Insurance (Public Liability) 405 Insurance (W orkers' C om p) 1,533 H arvesting and P lanting Equipm ent D epreciation S chedule T otal 13,148 $ Item Purchase Price U seful Life A nnual D epreciation Forage H arvester 29,000 $ 15 1,933.33 $ T ransportation V ariable C osts P er M ile Potato Planter 86,000 15 5,733.33 Fuel (3.872 Per G allon) 0.55 $ T ractor 150,000 15 10,000.00 T ires 0.03 T otal 17,666.67 $ Servicing & M aintenance 0.12 T otal 0.70 $ 113 G E M S T O N E T E A M B IO FU E LS Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 2,320 $ 26,564 $ 78,800 $ 94,560 $ 99,288 $ 104,252 $ 109,465 $ 114,938 $ 120,685 $ 126,719 $ 133,055 $ 139,708 $ 146,693 $ 154,028 $ 161,729 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 2,320 $ 26,564 $ 78,800 $ 94,560 $ 99,288 $ 104,252 $ 109,465 $ 114,938 $ 120,685 $ 126,719 $ 133,055 $ 139,708 $ 146,693 $ 154,028 $ 161,729 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (38,989) 10,053 57,059 71,241 75,495 79,986 84,727 89,732 95,016 100,595 106,484 112,698 119,256 126,172 133,465 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) (17,667) S traight line D epreciation (P rocessing E quipm ent) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) S traight line D epreciation (Transportation E quipm ent) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) S traight line A m ortization (Land) (12,749) (13,428) (14,144) (14,897) (15,690) (16,526) (17,406) (18,333) (19,309) (20,338) (21,421) (22,562) (23,763) (25,029) (26,362) S ee am ortization table O perating Incom e (145,738) $ (97,375) $ (51,085) $ (37,656) $ (34,195) $ (30,540) $ (26,679) $ (22,601) $ (18,293) $ (13,743) $ (8,937) $ (3,863) $ 1,492 $ 7,143 $ 13,103 $ Interest E xpense (Land) (46,291) (45,612) (44,897) (44,144) (43,350) (42,515) (41,634) (40,707) (39,731) (38,703) (36,479) (36,479) (35,277) (34,012) (32,679) P re-Tax Incom e (192,029) $ (142,987) $ (95,982) $ (81,800) $ (77,545) $ (73,054) $ (68,314) $ (63,309) $ (58,024) $ (52,446) $ (45,416) $ (40,342) $ (33,785) $ (26,868) $ (19,576) $ Incom e Taxes - - - - - - - - - - - - - - - N et Incom e (192,029) $ (142,987) $ (95,982) $ (81,800) $ (77,545) $ (73,054) $ (68,314) $ (63,309) $ (58,024) $ (52,446) $ (45,416) $ (40,342) $ (33,785) $ (26,868) $ (19,576) $ R evenue G row th R ate 1,045.1% 196.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (192,029) $ (142,987) $ (95,982) $ (81,800) $ (77,545) $ (73,054) $ (68,314) $ (63,309) $ (58,024) $ (52,446) $ (45,416) $ (40,342) $ (33,785) $ (26,868) $ (19,576) $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 D epreciation (P rocessing E quipm ent) 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 D epreciation (Transportation E quipm ent) 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 A m ortization (Land) 12,749 13,428 14,144 14,897 15,690 16,526 17,406 18,333 19,309 20,338 21,421 22,562 23,763 25,029 26,362 C hange in W orking C apital (27,225) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities 79,524 $ 107,428 $ 108,144 $ 108,897 $ 109,690 $ 110,526 $ 111,406 $ 112,333 $ 113,309 $ 114,338 $ 115,421 $ 116,562 $ 117,763 $ 119,029 $ 120,362 $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent (265,000) - - - - - - - - - - - - - - P rocessing E quipm ent (797,000) - - - - - - - - - - - - - - Land A cquisition (1,120,000) - - - - - - - - - - - - - - Transportation E quipm ent (182,000) - - - - - - - - - - - - - - C ash Flow From Investing A ctivities (2,364,000) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan 896,000 - - - - - - - - - - - - - - C ash flow from Financing A ctivities 896,000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (1,580,505) $ (35,559) $ 12,162 $ 27,097 $ 32,145 $ 37,471 $ 43,092 $ 49,024 $ 55,285 $ 61,892 $ 70,005 $ 76,220 $ 83,978 $ 92,160 $ 100,786 $ 114 G E M S T O N E T E A M B IO FU E LS Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 314.67 $ 4,213.63 $ 25,266.73 $ 30,320.07 $ 31,836.08 $ 33,427.88 $ 35,099.28 $ 36,854.24 $ 38,696.95 $ 40,631.80 $ 42,663.39 $ 44,796.56 $ 47,036.39 $ 49,388.21 $ 51,857.62 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 314.67 $ 4,213.63 $ 25,266.73 $ 30,320.07 $ 31,836.08 $ 33,427.88 $ 35,099.28 $ 36,854.24 $ 38,696.95 $ 40,631.80 $ 42,663.39 $ 44,796.56 $ 47,036.39 $ 49,388.21 $ 51,857.62 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (40,994) (12,297) 3,526 7,001 8,044 9,162 10,361 11,648 13,028 14,508 16,092 17,787 19,599 21,533 23,593 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ (17,666.67) $ S traight line D epreciation (P rocessing E quipm ent) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) (64,200) S traight line D epreciation (Transportation E quipm ent) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) (12,133) S traight line A m ortization (Land) (3,209) (3,380) (3,560) (3,750) (3,949) (4,160) (4,381) (4,615) (4,860) (5,119) (5,392) (5,679) (5,982) (6,300) (6,636) S ee am ortization table O perating Incom e (138,203) $ (109,677) $ (94,034) $ (90,749) $ (89,906) $ (88,998) $ (88,020) $ (86,966) $ (85,832) $ (84,612) $ (83,300) $ (81,892) $ (80,383) $ (78,767) $ (77,042) $ Interest E xpense (Land) (11,652) (11,481) (11,301) (11,112) (10,912) (10,702) (10,480) (10,247) (10,001) (9,742) (9,469) (9,182) (8,880) (8,561) (8,226) P re-Tax Incom e (149,855) $ (121,158) $ (105,335) $ (101,860) $ (100,817) $ (99,699) $ (98,500) $ (97,213) $ (95,833) $ (94,354) $ (92,769) $ (91,074) $ (89,262) $ (87,329) $ (85,268) $ Incom e Taxes - - - - - - - - - - - - - - - N et Incom e (149,855) $ (121,158) $ (105,335) $ (101,860) $ (100,817) $ (99,699) $ (98,500) $ (97,213) $ (95,833) $ (94,354) $ (92,769) $ (91,074) $ (89,262) $ (87,329) $ (85,268) $ R evenue G row th R ate 1,239.1% 499.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (149,855) $ (121,158) $ (105,335) $ (101,860) $ (100,817) $ (99,699) $ (98,500) $ (97,213) $ (95,833) $ (94,354) $ (92,769) $ (91,074) $ (89,262) $ (87,329) $ (85,268) $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 17,667 D epreciation (P rocessing E quipm ent) 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 64,200 D epreciation (Transportation E quipm ent) 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 12,133 A m ortization (Land) 3,209 3,380 3,560 3,750 3,949 4,160 4,381 4,615 4,860 5,119 5,392 5,679 5,982 6,300 6,636 C hange in W orking C apital (27,225.00) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities 69,984.21 $ 97,380.12 $ 97,560.14 $ 97,749.75 $ 97,949.45 $ 98,159.78 $ 98,381.32 $ 98,614.66 $ 98,860.43 $ 99,119.28 $ 99,391.92 $ 99,679.08 $ 99,981.53 $ 100,300.09 $ 100,635.62 $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent (265,000) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ P rocessing E quipm ent (797,000) - - - - - - - - - - - - - - Land A cquisition (281,920) - - - - - - - - - - - - - - Transportation E quipm ent (182,000) - - - - - - - - - - - - - - C ash Flow From Investing A ctivities (1,525,920) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan 225,536 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities 225,536 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (1,380,255) $ (23,778) $ (7,775) $ (4,110) $ (2,868) $ (1,540) $ (119) $ 1,402 $ 3,027 $ 4,766 $ 6,623 $ 8,605 $ 10,719 $ 12,971 $ 15,368 $ 115 Scenario Three Revenue & Base Case Expenses P rocessing Equipm ent D epreciation S chedule Facility Inform ation P rofitability C alculations Item Purchase Price Installation U seful Life A nnual D epreciation H ectares A cres A ssum ptions D ryer 175,000 $ 71,000 $ 15 $ 16,400 $ A verage M D Farm 64.75 160 Land Price (% ) 50.0% Pellet M ill 157,500 71,000 15 15,233 M D Price Per A cre 3,500 $ Subsidy A m ount 50.0% Pellet C ooler 16,000 24,000 15 2,667 Land Purchase Price 560,000 $ M iscellaneous Equipm ent 50,000 - 15 3,333 Equipm ent Purchased 50.0% A nnual D epreciation 37,633 $ M arginal Land Price Per A cre 881 $ Equipm ent O w ned 50.0% Land A cquisition Price 140,960 $ C hoose 11 P rocessing C ost S chedule ($ / T on) T ons P roduced M iscanthus Price 240.10 $ D rying 7.84 $ Y ear 1 9.66 Price Per M iscanthus R hizom e 2.25 $ Pelletizing 2.09 Y ear 2 110.64 Packaging 1.37 Y ear 3 328.20 A cres Per H ectare 2.4710538 T otal $ / T on 11.30 $ T ransportation Fixed C osts T ransportation Equipm ent D epreciation S chedule R egistration, Perm its & Fees 6,970 $ Item Purchase Price U seful Life A nnual D epreciation Insurance (V ehicle) 3,290 Loader 41,000 $ 15 $ 2,733 $ Insurance (G oods-in-T ransit) 500 T ruck 50,000 15 3,333 Insurance (Personal Sickness) 450 T otal 6,067 $ Insurance (Public Liability) 405 Insurance (W orkers' C om p) 1,533 H arvesting and P lanting Equipm ent D epreciation S chedule T otal 13,148 $ Item Purchase Price U seful Life A nnual D epreciation Forage H arvester 14,500 $ 15 966.67 $ T ransportation V ariable C osts P er M ile Potato Planter 43,000 15 2,866.67 Fuel (3.872 Per G allon) 0.55 $ T ractor 75,000 15 5,000.00 T ires 0.03 T otal 8,833.33 $ Servicing & M aintenance 0.12 T otal 0.70 $ 116 G E M S T O N E T E A M B IO FU E LS Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 2,320 $ 26,564 $ 78,800 $ 94,560 $ 99,288 $ 104,252 $ 109,465 $ 114,938 $ 120,685 $ 126,719 $ 133,055 $ 139,708 $ 146,693 $ 154,028 $ 161,729 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 2,320 $ 26,564 $ 78,800 $ 94,560 $ 99,288 $ 104,252 $ 109,465 $ 114,938 $ 120,685 $ 126,719 $ 133,055 $ 139,708 $ 146,693 $ 154,028 $ 161,729 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (38,989) 10,053 57,059 71,241 75,495 79,986 84,727 89,732 95,016 100,595 106,484 112,698 119,256 126,172 133,465 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) (8,833) S traight line D epreciation (P rocessing E quipm ent) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) S traight line D epreciation (Transportation E quipm ent) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) S traight line A m ortization (Land) (6,375) (6,714) (7,072) (7,448) (7,845) (8,263) (8,703) (9,166) (9,655) (10,169) (10,710) (11,281) (11,882) (12,514) (13,181) S ee am ortization table O perating Incom e (97,897) $ (49,195) $ (2,546) $ 11,259 $ 15,117 $ 19,190 $ 23,490 $ 28,032 $ 32,828 $ 37,893 $ 43,240 $ 48,884 $ 54,841 $ 61,124 $ 67,751 $ Interest E xpense (Land) (23,145) (22,806) (22,448) (22,072) (21,675) (21,257) (20,817) (20,354) (19,866) (19,351) (18,239) (18,239) (17,639) (17,006) (16,339) P re-Tax Incom e (121,042) $ (72,001) $ (24,995) $ (10,813) $ (6,558) $ (2,067) $ 2,673 $ 7,678 $ 12,963 $ 18,541 $ 25,000 $ 30,645 $ 37,202 $ 44,119 $ 51,411 $ Incom e Taxes - - - - - - 802.0 2,303.5 3,888.8 5,562.4 7,500.1 9,193.4 11,160.6 13,235.6 15,423.4 N et Incom e (121,042) $ (72,001) $ (24,995) $ (10,813) $ (6,558) $ (2,067) $ 3,475 $ 9,982 $ 16,851 $ 24,104 $ 32,501 $ 39,838 $ 48,363 $ 57,354 $ 66,835 $ R evenue G row th R ate 1,045.1% 196.