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Good Afternoon, Rob:

Further to our telephone discussion last week, I am pleased to provide


an overview of Ecostrat’s vast experience and proprietary Biofuel
Supply Network® (www.ecostrat.com), together with an outline the
unique opportunities available.

COMPANY OVERVIEW

Ecostrat and our biofuel affiliate, General Biofuel, purchase,


manufacture and distribute wood by-products, renewable fuels and
biomass. With proprietary access to over 200,000 point sources of
wood supply, we have the largest reach of any wood fuel supplier in
the country today.

We have been supplying hundreds of thousands of tons of wood fuel


throughout the US and Canada for over 17 years. We specialize in
virgin, post-industrial, and construction & demolition derived wood
fuels. Our staff has extensive experience in the wood biomass
business. We are reliable, straight-forward, and deliver high quality
wood fuel on time, all the time.

Our Businesses:

BIOMASS SUPPLY WITHIN NORTH AMERICA

• We have over 17 years and hundreds of thousands of tons of


wood fuel supply experience. We know how to contract and
deliver woodfuel.
• We offer long-term fuel supply contracts of up to 10 years.
• Our integrated logistics and supply network (truck, rail and ocean
vessel) is capable of delivering biomass anywhere in North
America and the world.
• We install grinding, screening and loading equipment, and set-up
fuel consolidation yards to ensure secure supply and quality of
fuel mix.
• All our fuels are rigorously tested according to ASTM standards to
ensure the highest quality.
• We supply top quality biofuel to a wide range of customers:
paper and board manufacturers, power plants, greenhouses,
schools, buildings, cement kilns, and pellet manufacturers.
• General Biofuel is able to supply woody biomass for industrial co-
firing, regional combined heat and power projects (CHP), and
Energy Service Company (ESCO) clean heat and power projects.

BIOMASS SUPPLY INTERNATIONALLY


• We supply paper and board quality chips and biofuel in shipload
quantities to Europe and Asia.
• Our integrated wood biomass supply chain extends from
harvesting to stockpiling, loading, fumigation, ocean freight and
discharge.
• We supply top quality biofuel and woodchips to leading MDF and
composite board manufacturers and power companies.
• We opened the east coast Wood Pellet market to bulk export by
making the first bulk shipment of fuel pellets to the Netherlands
in 2003.
• We opened the Composite Board market in Turkey to import of
bulk wood chips and sent the first successful bulk vessel to
Turkey (2005). The Turkish Composite Board Market currently
imports over 1 million tons of wood chips per year.

CONSULTING SERVICES

• Our consulting division performs three kinds of studies:


1. Biofuel Supply Assessments to determine availability and
cost of wood fuel in any woodshed across North America.
2. Biomass Power and Co-Generation Evaluations to
determine CapEx,
3. Operating cost, cash flow and ROI for clean power projects
and conversions.
4. Carbon Credit Evaluations to determine whether a project
qualifies for ghg offsets or other carbon credits and most
effective direction to monetize credits.
• Leading clean power companies like Honeywell, Rentech and
Johnson Control have used our team to get the answers they
need.

BIOFUEL SUPPLY NETWORK®

Ecostrat's Biofuel Supply Network® supply is the largest and most


comprehensive in North America with over 200,000 proprietary,
qualified sources of woody biomass. The Network is the result of over
10 years and 30,000 man-hours of collecting, consolidating, and
parsing of raw source data. It contains over 96% of all point sources of
virgin and post-industrial wood in the country.

The Network is powered by FuelFind®, our proprietary technology that


automatically filters, parses and coordinates thousands of potential
suppliers of wood by-products. Our procurement managers use
FuelFind® to determine the most reliable and cost effective supplies of
biofuel. Our team consolidates the biofuel supply, co-ordinates supply
and logistics, and delivers the fuel to the buyer.
Our team of fuel supply experts, supported by the largest network of
wood fuel sources in the country, make us uniquely positioned to fill
our customers' needs guaranteeing supply of wood fuel, to providing
leading-edge information on supply, pricing, sustainability and
competition in the local woodshed.

LONG-TERM SUPPLY AGREEMENT OPPORTUNITIES

The current push for energy independence and the environmental


need for sustainable and renewable energy sources, coupled with an
increasing level of governmental assistance initiatives at all levels
worldwide, has resulted in an increasing number of major biomass
clean energy projects being developed. Ecostrat has in its pipeline
over 1M tons per year of potential supply agreements and estimates
that there are millions more tons of supply agreements available for
properly secured arrangements.

