This might help taken from the recent S-1
Higher food prices have led to food shortages around the globe and it has been argued that people are starving so we can make the fuel to drive our cars. This argument has resonated with many world leaders and resulted in a global effort to derive biofuels from plants that are not in the human food chain. These are called cellulosic biofuels.
Cellulosic biofuels are based on nonfood plants including grass, shrubs and trees. These plants do not have a lot of sugar and cannot be fermented directly like corn. They do have a lot of cellulose in their leaves, stalks and branches which contain carbon and hydrogen which can be converted into ethanol which is called cellulosic ethanol.
A growing trend and a recent business opportunity is to simply burn the grass in a power plant to generate electricity. More than 20 new power plants fueled entirely by biomass are operating in China. These power plants currently use agricultural waste such as corn straw, wheat straw and wood chips as the fuel. Agricultural waste is seasonal and supply can be erratic with varying quality and price. As stated in the MOU, Dragon Power has informed us that they would like to have the plant fueled completely by a dedicated energy crop or at least 50% by agricultural waste and 50% by a dedicated energy crop such as Giant King Grass.
We are seeking long-term supply contracts for Giant King Grass with biofuel producers and power plants, as well as animal feed. We are in discussions with these parties, but as of this date, we have not entered into any such contracts. We have no customers for our grass crops at this time. . However the Memorandum of Understanding with DP Cleantech, a subsidiary of Dragon Power the largest builder, owner and operator of biomass power plants in China, may lead to their becoming a customer of the Registrant.
Currently we grow Giant King Grass on 45 hectares of land leased by it for 20 years in Guangdong province in China. This grass can be harvested and sold directly to customers, and it can be used to provide new seedlings for expanded growing. A single plant can generate 20 to 35 seedlings from its stalk and shoots (tillers) in addition to allowing the harvest and sale of the leaves. The current 45 hectares can provide enough seedlings for 900-1575 hectares, and each year the production capability can increase by a factor of 20 to 35. We are aggressively pursuing additional land to support long-term supply contracts. We believe we will have access to sufficient capital to lease additional land to support such contracts. The Company is also pursuing partnership discussions with parties that have access to land in China and other countries
We are working to produce enough seedlings and obtain enough land to have at least 1000 to 2000 hectares under cultivation in 2010. Dragon Power analyzed the energy content of Giant King Grass and indicated in the MOU that their 30 MW power plant fueled 100% by Giant King Grass would consume 600 tons of biomass per day. At an 80% utilization factor this is 175,200 tons per year. At 25% moisture content, which is suitable for a power plant, Giant King Grass has an effective yield of 125 to 180 tons per hectare per year, and the land requirement would be 973-1402 hectares. Thus, a 30 MW electricity generating power plant may potentially be fueled 100% by grass, or by a combination of grass and agricultural waste. Dragon Power has said in the MOU that they prefer to have a dedicated energy crop to provide a reliable and consistent fuel source for at least 50% of their power generation needs. We are in discussions with biomass power plant suppliers and operators, and with parties that have access to significant amounts of land.
We leased land in Guangdong province in southern China at favorable rates, and contract with local farmers to provide the labor for growing grass at favorable rates. Management believes sufficient land to meet our initial objectives in Guangdong province can be acquired and financed within our current capital resources. The land required to grow Giant King Grass to supply a power plant does not necessarily need to be contiguous, but can consist of several parcels all within a 50 km radius of the power plant. Parcels up to 666 ha can be leased with only local or provincial approval. We are also pursuing other opportunities for significant expansion that may require joint ventures or raising capital.
We currently seek long-term supply contracts for grass for animal feed, electrical power production and for liquid biofuels such as cellulosic ethanol. We are offer Giant King Grass for sale to customers. We do not sell seedlings to third parties, but will provide seedlings and grass growing expertise to joint venture partners where we can benefit from the recurring revenue stream of grass sales. Based on our discussions with Dragon Power, the largest biomass power plant builder and operator in China,, Dragon Power has considered the possibility of entering into a 20 year grass supply contract for Giant King Grass with several additional 10 year options. The lifetime of their power plant is up to 50 years, and they need an assured, reliable source of biomass fuel. While these durations have been discussed, there is no assurance nor guarantee that Dragon Power will enter into any agreement. Even if they enter into an agreement with us, there is no assurance it will be for 20 years or so.
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