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (121,042) $ (72,001) $ (24,995) $ (10,813) $ (6,558) $ (2,067) $ 3,475 $ 9,982 $ 16,851 $ 24,104 $ 32,501 $ 39,838 $ 48,363 $ 57,354 $ 66,835 $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 D epreciation (P rocessing E quipm ent) 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 D epreciation (Transportation E quipm ent) 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 A m ortization (Land) 6,375 6,714 7,072 7,448 7,845 8,263 8,703 9,166 9,655 10,169 10,710 11,281 11,882 12,514 13,181 C hange in W orking C apital (27,225) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities 31,683 $ 59,248 $ 59,605 $ 59,982 $ 60,378 $ 60,796 $ 61,236 $ 61,700 $ 62,188 $ 62,702 $ 63,244 $ 63,814 $ 64,415 $ 65,048 $ 65,714 $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent (132,500) - - - - - - - - - - - - - - P rocessing E quipm ent (398,500) - - - - - - - - - - - - - - Land A cquisition (560,000) - - - - - - - - - - - - - - Transportation E quipm ent (91,000) - - - - - - - - - - - - - - C ash Flow From Investing A ctivities (1,182,000) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan 448,000 - - - - - - - - - - - - - - C ash flow from Financing A ctivities 448,000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (823,359) $ (12,753) $ 34,610 $ 49,169 $ 53,820 $ 58,729 $ 64,711 $ 71,682 $ 79,039 $ 86,806 $ 95,744 $ 103,652 $ 112,778 $ 122,402 $ 132,549 $ 117 G E M S T O N E T E A M B IO FU E LS Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 314.67 $ 4,213.63 $ 25,266.73 $ 30,320.07 $ 31,836.08 $ 33,427.88 $ 35,099.28 $ 36,854.24 $ 38,696.95 $ 40,631.80 $ 42,663.39 $ 44,796.56 $ 47,036.39 $ 49,388.21 $ 51,857.62 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 314.67 $ 4,213.63 $ 25,266.73 $ 30,320.07 $ 31,836.08 $ 33,427.88 $ 35,099.28 $ 36,854.24 $ 38,696.95 $ 40,631.80 $ 42,663.39 $ 44,796.56 $ 47,036.39 $ 49,388.21 $ 51,857.62 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (40,994) (12,297) 3,526 7,001 8,044 9,162 10,361 11,648 13,028 14,508 16,092 17,787 19,599 21,533 23,593 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ (8,833.33) $ S traight line D epreciation (P rocessing E quipm ent) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) (37,633) S traight line D epreciation (Transportation E quipm ent) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) (6,067) S traight line A m ortization (Land) (1,605) (1,690) (1,780) (1,875) (1,975) (2,080) (2,191) (2,307) (2,430) (2,560) (2,696) (2,840) (2,991) (3,150) (3,318) S ee am ortization table O perating Incom e (95,132) $ (66,520) $ (50,788) $ (47,407) $ (46,464) $ (45,451) $ (44,363) $ (43,192) $ (41,935) $ (40,585) $ (39,137) $ (37,586) $ (35,925) $ (34,151) $ (32,258) $ Interest E xpense (Land) (5,826) (5,741) (5,651) (5,556) (5,456) (5,351) (5,240) (5,123) (5,000) (4,871) (4,735) (4,591) (4,440) (4,281) (4,113) P re-Tax Incom e (100,958) $ (72,261) $ (56,438) $ (52,963) $ (51,920) $ (50,802) $ (49,603) $ (48,316) $ (46,936) $ (45,456) $ (43,872) $ (42,177) $ (40,365) $ (38,431) $ (36,371) $ Incom e Taxes - - - - - - - - - - - - - - - N et Incom e (100,958) $ (72,261) $ (56,438) $ (52,963) $ (51,920) $ (50,802) $ (49,603) $ (48,316) $ (46,936) $ (45,456) $ (43,872) $ (42,177) $ (40,365) $ (38,431) $ (36,371) $ R evenue G row th R ate 1,239.1% 499.