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BioProcess Algae broke ground on a five acre algae farm in the first quarter of 2012 at the same location. If we and the
other BioProcess Algae members determine that the venture can achieve the desired economic performance from the five
acre farm, a build-out of 400 acres of Grower Harvester reactors will be considered. The cost of such a build-out is estimated
at $40 million to $60 million and could take up to a year to complete. Funding for BioProcess Algae for such a project would
come from a variety of sources including current partners, new equity investors, debt financing or a combination thereof. If a
decision was made to replicate such a 400 acre algae farm at all of our ethanol plants, we estimate that the required
investment could range from $300 million to $500 million. BioProcess Algae currently is exploring potential algae markets
including animal feeds, nutraceuticals and biofuels.
Our Competition
Domestic Ethanol Competitors
We compete with numerous other ethanol producers located throughout the United States, several of which have much
greater resources, in the sales of ethanol and distillers grains. In 2011, the three largest ethanol producers in North America
were Archer-Daniels-Midland Company, POET, LLC and Valero Energy Corporation. We believe that our principal
competitors’ expected managed production capacity and ethanol marketed ranges between approximately 200 mmgy and
approximately 1,800 mmgy. Based on production capacity as reported by Ethanol Producer Magazine, we believe we are the
fourth largest ethanol producer in North America. According to Ethanol Producer Magazine, as of December 31, 2011, there
were 218 ethanol-producing plants within the United States, capable of producing 14.8 billion gallons of ethanol annually, as
well as several new plants that were under construction or expanding their capacity. The industry typically does not operate at
100% of capacity with historical rates of annual production to available plant capacity averaging in the high 80 percent to the
low 90 percent range. We believe that by the end of 2012, annual U.S. ethanol production capacity could reach 15.0 billion
Competition for corn supply from other ethanol plants and other corn consumers exists in all areas and regions in which
our plants operate. According to Ethanol Producer Magazine, as of December 31, 2011, the states of Iowa, Indiana,
Michigan, Minnesota, Nebraska and Tennessee had a total of 107 operating ethanol plants. The state of Iowa had 42
operating ethanol plants concentrated, for the most part, in the northern and central regions of the state where a majority of
the corn is produced. The state of Nebraska had 25 operating ethanol plants.
Foreign Ethanol Competitors
We also face competition from foreign producers of ethanol and such competition may increase significantly in the
future. Large international companies with much greater resources than ours have developed, or are developing, increased
foreign ethanol production capacities. Brazil is the world’s second largest ethanol producer. Brazil makes ethanol primarily
from sugarcane. Several large companies produce ethanol in Brazil. For example, in August 2010, Royal Dutch Shell formed
a joint venture with Cosan, which produces approximately 450 mmgy of sugarcane-based ethanol per year.
Other Competition
Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development by ethanol
and oil companies. Ethanol production technologies continue to evolve, and changes are expected to occur primarily in the
area of ethanol made from cellulose obtained from other sources of biomass such as switchgrass or fast growing poplar trees.
Because our plants are designed as single-feedstock facilities, we have limited ability to adapt the plants to a different
feedstock or process system without additional capital investment and retooling.
Regulatory Matters
Government Ethanol Programs, Policies and Subsidies
In an effort to reduce this country’s dependence on foreign oil, federal and state governments have enacted numerous
policies, incentives and subsidies to encourage the usage of domestically-produced alternative fuel solutions. The U.S.
ethanol industry has benefited significantly as a direct result of these policies. While historically the ethanol industry has
been dependent on economic incentives, the need for such incentives has and may continue to diminish as the acceptance of
ethanol as a primary fuel and as a fuel extender continues to increase.