Conversion of Renewable Feedstocks to Chemicals: technical and economical perspectives from the view of a biotechnology player, Novozymes A/S

1. The Potential Future Impact of
Biotech on the Chemical Industry
“Conversion of Renewable Feedstocks
to Chemicals: technical and
economical perspectives from the
view of a biotechnology player”
April 22nd, 2009
Thomas Schäfer,
Senior Director, BioBusiness
Tsch@novozymes.com

2. 2
World leader in bio innovation and industrial NOVOZYMES
biotechnology IN BRIEF
Ca. 50 % market share in industrial enzymes
State-of-the-art expertise in microbiology,
biotechnology and gene technology
Strong global presence
Sales of more than 700 different
products to more than
130 countries
Sales 2007: ~1.5 bn USD
Sales 2008: ~ 1.65 bn USD
13% of turnover spent on R&D
Ca. 5150 employees in 30 countries

3. 3
Novozymes principles for >10 years:
the tripple bottomline
”We imagine a future where
our biological solutions
create the necessary balance
between better business,
cleaner environment and
better lives”.

4. Novozymes Vision is to deliver
4
Bio-Innovations in the coming Biobased Society
We will deliver biotech solutions from renewable feedstock to consumer & industrial
markets

5. 5
”Renewable Chemicals” is a Strategic Growth Platform
for Novozymes:
Global drivers Support the Business Case
Crude oil prices have shown unexpected volatility

6. 6
Conversion of Renewables is a Strategic Growth
Platform for Novozymes:
Global drivers Support the Business Case
Continued strong growth in China, India, Russia keeps demand for
petro derived products high
from 6.7 billion people in 2008 to 9 billion people in 2042-2050
new middle classes arising esp. in China, India, LatAm:
additional 1 Bio consumers
Energy supply security consequence
Growing public environmental concerns
“Going Green”, green mission statements and
environmental/sustainability goals defined by
many companies
Technology developments to enable the transition

7. 7
We need a variety of sustainable solutions:
Biotechnologies are expected to contribute

8. 8
We need a variety of sustainable solutions:
Biotechnologies are expected to contribute

9. 9
9 28/04/2009 NOVOZYMES PRESENTATION
Biotechnology – enzymes – can contribute
- Decoupling use of resources from growth
Use of natural
resources Enzymes are efficient
biological catalysts known
Business as usual from any living organism
Used in production they
can increase efficiency and
Enzymatic solutions
yield of a wide range of
processes in our society
With enzymes we can
“produce more with less”
and contribute to the
decoupling of economic
growth and use of natural
Economic growth resources

10. 10
Environmental impact of industrial enzymes and
biosolutions – in partnership with customers
MINUS
Novozymes products
contribute with a GHG
emission reduction of ca.
20 Mio t CO2 equivalents
3,800 KG
3,400 KG
CO2 REDUCTION USING 1 KG ENZYME
IN DIFFERENT INDUSTRIES :
1,300 KG
MINUS UP TO
600 KG BIOCATALYSIS
CEREAL
100 KG 150 KG 150 KG 200 KG
30 KG 40 KG
OIL & FATS
PAPER
TEXTILES BIOETHANOL DETERGENT FOOD CO2 COST PRODUCING 1 KG
ANIMAL FEED LEATHER
ENZYME:
PLUS 1-10 KG

11. 11
Our first steps into the biobased economy:
1st and 2nd generation bioethanol
Starch Enzyme
e.g. corn process
Ferment- Fermen-
able tation
sugars process
Pre-
Waste Cellulose Enzyme
treatment
biomass process
process
Steen Risgaard,
CEO Novozymes:
“we have
commercial
BI EN RG
CH33 solutions for
CH22 biomass
OH degradation ready
by 2010”

12. Biofuels reduce our dependency on oil
In 2007 biofuel production replaced 1
million barrels of crude oil – every day (1)
Today’s biofuel share of global transport fuel
use is 1-2% – with great regional variation:
Brazil: 50%
US: 5%
China: 2%
EU: 1%
This level of biofuel production helped keep
oil prices 15% lower than otherwise*
Biofuels can meet at least 25% of global need
for transport fuel in 2030 – without significant
increase in acreage used for biofuel feedstocks
Source: US DoE, Merrill Lynch, International Energy Agency, UNICA, Renewable Fuel Association, EU Commission
(1) ca. 85 Million bbl crude oil are produced daily

