Biogas Plant In Municipality Ljutomer Construction Essay

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We do not expect any problems, because the area of ​​impact is calculated by volume and size of buildings. In this project the area of ​​influence in the maximum radius of 150 meters from the location.

A license for performing energy activities.

BORZEN d.o.o. is the state company, which pays all produced green energy. They issued a letter of intent regarding the inclusion and buy off all the green electricity produced in biogas plant - check Anex. Nr.1

Operating permit.

Permit to operate shall be issued within 8 days after the adoption of a technical facility. This is the final phase and we should not expect any problems. Construction of the facility will be implemented in accordance with the issued building permit, and I mean the technical acceptance - review of materials and equipment purchased under projects.

Work must be carried out in accordance with applicable laws. Accredited and independent supervision of a licensed person will take place in construction phase for the proper execution of works.

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Approval of the veterinary administration.

IPPC permit is a process that lasts six months. It is the only process where the inputs are analyzed. When a permit is issued then measurements take lace 2 times a year. With this procedure we do not see danger, because the biogas plant in Slovenia must have such a IPPC permit.

Our biogas plant is the most simple and classic example of biomethane production without the use of animal waste.

Some biogas plants using other organic waste - animal blood and other animal waste have more restrict laws. In this case, the IPPC permit is very difficult to get.

Qualified electricity producer status approved by the ministry of economy.

Qualified electricity producer status approved by the ministry of economy is in 3 months of start of trial operation.

Consent for connection to distribution networks.

The project to connect the electricity supply company Elektro Maribor dd was already acquired. In the project was made ​​the point of connection to the electrical grid. Medium-voltage cable running along the ground and place of our biogas plant is-will be on our plot - point exactly where the trafo-station will located.

We would like to know the current status of each of those approvals needed, and your best estimations regarding when we will have it all completed.

Status

1-10

Months to complete

Building permit

5

Due to the attached plan Annex 2

A license

10

Operating permit

1

Approval of the veterinary administration

6

Qualified electricity producer

1

Connection to distribution networks - final project

9

Timetable

The business plan talks about 7 months of construction, 1 month testing (December 2011), and full capacity production starting January 2012.

Is it a realistic timetable?

This is a realistic plan, where we took into account the experience of our manufactured equipment (SCHAMCK) and other equipment suppliers.

Obtaining a building permit is the real start of construction. In May 2011 it is unrealistic to start construction but as soon as possible we will obtain a building permit we make kick-off of whole project.

So after planning permission is granted, biogas plant will be built.

Do you have an experience building biogas plants this pace? If so, can you present it to us?

One of the Owner, Klima Petek d.o.o. is an 31 years old company, well experienced in project managing. In the past we managed succesfully many project in the part of building technics in Industrial, Office, Retail, IT and public buildings. Other owner Marsel Zelenik is well experienced in Residential and Retail Real estate projects in Slovenia and Croatia. Gregor Oresek is also well experienced in Residential and Retail Real estate projects in Slovenia and Croatia as well as in 4-functioning biogas plants.

With deliverer of main components and technology Schmack Biogas we are developing our first project in Slovenia, which is now under construction in the municipality of Å alovci. Schamck provided all the technical documentation. Our designers in Slovenia made precise plans and calculations. Schmack references are 230 functioning biogas plants in Germany, Austria, England and Italy.

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Can we have a more detailed timetable?

Check Annex 2

Investment & Taxation

Can we have a more detailed breakdown of the investment costs?

Financial plans Annex 3

What is the role of SCHMACK BIO GAS? Will they be the sub contractor to establish the plant or just to provide the equipment?

Schmack is a sub contactor (http://www.schmack-biogas.com/) supplying a key and vital equipment for biogas plants. The main contractor and coordinator of operations, is the company Klima Petek d.o.o.

The property - are we going to own the land? Who owns the land today? How did you determine the price? Is the price negotiable? Does the price include real-estate or any other applicable taxation?

Real estate is owned by agricultural cooperatives KZ Farmer z.b.o.

The price is agreed and is not negotiable anymore

The price is without any taxation

At the completion of the project documentation, before granting a building permit will be required to pay municipal contributions. It is possible to negotiate on the amount. Following the assessment will amount to approx. € 100,000

The investment costs do not include VAT since "the investor is a taxable person with the right to deduct input VAT" (p. 50). Is it a valid assumption, unless we own 100% of the company? The investor's investment is planned to be only 21% of the entire establishment cost. Doesn't it mean that only 21% of the investment can be VAT deducted?

Our project company - biogas plant Belatriks d.o.o.. is a taxpayer to deduct input tax. The complete investment will be VAT deducted.

What is the Value Added Tax rate in Slovenia?

20%

What is the corporate tax rate in Slovenia?

22%. It will be changed.

What happens after 15 years of operation? Can we recover the plant? How much should it cost?

It is up to us what we will do. We can recover the plan or...

The Exit is open!

What guarantees we should give to the bank in order to have the 4.2 million Euros loan?

On the basis of the projects now in Slovenia for the warranty is required:

• Flag of land - where the biogas plant stand

• Flag of the equipment - the total biogas plant

• Bills from Obnovljive investicije d.o.o. and Bioplinarna Belatrix d.o.o.

• Personal guarantees of owners

Current Expenses

What is the uncertainty level of the prices estimation in the business plan?

Very low.

Can we count of those prices to last over time?