Ecostrat, due to its recognized expertise in the field, has been called
upon, not only as a supply source, but as consultants and experts to
those developing clean energy projects.

Integral to the efficient budgeting and financing of these clean energy


projects is a guaranteed long term supply of feedstock. Ecostrat is
uniquely qualified to provide long term supply agreements that would
guarantee the feedstock price, quality and quantity.

Additionally, through extensive consultation, Ecostrat has determined


that a ‘guaranteed’ supply agreement could, in fact, make the project
financing easier and up to 100 basis point less expensive.

Ecostrat proposes to provide such clean energy projects with a


‘guaranteed’ long-term supply agreement through the issuance of a
supply performance surety bond type of instrument.

SAMPLE CLEAN ENERGY PROJECT

Project #1: XYZ, CT

1. Basic Details

• Project XYZ Renewable Energy Project, XYZ, CT


• Size 37.5 MW
• Fuel
• Minimum 64% processed (i.e.
chipped) Construction and
Demolition (“C&D”) Wood,
including painted and varnished
wood (but excluding pressure
treated or railroad ties)
• Land clearing debris
• Recycled or clean wood
• Regulated wood fuel

• Fuel Quantity: 350,000 tons/yr


• Term Requested: 10 years
• Start date: 2013 expected
• Upstream Suppliers: Major waste management
companies/landfill owners

2. Supply Agreement Structure

• Ecostrat to guaranteed supply fibre to project at fixed price of


$11 per ton
• Actual final cost of fibre will be $6/ton.Termsheets with suppliers
have been negotiated, drafted and are ready to sign.

3. Relevant Wood Market Characteristics

• C&D wood is handled by commercial waste haulers (i.e.


construction dumpster suppliers), such as Waste Management
Inc. and similar large companies.
• Disposal of C&D wood is very expensive in New England.
Massachusetts has no licensed disposal sites. Rhode Island has
one landfill licensed to take it and CT has two, but one has
recently closed to taking it and the other is near capacity.
Tipping fees are high. Maine and New Hampshire each have one
licensed facility that can burn C&D wood.
• Currently, most C&D wood is sent to landfills in Ohio via
truck and rail, leading to disposal costs between $50-85/ton
• XYZ facility is the ONLY conversion facility licensed to burn
C&D wood in CT and was grandfathered in the relevant
legislation to be the only facility able to generate Connecticut
RECS from burning C&D wood.
• Highly unlikely that significant additional disposal options
will appear during 10 year term of credit wrap (typically takes
many years to permit such a facility even where political will
exists to do so – and it does not today).
• Project sponsors anticipate supply of wood to the facility to
far outstrip the facility’s demand.

4. Key Risk Elements- Mitigants

• Shortage of C&D Wood. This is unlikely because 1) the US is just


now emerging from a large economic contraction. Decreased
economic activity results in lower quantities of C&D. As a result,
right now we are seeing the bottom of the curve in terms of
quantities of C&D available. As the economy recovers, more C&D
is expected in New England, not less; 2) there is not likely to be
over the term more attractive disposal alternatives than XYZ.
Even if there were, there is over 2M tons of C&D wood that is
generated in New England. New disposal alternative (if they can
be permitted, which is unlikely) are not likely to “soak up” all the
additional feedstock; 3) the fact that New England is one of the
highest and most consistent construction / demolition activity
regions in the US acts as a natural hedge against shortages of
C&D.
• Market price for C&D wood will increase is unlikely to occur
because this facility is likely to remain the least-cost option for
disposal. If new landfills are permitted, they will likely have
tipping fees, resulting in a cost to the suppliers, as opposed to
receiving $6-8 from XYZ. Significant export of materials (e.g. to
UK where high incentives in place for using biomass) unlikely
because of poor stowage factor of this material, leading to very
expensive ocean freight.
• The price is capped at $12 and has no provision for inflation or
higher diesel prices.
• Because of its location, inflation (both generally and in diesel
fuel) works in favor of the project, helping to retain its position as
the least-cost disposal option. Because of this suppliers have
agreed to a long term supply contract.
• Individual supplier risk/credit risk. Resolve through diversity of
suppliers.

I trust that the material provides an understanding of our business and


how the EDC could be of assistance.

I will take the liberty of contacting you next week to answer any
questions and discuss with you the next steps. In the interim, please
feel free to contact me with any questions.
Regards,

Ira Lyons
416-303-9499

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