13. Novozymes is committed to 2nd generation
cellulosic ethanol
Unique, global effort:
Large projects with a handful of leaders
(USA: POET, ICM, ADM, Cargill / China: COFCO / Brazil: CTC)
Implication across the entire value chain focusing
on integration of key processes
Focus on the main feedstock: corn stover & sugar cane bagasse
More than 100 R&D people are working on biomass
Well on our way:
Department of Energy Grant 2001-2004 (17.8 MUSD)
Substantial focus & scale-up work since 2004
New funding allocated by the DoE (2008 – 2011)
Novozymes will have a commercial solution in 2010 to serve the
first commercial plants

14. Starch & biomass processes are important
platform technologies:
same input to other products
We can modify the
1
fermentation
process
Starch Enzyme
e.g. corn process
Ferment- Fermen-
able tation
sugars process
Pre-
Waste Cellulose Enzyme
treatment
biomass process
process
Ethanol is more
2 than fuel – it’s a
platform chemical

15. Platform technologies:
Novozymes technology goes far beyond fuel ethanol
- metabolic pathway engineering is key
Bio energy
transport, energy
Starch Enzyme Bio materials
e.g. corn process plastic, polymers
Ferment-
able
sugars
Pre- Commodity/
Waste Cellulose Enzyme Specialty
treatment
biomass process chemicals
process
New
bio materials

16. Novozymes and Cargill have joined forces to
develop commercial solutions for Bio-Acrylic Acid
Current petro-route for production of Acrylic Acid:
Propylene Acrylic Acid
Propylene 2000: 430 USD/metric ton
Propylene 2008: 1450 USD/metric ton
New fermentation enabled route to Acrylic Acid
Starch, 3-Hydroxy- Bio-Acrylic
Biomass Glucose Acid
propionic acid
NZ Chemical
NZ technology:
Enzymatic downstream
Optimised pathways
Process process

17. Acrylic acid is used in a variety of existing
markets and applications: the existing
market size is 11 Bio USD illustrative
• 3.1 Million tons production in 2005
• Serving high end industries such as diapers,
hygiene products, flocculants, coatings,
dispersions and adhesives
• A myriad of applications
• Growth 4 %
• Mainly in SEA
Superabsorbers
Fibers
3-HPA Acrylic Acid
Coatings,
Adhesives
Polymers

18. The Bio-route for Acrylic acid is competitive with
current propylene-based production processes
Regional Bio-Acrylic Acid Cost Competitiveness,
160 000 tonnes per year
1400
1200
1000
$US per tonne
800
600
400
200
0
US LED Glacial US Bio-Glacial BZ Bio-Glacial CH Bio-Glacial
Net Raw Materials Utilities Direct Fixed Costs
Allocated Fixed Costs Depreciation Source: Nexant
LED = Leader Technology, propylene based. Costing year: 2006, Crude oil price: 65 USD/bbl
(1)
Glucose price assumptions: US (14c/lb); BZ (sucrose 7 c/lb); China (11c/lb)
Source: Nexant

19. The capital investment in bio AA should not be prohibitive
as it is competitive with its petrochemical equivalent
Petrochemical and Bio-Acrylic Acid Investment,
160 000 tonnes per year
400
350
300
$US millions
250
200
150
100
50
0
US LED Crude US LED Glacial US Bio-3HP US Bio-Glacial
Source: Nexant
Inside Battery Limits Outside Battery Limits Other Project Costs

20. The bio-process acrylic looks competitive in a medium
crude oil scenario… and even more competitive if
Brazilian sucrose prices applied
Bio-Acrylic Acid Indifference Curve, 160 000 tons per year capacity
20 Technology Leader
18
16
Glucose, cts per lb
14
Equals a US net corn price of $4/bu
12
10
8 Potential sucrose prices in Brazil
6
Brazil
4
2
0
20 25 30 35 40 45 50 55 60 65 70
Crude Oil, $ per bbl

