Tana3S will achieve global lowest cost position compared to sugarcane ethanol which ensures that it will remain profitable during price cycles lows. The benchmark of sugar and ethanol production costs is established by Brazil which is currently the lowest cost producer in the world.
The Pesege – Esalq survey reported that average production cost (CT) in Brazil for 2013/2014 crop was 1.277 R$ or 646 US$ / M3 for Anhydrous Ethanol.The operational cost (COT, capital opportunity cost of capital depreciation and interest not included) was 1277 R$/M3 or 564 US$/M3. Tana 3S’ projected operational production cost is only 253 US$/M3, half of the Brazilian cost.
The Kyoto Protocol has sanctioned offsets as a way for governments and private companies to earn carbon credits which can be traded on a marketplace. The protocol established a Clean Development Mechanism (CDM) which validates and measures projects to ensure they produce authentic benefits and are genuinely “additional” activities that would not be otherwise undertaken. Companies that have difficulties in meeting their emissions quota are able to offset by buying CDM-approved Certified Emissions Reductions.
The Tana 3S plant unit could possibly receive a carbon credit based on the GHG reduction resulting from the electricity production by co-generation. The granting of carbon credits would however be subject to the demonstration that the grid electricity consumed by a plant without a cogeneration unit would ultimately be generated by thermal power station using fossil energy.
Once fully developed, Tana 3S’ agricultural estate value will largely exceed 950 US$/ha. The total value of the 10.000 hectares estate without taking into account the irrigation system is thus 9.5 M US$. After adding the residual value of the Industrial & Agro- Equipment assets (27.9 M US$ – based cumulated depreciation until 2020), the 2020 Book Value of the company would be 37.4 M US$.
The 2020 book value would not reflect the market asset value: well maintained Brownfield ethanol plant retain most of their value along the years. Based on a typical 2 % yearly plant value loss in constant dollars, the 2020 market value of the plant + agro estate would be 55 M US$.
Under the Worst Case Scenario*, Tana 3S’ EBITDA in 2020 will still reach 11.2 Million US$/year.
Based on a low-end EBITDA multiple (Value/EBITDA) of 4, Tana 3S would fetch a price of 44.8 M US$ under the Worst Case Income Scenario. Considering a total investment of 48 M US$ and an outstanding debt of 19.4 M by end of 2020 US$, the net enterprise sale value would be 28.6 M US$ which represents 220% of the cash equity contribution of 13 M US$.
In conclusion, the shareholders who wish to exit the business or dilute their position will recover more than twice their investment made under the most unfavorable scenario.