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (100,958) $ (72,261) $ (56,438) $ (52,963) $ (51,920) $ (50,802) $ (49,603) $ (48,316) $ (46,936) $ (45,456) $ (43,872) $ (42,177) $ (40,365) $ (38,431) $ (36,371) $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 8,833 D epreciation (P rocessing E quipm ent) 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 37,633 D epreciation (Transportation E quipm ent) 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 6,067 A m ortization (Land) 1,605 1,690 1,780 1,875 1,975 2,080 2,191 2,307 2,430 2,560 2,696 2,840 2,991 3,150 3,318 C hange in W orking C apital (27,225.00) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities 26,912.94 $ 54,223.40 $ 54,313.40 $ 54,408.21 $ 54,508.06 $ 54,613.23 $ 54,724.00 $ 54,840.66 $ 54,963.55 $ 55,092.97 $ 55,229.29 $ 55,372.87 $ 55,524.10 $ 55,683.38 $ 55,851.14 $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent (132,500) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ P rocessing E quipm ent (398,500) - - - - - - - - - - - - - - Land A cquisition (140,960) - - - - - - - - - - - - - - Transportation E quipm ent (91,000) - - - - - - - - - - - - - - C ash Flow From Investing A ctivities (762,960) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan 112,768 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities 112,768 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (724,237) $ (18,038) $ (2,125) $ 1,445 $ 2,588 $ 3,811 $ 5,121 $ 6,525 $ 8,028 $ 9,637 $ 11,357 $ 13,196 $ 15,159 $ 17,252 $ 19,481 $ 118 Scenario Three Revenue & Best Case Expenses Processing Equipm ent D epreciation S chedule Facility Inform ation P rofitability C alculations Item Purchase Price Installation U seful Life A nnual D epreciation H ectares A cres A ssum ptions D ryer - $ - $ 15 $ - $ A verage M D Farm 64.75 160 Land Price (% ) 0.0% Pellet M ill - - 15 - M D Price Per A cre - $ Subsidy A m ount 100.0% Pellet C ooler - - 15 - Land Purchase Price - $ M iscellaneous Equipm ent - - 15 - Equipm ent Purchased 0.0% A nnual D epreciation - $ M arginal Land Price Per A cre - $ Equipm ent O w ned 100.0% Land A cquisition Price - $ C hoose 11 P rocessing C ost S chedule ($ / T on) T ons P roduced M iscanthus Price 240.10 $ D rying 7.84 $ Y ear 1 9.66 Price Per M iscanthus R hizom e 2.25 $ Pelletizing 2.09 Y ear 2 110.64 Packaging 1.37 Y ear 3 328.20 A cres Per H ectare 2.4710538 T otal $ / T on 11.30 $ T ransportation Fixed C osts T ransportation Equipm ent D epreciation S chedule R egistration, Perm its & Fees 6,970 $ Item Purchase Price U seful Life A nnual D epreciation Insurance (V ehicle) 3,290 Loader - $ 15 $ - $ Insurance (G oods-in-T ransit) 500 T ruck - 15 - Insurance (Personal Sickness) 450 T otal - $ Insurance (Public Liability) 405 Insurance (W orkers' C om p) 1,533 H arvesting and P lanting Equipm ent D epreciation S chedule T otal 13,148 $ Item Purchase Price U seful Life A nnual D epreciation Forage H arvester - $ 15 - $ T ransportation V ariable C osts P er M ile Potato Planter - 15 - Fuel (3.872 Per G allon) 0.55 $ T ractor - 15 - T ires 0.03 T otal - $ Servicing & M aintenance 0.12 T otal 0.70 $ 119 G E M S T O N E T E A M B IO F U E L S Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 2,320 $ 26,564 $ 78,800 $ 94,560 $ 99,288 $ 104,252 $ 109,465 $ 114,938 $ 120,685 $ 126,719 $ 133,055 $ 139,708 $ 146,693 $ 154,028 $ 161,729 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 2,320 $ 26,564 $ 78,800 $ 94,560 $ 99,288 $ 104,252 $ 109,465 $ 114,938 $ 120,685 $ 126,719 $ 133,055 $ 139,708 $ 146,693 $ 154,028 $ 161,729 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (38,989) 10,053 57,059 71,241 75,495 79,986 84,727 89,732 95,016 100,595 106,484 112,698 119,256 126,172 133,465 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) - - - - - - - - - - - - - - - S traight line D epreciation (P rocessing E quipm ent) - - - - - - - - - - - - - - - S traight line D epreciation (Transportation E quipm ent) - - - - - - - - - - - - - - - S traight line A m ortization (Land) - - - - - - - - - - - - - - - S ee am ortization table O perating Incom e (38,989) $ 10,053 $ 57,059 $ 71,241 $ 75,495 $ 79,986 $ 84,727 $ 89,732 $ 95,016 $ 100,595 $ 106,484 $ 112,698 $ 119,256 $ 126,172 $ 133,465 $ Interest E xpense (Land) - - - - - - - - - - - - - - - P re-Tax Incom e (38,989) $ 10,053 $ 57,059 $ 71,241 $ 75,495 $ 79,986 $ 84,727 $ 89,732 $ 95,016 $ 100,595 $ 106,484 $ 112,698 $ 119,256 $ 126,172 $ 133,465 $ Incom e Taxes - 3,015.9 17,117.6 21,372.2 22,648.6 23,995.8 25,418.0 26,919.5 28,504.8 30,178.4 31,945.1 33,809.5 35,776.7 37,851.6 40,039.4 N et Incom e (38,989) $ 13,069 $ 74,176 $ 92,613 $ 98,144 $ 103,982 $ 110,145 $ 116,651 $ 123,521 $ 130,773 $ 138,429 $ 146,508 $ 155,032 $ 164,024 $ 173,504 $ R evenue G row th R ate 1,045.1% 196.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally V iable Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (38,989) $ 13,069 $ 74,176 $ 92,613 $ 98,144 $ 103,982 $ 110,145 $ 116,651 $ 123,521 $ 130,773 $ 138,429 $ 146,508 $ 155,032 $ 164,024 $ 173,504 $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) - - - - - - - - - - - - - - - D epreciation (P rocessing E quipm ent) - - - - - - - - - - - - - - - D epreciation (Transportation E quipm ent) - - - - - - - - - - - - - - - A m ortization (Land) - - - - - - - - - - - - - - - C hange in W orking C apital (27,225) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities (27,225) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent - - - - - - - - - - - - - - - P rocessing E quipm ent - - - - - - - - - - - - - - - Land A cquisition - - - - - - - - - - - - - - - Transportation E quipm ent - - - - - - - - - - - - - - - C ash Flow From Investing A ctivities - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan - - - - - - - - - - - - - - - C ash flow from Financing A ctivities - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (66,214) $ 13,069 $ 74,176 $ 92,613 $ 98,144 $ 103,982 $ 110,145 $ 116,651 $ 123,521 $ 130,773 $ 138,429 $ 146,508 $ 155,032 $ 164,024 $ 173,504 $ 120 G E M S T O N E T E A M B IO F U E L S Illustrative M aryland C om m ercial M iscanthus P roduction Incom e S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes R evenue M iscanthus x. G iganteus S ales 314.67 $ 4,213.63 $ 25,266.73 $ 30,320.07 $ 31,836.08 $ 33,427.88 $ 35,099.28 $ 36,854.24 $ 38,696.95 $ 40,631.80 $ 42,663.39 $ 44,796.56 $ 47,036.39 $ 49,388.21 $ 51,857.62 $ O ther - - - - - - - - - - - - - - - R evenue from shipping Total R evenue 314.67 $ 4,213.63 $ 25,266.73 $ 30,320.07 $ 31,836.08 $ 33,427.88 $ 35,099.28 $ 36,854.24 $ 38,696.95 $ 40,631.80 $ 42,663.39 $ 44,796.56 $ 47,036.39 $ 49,388.21 $ 51,857.62 $ C ost of P roduction H arvesting & P lanting (123) (1,410) (4,181) (5,017) (5,268) (5,532) (5,808) (6,099) (6,404) (6,724) (7,060) (7,413) (7,784) (8,173) (8,582) $12.74 C ost of P lants (27,225) - - - - - - - - - - - - - - Includes D rying, pelletizing, and packaging P