21. 3-HP is a platform chemical on its own – and
will potentially enter existing and new
markets
http://www1.eere.energy.gov/biomass/pdfs/35523.pdf

22. Selected other projects:
”untraditional partnerships”
DuPont/BP: Butanol
Danisco/Goodyear: Isoprene
Amyris Biotechnologies: Isoprene, alternative fuel
LS-9: alternative fuels
Roquette/DSM: Bio-Succinic
Metabolics Explorer: L-Methionine, 1,2-Propanediol,
1,3-Propanediol, N-Butanol, Glycolic acid
Genomatica: 1,4-Butanediol

23. 23
The general challenges are high
Today´s chemicals are a product of many years of optimisation
Costs are generally low
Performance is generally top

24. 24
Classical Chemistry is highly optimised
illustrative
Petroleum based chemistry
Level of optimisation
Optimisation:
challenge
• Scale (Ethylene plant SA: 1.5 mio t)
• Energy efficiency
• Fixed cost reduction
• Improved maintenance
• Sourcing /supply chains
• Value engineering
• Plant reliability
• On-stream time
• …
Foundation Development Expansion Diversification Maturity (1)
time
(1) Modified from “Value Creation”, Budde et al. 2006

25. 25
Classical Chemistry is highly optimised
illustrative
Petroleum based chemistry
Level of optimisation
challenge
1865: BASF 1920: first
(www. BASF.com) ethylene
plant by
Union
Carbide
1856: Perkin
– purple dye 1892: Viscose 1933: PE
from aniline 1933: PVC
1939: Nylon
1941: Polyester
1954: Polypropylene
1958: Polycarbonate
time

26. 26
Renewables/Biotech based chemistry is in its
infancy but has to compete on price &
performance
illustrative
Petroleum based chemistry
“What is
Level of optimisation
the price of
your
product?”
challenge
challenge
“Renewables/Biotech based chemistry”
Foundation Development
time

27. 27
The general challenges are high
Today´s chemicals are a product of many years of optimisation
Costs are generally low
Performance is generally top
Yield & productivity for biotech routes must be on top: R&D
We can not afford to loose carbon in the future
Capex must be affordable
Novel downstream processes are needed
Most Biorefineries still need to be built: infrastructure
…and they have to compete with existing “economy-of-scale” of large petroleum
refineries
Entry time for new chemicals is traditionally long: strategy
As shown for PLA, PHB, PHA
“Green” alone does not sell though consumer awareness increases
The industry is focused on ”price/performance”
New value chain needs to be assembled

28. 28
The potentials are significant ….
Total Value of Chemical products sold in
2003: USD 1.24 trillion
- Excluding pharmaceutical and consumer
products
Here: Output by region
Commodity Chemical Market Size
Japan (2005): ca. 360 Billion USD
RoW
• Virtually all bulk chemicals are
produced from oil and gas today
Asia • Technological advances and
Western sustained high oil prices suggest
Europe that it is possible to substitute
many bulk chemicals at a lower and
USA less volatile cost using a biological
route
Japan Asia USA Western Europe RoW
Source: modified from “Value Creation”, chapter 1
Ed.Budde, Felcht, Frankemölle, 2006,

29. 29
… dedicated pioneers have shown
”it can be done” – even with new molecules
1,3-propanediol
PLA (Polylactic acid)
Branched Poly-
hydroxy-alkanoates
Poly-hydroxy-
butyrate (PHB)

30. 30
…but also existing chemicals like PE can be made
(Braskem, Dow): Ethanol as platform chemical

31. 31
Bio-PE has positive impact on GHG emissions

32. 32
The Board of Directors made an
important decision to approve the
investment of R$488 million (ca. 200
Mio USD) to build a unit producing
ethylene made from 100% renewable
raw materials.
Capacity of 200 kton/year. The green
polyethylene unit already has its building
licenses and will be installed at the
Triunfo Complex.
Braskem should become the first
company in the world to produce
green polyethylene on an industrial
scale, with the plant expected to come
online in the first quarter of 2011.

