1. Executive Summary

1.1. Background

Numaligarh Refinery Limited is a BPCL group company, currently operating a 3 MMTPA refinery in in district in the state of . Limited (NRL) and Chempolis have signed a Memorandum of Understanding (MoU) for establishing a bio-refinery in North-East . Through this partnership, both NRL and Chempolis are targeting at larger production of sustainable bio-fuels in India, which would reduce India’s dependence on imported petroleum. The bio-refineries will be based on Chempolis’ 3rd generation bio-refining technology, which enables selective fractionation of biomass and co-production of multiple products in a sustainable way.

Against this background, NRL and Chempolis had engaged PwC to carry out a feasibility study for the project and prepare a Detailed Feasibility Report for the Bio-Refinery Plant including availability of feedstock. The report should be in a format that is acceptable to international financial institutions covering all techno- economic aspects in a detailed manner. Additionally, the study will evaluate project risks and evaluates opportunities, benefits and impacts of scaling up the bio-refining business.

The following broad parameters have been identified by Chempolis for conducting the study:

• Arrive at a favorable location of the bio-refinery

• Provide insights to the availability, price and supply chain aspects of cellulosic feedstocks (especially bamboo and most potential other lignocellulosic biomasses like agricultural residues) in selected provinces in India

• Assess demand, sales and prices of bio-refinery products and residue

• Undertake assessment of overall economics and impact of the bio-refinery project 1.2. Scope of Work

The scope includes preparation of a Detailed Feasibility Report for a bio-refinery plant and feedstock availability study, as per the scope of work described as under.

• Availability and price of feedstock

• Favorable location of the bio-refinery

• Demand, sales and prices of bio-refinery products and residue

• Overall economics and impact of the bio-refinery project

In addition, the study will evaluate project risks and evaluates opportunities, benefits and impacts of scaling up the bio-refining business.

1.3. Design Parameters

The project aims at construction of a biorefinery that produces cellulosic ethanol and platform chemicals from bamboo. The biorefinery will use Chempolis’ formico bio™ technology. The present study surveys two concepts for the implementation of the technology: 1) ‘Basic concept’ that produces platform chemicals from hemicelluloses and 2) ‘Expanded concept’ that produces also ethanol from hemicelluloses. The ‘Expanded concept’ will be an add-on to the ‘Basic concept’ and the project for the expansion may begin once the biorefinery based on ‘Basic concept’ has started operation. The present study focuses on the implementation of the ‘Basic concept’.

The primary feedstock is bamboo growing in North-East India. Biorefinery may also use other locally available biomasses such as cereal straws. The biorefinery will consume annually 300,000 tonnes of cellulosic biomasses. The primary products of the biorefinery are cellulosic ethanol and platform chemical (acetic acid, furfural alcohol). Biorefinery will also produce combustible residues (biocoal, lignin, stillages). As per the Basic Concept, the bio-refinery will produce 48,900 MT of ethanol, 11,100 MT of acetic acid, 18,600 MT of furfural alcohol, 160,000 MT of biocoal (to combustion) and 30,000 MT of stillages.

The main units of the bio-refinery are: bamboo handling, fractionation of bamboo, washing of cellulose, hydrolysis of cellulose and fermentation of hydrolysate into ethanol, separation of ethanol, evaporation and concentration of spent liquors from fractionation, distillates of filtrates from washing and concentration of stillages for combustion. A detailed description of all the units is present in “Design Basis” section. 1.3.1. Technology Description

Chempolis’ formicobio ™ is a technology for the production of cellulosic sugars and further ethanol. The technology has been specially developed for non-food raw materials (e.g. bamboo, bagasse, straws, oil palm biomass, and other agricultural residues), and it is based on selective fractionation of biomass with fully recoverable biosolvent containing formic acid.

The formicobio ™ technology avoids the main problems associated with other technologies developed for non- food raw materials and represents a true third-generation (3G) technology for the production of cellulosic sugars and further ethanol. The technology enables co-production of platform chemicals, such as acetic acid and furfural, which are used as raw materials in the production of paints, adhesives, and plastics, and as solvent and raw material for resins. Furfural can also be converted into synthetic diesel or gasoline ingredient by hydrogenation. In addition, combustion of co-produced solid biofuel (biocoal) can generate all the energy needed in biorefinery, with some surplus to be used in other production.