rocessing (109) (1,250) (3,709) (4,450) (4,673) (4,883) (5,078) (5,256) (5,414) (5,549) (5,660) (5,745) (5,803) (5,832) (5,832) Transportation (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) (13,851) C onstant G ross P rofit (40,994) (12,297) 3,526 7,001 8,044 9,162 10,361 11,648 13,028 14,508 16,092 17,787 19,599 21,533 23,593 O perating, S G & A Expenses D epreciation (H arvest & P lanting E quipm ent) - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ S traight line D epreciation (P rocessing E quipm ent) - - - - - - - - - - - - - - - S traight line D epreciation (Transportation E quipm ent) - - - - - - - - - - - - - - - S traight line A m ortization (Land) - - - - - - - - - - - - - - - S ee am ortization table O perating Incom e (40,994) $ (12,297) $ 3,526 $ 7,001 $ 8,044 $ 9,162 $ 10,361 $ 11,648 $ 13,028 $ 14,508 $ 16,092 $ 17,787 $ 19,599 $ 21,533 $ 23,593 $ Interest E xpense (Land) - - - - - - - - - - - - - - - P re-Tax Incom e (40,994) $ (12,297) $ 3,526 $ 7,001 $ 8,044 $ 9,162 $ 10,361 $ 11,648 $ 13,028 $ 14,508 $ 16,092 $ 17,787 $ 19,599 $ 21,533 $ 23,593 $ Incom e Taxes - - 1,058 2,100 2,413 2,749 3,108 3,494 3,908 4,352 4,828 5,336 5,880 6,460 7,078 N et Incom e (40,994) $ (12,297) $ 4,584 $ 9,102 $ 10,457 $ 11,911 $ 13,470 $ 15,143 $ 16,937 $ 18,860 $ 20,920 $ 23,123 $ 25,479 $ 27,992 $ 30,671 $ R evenue G row th R ate 1,239.1% 499.6% 20.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% C onstant H arvesting & P lanting C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year P rocessing C ost G row th R ate 1,045.1% 196.6% 20.0% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% D ecrease by 50bp each year Illustrative M aryland C om m ercial M iscanthus P roduction C ash Flow S tatem ent (A griculturally M arginal Land) A ctual Estim ated P rojected Fiscal Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 P rojection N otes N et Incom e (40,994) $ (12,297) $ 4,584 $ 9,102 $ 10,457 $ 11,911 $ 13,470 $ 15,143 $ 16,937 $ 18,860 $ 20,920 $ 23,123 $ 25,479 $ 27,992 $ 30,671 $ C ash Flow From O perating A ctivities D epreciation (H arvest & P lanting E quipm ent) - - - - - - - - - - - - - - - D epreciation (P rocessing E quipm ent) - - - - - - - - - - - - - - - D epreciation (Transportation E quipm ent) - - - - - - - - - - - - - - - A m ortization (Land) - - - - - - - - - - - - - - - C hange in W orking C apital (27,225.00) - - - - - - - - - - - - - - C ash Flow From O perating A ctivities (27,225.00) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities H arvesting & P lanting E quipm ent - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ P rocessing E quipm ent - - - - - - - - - - - - - - - Land A cquisition - - - - - - - - - - - - - - - Transportation E quipm ent - - - - - - - - - - - - - - - C ash Flow From Investing A ctivities - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow from Financing A ctivities M ortgage Loan - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ C ash Flow From Investing A ctivities - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ N et C hange in C ash (68,219) $ (12,297) $ 4,584 $ 9,102 $ 10,457 $ 11,911 $ 13,470 $ 15,143 $ 16,937 $ 18,860 $ 20,920 $ 23,123 $ 25,479 $ 27,992 $ 30,671 $ 121 Worst Case Expenses Amortization Table Summary Viable Land Loan Assumptions Loan Amount: 896,000$ Interest Rate: 5.2% Term: 30 Amortization: 30 Interest Only: 0 LTV 80 Total Annual Loan Payment 59,040$ Annual Summary Year Interest Principal End Balance 1 46,291$ 12,749$ 883,251$ 2 45,612 13,428 869,822 3 44,897 