No. Therefore, we did in our cost add year growth rate of these costs. Please refer to Annex 3

Do you have / can you share with us the expenditure structure of similar plant?

Please check Annex 3

The annual labor cost seems very low. In pages 21-22 you define 3 types of operation workers needed to operate the plant. Are those workers going to be paid all together less then 50 thousand Euros per year? Is there any administrative staff in the plant?

The functioning of biogas plants controlled by the computer and 2 workers are responsible for filling a biogas plant. A worker in the morning and a worker in the afternoon. A worker is scheduled for labor administration. Labor cost is calculated on experience from Schmack.

The annual maintenance costs are calculated as a fixed amount for each year. Sometime between the 6th to the 8th year we'll have to restore the engines. We could not find the cost of those restorations in the business plan.

In Annex 3 - Detailed financial plans shows how much funding is necessary for the restoration of the engine.

Can you please explain the sentence "- for 0,99 MWel …… 9 EUR / hob, therefore 6€/MWh of production" in page 56?

Reservation costs for repair and service is 6 € / MWh. It is planned cost.

We could not find any administrative costs in the tables:

Accounting / bookkeeping.

Annual audit.

Cleaning.

Water.

Computers.

Computer maintenance.

Regional taxes.

Property taxes.

Office supplies.

Travels.

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All expenses of these are taken into account in the cost of labor and other costs.

Is the surplus 6% electricity production for self consumption priced in the current expenses?

Yes. Our energy consumption is subtracted from the gross production electricity. Net electricity output is sold. This is regulated by law.

Do the raw materials prices include transportation?

Yes. It is FCO - biogas plant.

Current Revenue

We understand that the price of the electricity is guaranteed by the government. Is it true? For how long?

The price of green electricity is set at the time of signing the contract with Borzen d.o.o.. Feed and rates are fixed for 15 years!

Do we have any guarantee regarding the prices of heat and substrat? If not, how did you determine the prices?

The price of heat is determined by the demand. But it is lower than fuel. The heat from the biogas plant is actually free and every penny / kW si a supplementary income.

For the price of the heat we will agreed in contract. Right now we have a letter of intent with two customers in the immediate vicinity:

1. KZ Farmer - require heat for drying grain

2. Krka - pharmaceutical company, needed heat and cooling

For the substrate we made market reasarch. Company Toplarna Ljubljana d.d. (http://www.te-tol.si/) has proven our example and right now we are negotiating for the price. Market price is 185 EUR/tone. Our pesimistic price is 150 EUR/tone.

Are the revenues calculated based on 8,760 operating hours per year or 8,055 operating hours per year? Can we have sensitive analysis regarding the annual operating hours?

Calculations are made in the pessimistic variant, and respected the script:

- less gas production than expected

- Non-functioning engine - failure

- engine overhaul - expected loss

Example 1.2 MW motor:

Our engine will have a rated power of 1.2 MW. This figure is the maximum power, which is transmitted in the electric grid in the month. By increasing the engine power we will produce electricity 25 days (25 days x 24hours x 1.2 MW = 720MW / h) and produce as much electricity as if the 1 MW engine worked 30 days.

This method of production allows us to monthly planning services and the maximum tolerance of the plan of electricity generation.

Do you have a sample of contracts selling electricity, heat and substrat in Slovenia?

Yes

Cash Flow

The table on page 57 does not include financing costs. According to our calculations, the repayments of a loan of 4.2 million Euros for 12 years with 6% interest rate, are 0.5 million Euros per year.

Payment of interest and, like all other data are in detailed Financial Plan - Annex 3

Can we have a more detailed cash flow table that includes the answers to all our questions and the repayment of the loan?

Yes - please check Annex. 3

Ownership structure

We understand that the company was established in June 2010 by 3 founders. Cam you tell us the share of each partner?

Klima Petek d.o.o. -50%

Gregor Orešek - 25%

Marsel Zelenik - 25%

We understand that the company intends to build 2 biogas power plants in 2011: BPN1 (0.5 MW) and BPN2 (1 MW), at the total cost of around 9 million Euros. Is it true? If so, can you please explain the last sentence in page 47 "Our plan is geared in the direction, that by 2011 we will begin to build our first biogas plant, and in 2012 run two of them in the size of 9.9 MW".

This is an obvious error - printing puck. 2012 will be operating two biogas plants in the power of 1.5 MW.

What is the partnership model you suggest?

Model:

• You invest € 1 million as equity in the newly established SPV - Biogas Belatrix d.o.o.

• We invest know-how and projects. We build and care for functioning biogas plants.

• The shares and the rest is a matter of agreement. All we agree on our first meeting.

Do you see the 1.1 million Euros as an owner loan to the company that will be repaid to the investor from the first revenues?

Investors may be paid in the first years of operation of biogas plants. The method and rate of repayment of the loan is agreed at the General Meeting of shareholders.

Other Questions

Do you have general information regarding electricity consumption in Slovenia in the past 10 years?

We have study which was prepared by DEM d.d. - This is the largest producer of hydropower in Slovenia. If needed we will translate it.

Do you have information regarding electricity price in Slovenia in the past 10 years?

Yes. In the above-described study where is collected such data. If needed we will translate it.

Can you give us a sense of the CPI (Consumer Price Index) behavior in Slovenia in the past 5 years?

Yes

If we build a 0.99 MW plant, is there an opportunity for growth in the future?

Of course. The location allows connection of biogas plants rated at 2 MW. Over the next four years we could increase the equity size biogas plants and doubled our revenues.