33. 33 09/08/2007 1H 2007 Financial results
The biobased economy will further drive
triple bottomline
Business: Environment
Environment
Business:
•Future •less emission
•less emission
•Future
Energy and (e.g.CO2),
(e.g.CO2),
Energy and
Materials •replacement
•replacement
Materials
market of brute force
of brute force
market
The biobased economy •Trillion USD chemistry
chemistry
•Trillion USD
markets •sustainable
•sustainable
markets
will create significant today
today
agriculture
agriculture
business, will be
beneficial for the Jobs:
Jobs:
•e.g. in
•e.g. in
environment and will developing
developing
create new jobs countries
countries
where the new
where the new
feedstocks are
feedstocks are
•New value
•New value
chains
chains

34. 34
Besides technical risks there are general
uncertainties
Decreasing crude oil and propylene
prices might make a bioroute less cost
competitive
Pricing for renewable feedstocks might
increase raw material costs structure
Decreased demand for Bio-Acrylic acid
might influence the growth scenarios
for the project
Infrastructure development might
delay the project

35. 35
Besides technical risks there are 2009:
Jan
general
uncertainties 15.000 jobs lost in the chemical industry
Decreasing crude oil and propylene
prices might make a bioroute less cost
competitive
Pricing for renewable feedstocks might
increase raw material costs structure
Decreased demand for Bio-Acrylic acid
might influence the growth scenarios
for the project
Infrastructure development might
delay the project

36. 36
…and potential advantages are many
• Independence of volatility of crude oil and its
derivatives (energy still needed)
• Cost competitiveness (depends on crude oil
prices and processes)
• Capex reduction
• Improved carbon footprints through
production and post-consumer value chain
incl. reduced GHG emissions and recycling
potentials
• Exploit waste biomass
• Branding of “green products” into the value
chain
• Novel molecules unattainable from
petrochemical sources

37. 37
Conclusions
We are witnessing a gradual change in our feedstock
• The Biobased Economy is coming
• There is basically no alternative
• It is challenging - but it is doable and the timing is right
• Offers exciting opportunities for grain processors, technology suppliers and
chemical companies – and for developing countries: they own the
feedstock of the future
• major innovations are expected

38. 38 The way forward into the biobased
economy will be in overlapping phases
Phase 4 (concept phase):
…it does not happen 4 deploy new tech, build
“overnight” more infrastructure,
invest in new technology,
build markets
…and innovation will go
on from then for many
years 3 Phase 3 (R&D phase):
deploy new tech, build
more infrastructure,
invest in new technology,
build markets
Phase 2 (initiated):
2 deploy new tech, build
more infrastructure, new
value chains, invest in Plus
new technology, build
markets
1
Phase 1 (today):
employ existing
technology, build
infrastructure and new
value chains, invest in new
technology, build markets
Foundation Development Expansion Diversification Maturity (1)

39. 39
The way forward
…there are several
alternatives to create 4 New Bio-
energy (wind, solar, materials
biogas, nuclear): keep
bio-carbon for materials Bio-refineries 2nd generation:
multiple feedstocks to multiple
products
3
Gradual replacement of
existing materials by bio-
materials
Gradual replacement of
2 existing materials by bio-
materials
Bio-refineries 1st
generation: specific
2nd generation feedstocks to products
fuel ethanol
1
1st generation
fuel ethanol
e.g. dry milling, wet milling

40. 40
The way forward
Drivers and enablers:
• Crude oil prices above 50
4
USD and volatile
• Technology is matured
• Policies, subsidies, CO2
credits
• Stakeholders
• Communication 3
• Labour creation in rural areas
(close to feedstock, limited
transport of feedstock)
•…
2 Challenges and hurdles:
• New value chain has to be assembled
• New infrastructure needed
• Crude oil below 30 USD/bll
• Bio-feedstock prices (sugar) above 20 ct/lb
1 • No demand
• No money for investments
• Economic crisis will cause delays
•…

41. 41
Bio-Innovations pave our way towards regained
sustainability
Sustainability index (relative)
Sustainable agriculture Future Industrial revolution
Feedstock based Feedstock based PLUS
sustainable industrial processes
Industrial revolution
crude oil based
time
High emmission load

42. 42
Thank You
Tsch@novozymes.com