Additional details of technology are incorporated in “Project Description” section of this report. 1.4. Assessment of Feedstock

1.4.1. Scope

The bio-refinery consumes annually 300,000 tonnes (estimated) of cellulosic feedstock (dry basis). The feasibility study will survey the availability of around 450,000 tonnes (estimated) green bamboo and prices of suitable lignocellulosic biomass (primarily bamboo) in the states of Assam, Arunachal Pradesh, Nagaland and Meghalaya.

The primary feedstock is bamboo and its parts, secondary various grasses, sugarcane bagasse, elephant grass, and straw (sugar cane tops, leaves and jiggery, bagasse) are also applicable. 1.4.2. Approach

The availability and price of bamboo is surveyed by interviewing farmers and key stakeholders based on scientifically but practically prepared questionnaire and stakeholders in Assam and connected states.

Farmers’ interviews should represent at least 20% of the total farmers and covering 80% of the total bamboo production is the state. The interviews will cover information such as area under bamboo cultivation, types of species of bamboo and their respective yields, quantity of bamboo being grown naturally, means of bamboo harvesting and transportation , price of bamboo and like. 1.4.3. Potential of Bamboo in India

In India, there are 125 indigenous and 11 exotic species of bamboos belonging to 23 genera. As per the FAO report on world forest resources, India is the second richest country of the world after China in terms of bamboo genetic resources. Of India’s total forest area of 67.7 million hectares, bamboo (both natural and planted) occupies around 13.96 million hectares. This represents 16.7 per cent of the total forest area of the country and 3.4 per cent of the total geographical area (329 million hectares) of India. But despite having the largest area under bamboo in the world comprising more than 100 different species, India contributes to only 4 per cent share of the global market. This is mainly attributed to the low productivity of around 0.4 tonnes per hectare which is much lower compared to other countries such as Japan, China and Malaysia which contribute about 80 per cent to the world’s bamboo market. More than 50 per cent of the bamboo species occur in Eastern India, viz. Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and West Bengal.

In India, 28 per cent of area and 66 percent of growing stock of bamboo is in the NER and 20 percent of area and 12 per cent of growing stock is in Madhya Pradesh and Chhattisgarh. Manipur is the state possessing maximum diversity of species with 53 species, followed by Arunachal Pradesh with 50 species.

In India, most of the bamboo is in the forest land which is difficult to access and thus poor pre and post- harvest management practices are required. Even though bamboo is grown in the non-forest land are planted, intensive management is not practiced. It is estimated that only about 15.4% of the total Bamboo resources of India lie on private lands; as a result, 84.6% of the resources are unavailable for utilization in industrial purposes without excessive regulation getting in the way (FAO, 2005). Over 39% of the total area under Bamboo is available in the North East Region, which is also the leader in availability of dense bamboo brakes, in green sound weight and number of green sound culms. 1.4.4. Bamboo availability in North-East

North-eastern region of the country is abundant with rich forest resources. The region, which constitutes only 7.98% of the geographical area of the country, accounts for nearly one fourth of its forest cover. The total forest cover in the region is 173,219 km2, which is 66.07% of its geographical area in comparison to the national forest cover of 21.05%.

Northeast region of India is very rich in bamboo diversity. Approximately 60% of the total bamboo species reported from India is represented from this region. NER alone shares 66% of India’s bamboo resources. Arunachal Pradesh has the maximum area under bamboo in NER with 16,083 sq. km. followed by Manipur (9,303 sq.km.), Mizoram (9,245 sq. km.), Assam (7,238 sq. km.), Nagaland (4,902 sq. km.), Meghalaya (4,793), Tripura (3,246 sq. km.) and Sikkim (1,181 sq. km.).

