Biomass Secure Power Inc. (BMSPF)

[PhillipD]

It's out on SEDAR today.

Phillip

Our Current Business
Our Business Plan was reviewed and rewritten in October 2018 to reflect current status and plans. The Company is implementing the business plan including an increase in the production capacity of Phase 1at Natchitoches and development of a roll out plan that targets a doubling of the production capacity eachyear for 4 years after Phase 1 at Natchitoches has been commissioned. On June 30, 2018 the Company acquired River Energy (RBE) a company based in the USA that has developed patented technology forthe production of biocoal using a fluid bed reactor. RBE successfully completed the development of a small scale production plant in Wyoming. Samples prepared at the Wyoming plant were provided topotential end users for testing in power boilers where the fuel was proved to be a suitable fuel for power
generation with little performance dropoff when compared with whitewood pellets.

The Company has decided to move ahead with the construction of phase one of the biocoal plant at Natchitoches, Louisiana. Phase 1 will see the construction of 400,000 tonnes/yr. of biocoal. An MOU is in place for 200,000 tonne with a USA power producer. We are waiting for confirmation of shipping cost that will make this a valid off-take. Several power producers in Europe and Japan are considering off-take agreements that will sell out phase one and additional 600,000 tonne to be built in phase two.

On January 31, 2017 the Governor of Louisiana John Bel Edwards signed Executive Order Number JBE 17-03 (Carry-Forward Bond Allocation 2016) Pursuant to and in accordance with the provisions of Section 146(f) of the Internal Revenue Code of 1986, as amended, and in accordance with the request for carryforward filed by designated issuer, the issuer(s), for the following carry-forward project(s), and in the following amount(s):
ISSUER: Louisiana Public Facilities Authority.
Carry-Forward Project: Biomass Power Louisiana, LLC
Carry-Forward Amount: $88,536,200
The Company has completed all of the preliminary engineering and plant design and layout. Wood PLC (formally Amec Foster Wheeler) is the EPC. Wood has completed the engineering report to a FEL 2 standard and this has been forwarded to Bank of America Merrill Lynch for their review.
Bank of America Merrill Lynch (BAML) has reviewed the FEL 2 report and developed a plan to complete sale of tax exempt bond and construction commencing July 1, 2019. Leidos has been selected to complete an independent review of engineering completed by the Company and wood plc. This process is expected take six to 8 weeks. The FEL 2 budget reflects the doubling of production of phase 1. In order to cover additional costs the Company asked the Louisiana Public Facilities Authority to increase tax exempt bond issue to $140 million. The Company has received verbal approval and are waiting for Governor of Louisiana to sign approval.

In conjunction with Bank of America Merrill Lynch and our bond solicitor a definitive schedule has been developed to complete milestones to ensure we can draw down on tax exempt bond on July 1, 2019. The business plan calls for the development of phase one with production starting in the third quarter2019 with a target after a ramp up period of 400,000 tonnes. Phase two will commence upon completion of phase 1 adding 600,000 tonnes/yr. of production capacity bringing total plant production upon completion to one million tonne per year.
Hawkins Wright has predicted that the global demand for wood pellets will reach 64MT in 2023, including 32MT in the industrial sector and 32MT in the heating sector. This shows that growth opportunities are available, however we see the market growing faster as torrefied product becomes available in quantity.

In 2014 global consumption of coal was 8,165 billion short tons. Governments around the world are eliminating or reducing the amount of coal being used, which will open additional markets for bio-coal. A one percent penetration would require the production of 80m tonnes of biocoal. Inquiries from the steel manufacturers have shown interest in using biocoal as a replacement for coal in order to reduce and meet carbon emission requirements. This along with some other industrial opportunities opens up additional potential markets in areas other than power production and heating.

Biocoal has a number of technical advantages over white wood pellets: higher calorific value (22Gj/T vs 17Gj/T. Coal has 25Gj/T); higher bulk density 750-800 kg/m3 versus 650 kg/m3 for white pellets; bio-coal is hydrophobic enabling it to be stored outside; eliminating the need for storage buildings; improved combustion characteristics with a potential efficiency and capacity increase at certain converted coal plants. Shipping costs per unit of energy is lower than whitewood pellets due to the higher calorific value and bulk density; Existing facilities that use coal can be converted to bio-coal with little or no modifications or investment. The resulting savings in avoided CAPEX is arguably the most valuable benefit for power producers when comparing bio-coal with white pellets. The Company plans to sell biocoal at the same price per Gj as charged by white pellet producers which gives biocoal a distinct cost advantage for potential users.