14,144 855,679 4 44,144 14,897 840,782 5 43,350 15,690 825,092 6 42,515 16,526 808,566 7 41,634 17,406 791,160 8 40,707 18,333 772,827 9 39,731 19,309 753,518 10 38,703 20,338 733,180 11 37,620 21,421 711,759 12 36,479 22,562 689,198 13 35,277 23,763 665,434 14 34,012 25,029 640,406 15 32,679 26,362 614,044 16 31,275 27,766 586,278 17 29,796 29,244 557,034 18 28,239 30,802 526,232 19 26,598 32,442 493,790 20 24,870 34,170 459,620 21 23,050 35,990 423,630 22 22,895 36,146 385,723 23 22,738 36,302 345,798 24 22,581 36,460 303,746 25 22,423 36,618 259,454 26 22,264 36,776 212,804 27 22,105 36,936 163,670 28 21,945 37,096 111,918 29 21,784 37,257 57,411 30 21,622 37,418 - Marginal Land Loan Assumptions Loan Amount: 225,536$ Interest Rate: 5.2% Term: 30 Amortization: 30 Interest Only: 0 LTV 80 Total Annual Loan Payment 14,861$ Annual Summary Year Interest Principal End Balance 1 11,652$ 3,209$ 222,327$ 2 11,481 3,380 218,947 3 11,301 3,560 215,387 4 11,112 3,750 211,637 5 10,912 3,949 207,687 6 10,702 4,160 203,528 7 10,480 4,381 199,146 8 10,247 4,615 194,532 9 10,001 4,860 189,671 10 9,742 5,119 184,552 11 9,469 5,392 179,160 12 9,182 5,679 173,481 13 8,880 5,982 167,499 14 8,561 6,300 161,199 15 8,226 6,636 154,564 16 7,872 6,989 147,575 17 7,500 7,361 140,213 18 7,108 7,753 132,460 19 6,695 8,166 124,294 20 6,260 8,601 115,693 21 5,802 9,059 106,634 22 5,763 9,098 97,092 23 5,723 9,138 87,042 24 5,684 9,177 76,457 25 5,644 9,217 65,308 26 5,604 9,257 53,566 27 5,564 9,297 41,198 28 5,524 9,338 28,171 29 5,483 9,378 14,451 30 5,443 9,419 - 122 Base Case Expenses Amortization Table Summary Viable Land Loan Assumptions Loan Amount: 448,000$ Interest Rate: 5.2% Term: 30 Amortization: 30 Interest Only: 0 LTV 80 Total Annual Loan Payment 29,520$ Annual Summary Year Interest Principal End Balance 1 23,145$ 6,375$ 441,625$ 2 22,806 6,714 434,911 3 22,448 7,072 427,839 4 22,072 7,448 420,391 5 21,675 7,845 412,546 6 21,257 8,263 404,283 7 20,817 8,703 395,580 8 20,354 9,166 386,413 9 19,866 9,655 376,759 10 19,351 10,169 366,590 11 18,810 10,710 355,880 12 18,239 11,281 344,599 13 17,639 11,882 332,717 14 17,006 12,514 320,203 15 16,339 13,181 307,022 16 15,637 13,883 293,139 17 14,898 14,622 278,517 18 14,119 15,401 263,116 19 13,299 16,221 246,895 20 12,435 17,085 229,810 21 11,525 17,995 211,815 22 11,447 18,073 192,861 23 11,369 18,151 172,899 24 11,290 18,230 151,873 25 11,211 18,309 129,727 26 11,132 18,388 106,402 27 11,052 18,468 81,835 28 10,972 18,548 55,959 29 10,892 18,628 28,705 30 10,811 18,709 - Marginal Land Loan Assumptions Loan Amount: 112,768$ Interest Rate: 5.2% Term: 30 Amortization: 30 Interest Only: 0 LTV 80 Total Annual Loan Payment 7,431$ Annual Summary Year Interest Principal End Balance 1 5,826$ 1,605$ 111,163$ 2 5,741 1,690 109,473 3 5,651 1,780 107,693 4 5,556 1,875 105,818 5 5,456 1,975 103,844 6 5,351 2,080 101,764 7 5,240 2,191 99,573 8 5,123 2,307 97,266 9 5,000 2,430 94,836 10 4,871 2,560 92,276 11 4,735 2,696 89,580 12 4,591 2,840 86,740 13 4,440 2,991 83,750 14 4,281 3,150 80,600 15 4,113 3,318 77,282 16 3,936 3,495 73,787 17 3,750 3,681 70,107 18 3,554 3,877 66,230 19 3,348 4,083 62,147 20 3,130 4,301 57,846 21 2,901 4,530 53,317 22 2,881 4,549 48,546 23 2,862 4,569 43,521 24 2,842 4,589 38,229 25 2,822 4,609 32,654 26 2,802 4,629 26,783 27 2,782 4,649 20,599 28 2,762 4,669 14,086 29 2,742 4,689 7,226 30 2,721 4,709 - 123 Works Cited Abd El-Rehim, H.A., Hegazy, E.-S.A., Abd El-Mohdy, H.L., 2004. 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