This is a description of a complete system that solves a severe problem in Israel; wood waste and garden clipping.
The current situation does not provide an economical solution to process woody waste. There are very few sites that accept this kind of waste and the processing is very expensive since most of the waste is sent to landfills.
In many regions of the state pirate burning of woody waste takes place and has already caused some major fires. The government does not enforce the law and the situation is very annoying to the people living in these areas.
Our system provides a very economical solution to the municipalities and processes all the waste into Wood Pellets = WP and exporting it to Europe.
There are basically two major markets in Europe. The first is the consumer market in which only very clean and high-quality WP are consumed. The second is the power industry. There is a more relaxed standard that fits the use of our raw materials.
70% of the power production in Europe is still coal based. It is very common to change from coal to gas. However, since there is shortage in supply of gas, the ONLY other acceptable solution is conversion to WP. Unlike gas where conversion is relatively easy and can be dual use, once the conversion to WP is done, there is no way back. Committing to WP requires reliable sources for very large annual quantities ranging from 1 Million MT to 2 Million MT.
80% of the WP for the European power industry are supplied by the USA and Canada. Strict standards prohibit the use of fresh cut trees and allows only scrap wood. Furthermore, due to some export restrictions the amount cannot be raised. This makes the market a buyer’s market with prices constantly rising. On the other end polluting coal stations need to buy carbon credits and the price has risen 200% since the beginning of the year.
All the above lead to the economic push for our business. The proposed system has the following advantages:
· Raw materials – No cost or even some processing fees.
· Steady supply of acceptable wood source.
· Transportation using empty vessels from Israeli ports.
· Much shorter transport routes.
· Established contract with a leading consulting company, to secure 20,000 MT @ month to power companies in Scandinavia.
The plants are based on known and tested technologies. We plan to "copy-paste" a Dutch plant that is successfully operating for over 5 years.
We will utilize some new shredding technologies to deal with the scrap wood.
We have identified at least three areas where the system can be immediately installed and operated in less than one year.
A very itemized tour of a WP facility in Holland (Martens) has been performed and a tentative agreement has been reached to duplicate the plant in Israel. The plant can be “copy-paste” into any place in Israel and production efficiency is guaranteed.
Each system will produce 10,000 MT @ month. We have calculated a lower selling price to secure a three-year contract at $ 170 MT. (Current price is $ 190)
We intent to charge 50 NIS ($ 13) for MT of chipped raw materials from the municipalities. The current cost is 240 – 360 NIS.
Capex has been calculated at $ 8M for 20,000 MT @ year.
The financials are very promising:
Generally, the cost of production will be covered by the processing fee ($13). The land transport and storage with addition to the sea transport to the customer’s dock has been calculated at $70 per MT. (This is with 20% Misc.)
Therefore, a simple calculation shows a margin of over 50% reaching $24M per year providing an ROI of 6-8 months!!