Total bamboo growing stock in NER is 55.14 million MT, among which Arunachal Pradesh has the maximum growing stock of 14.43 million metric tonne (MMT) followed by Manipur (13.73 MMT), Assam (12.22 m MT), Meghalaya (7.49 m MT) and Nagaland (7.27 m MT). 1.4.4.1. Assam

The recorded forest area of Assam is 26,832 km2 accounting for 34.21% of its geographical area. The forest cover in the state is is 35.28% of the geographical area. There are 34 species of Bamboos occurring in the State. The extent of bamboo bearing area in the forests of the state is 7,238 km2. An estimated 7,25,000 MT of bamboo is available in Assam. 1.4.4.2. Arunachal Pradesh

The recorded forest area in the state is 51,540 km2 which works out to be 61.55% of its geographical area. Reserved Forests, Protected Forests and Unclassed Forests constitute 20.46%, 18.49% and 61.05% of recorded forest area respectively. The extent of bamboo bearing area in the forests of the state is 16,083 km2 and total bamboo growing stock in the state is 14.43 million MT. The total numbers of green sound culms in Arunachal Pradesh are 2666 million and their equivalent weight is 12.359 million MT and dry sound culms in the state are 234 and their equivalent weight is 2.072 million MT. Thus the total estimated green weight of bamboo culms at state level is estimated to be 14.431 million MT. 1.4.4.3. Meghalaya

Meghalaya has 4793 Km2 of bamboo forest, which is 21 % of the geographical area of the state. Considering felling cycle of 4 years, the potential yield of bamboo in the state is 2.09 tonnes/ha/year. The total numbers of green sound culms in Meghalaya are 1109 million and their equivalent weight is 6.334 million MT and dry sound culms in the state are 104 and their equivalent weight is 1.157 million MT. Thus the total estimated green weight of bamboo culms at state level is estimated to be 7.491 million MT. 1.4.4.4. Manipur

The recorded forest area of the state is 17,418 km2 which is 78.01% of its geographical area. The Reserved Forests constitute 8.42%, Protected Forests 23.95% and Unclassed Forests 67.63% of the RFA. The forest cover in the state, based on interpretation of satellite data of January-February 2009, is 17,090 km2 which is 76.54% of the state's geographical area.

40 species out of 126 species, that are found in India, are from Manipur. The extent of bamboo bearing area in the forests of the state is 9303 km2. As per national bamboo mission data, total bamboo growing stock in the state is 13.738 m/MT. 1.4.4.5. Nagaland

The Geographical area of the state is 16,579sq.km. Out of Nagaland’s total area of 16, 57,583 hectare, forest occupies an area of 8, 62,930 which work out to 52% of the total area. . The growing stock of bamboo been estimated to be around 7.274 million MT, consisting of 46 species, is assessed to be available in Nagaland. The total numbers of green sound culms in Nagaland are 1077 million and their equivalent weight is 6.150 million MT and dry sound culms in the state are 102 and their equivalent weight is 1.124 million MT. Thus the total estimated green weight of bamboo culms at state level is estimated to be 7.274 million MT.

Total bamboo growing stock in identified states of NER is 55.14 m MT, among which Arunachal Pradesh has the maximum growing stock of 14.43 m MT followed by Manipur (13.73 m MT), Assam (12.22 m MT), Meghalaya (7.49 m MT) and Nagaland (7.27 m MT). The total bamboo bearing area of the region is estimated to be 42,319 sq. km. Arunachal Pradesh has maximum bamboo bearing area of 16,083 sq. km followed by Manipur (9,303 sq. km), Assam (7,238 sq. km), Nagaland (4,902 sq. km) and Meghalaya (4,793 sq. km). Thus, it is established that bamboo is available for the proposed project. The only concern for NRL-Chempolis is the cost at which bamboo would be available at the factory gate and from where and how the bamboo should be sourced for the sustainable supply. 1.5. Location of the Bio-refinery

States Criteria Sub Criteria Max Total Arunacha Assa Meghalay Manipu Nagalan Point Point l Pradesh m a r d s s Feedstock Price 10 30 10 6 6 7 8 Availability 15 12 10 10 12 12 Bamboo 5 5 5 5 5 5 Flowering

Infrastructure Road 5 20 3 4 4 2 3 Rail 5 1 5 1 2 1

Power 5 3 3 2 1 1

Waterway/Airpo 5 3 3 1 1 0 rt

Political Less local 5 10 2 3 2 1 1 Stability community issues Less Bands, 5 2 2 2 1 1 Strikes and Unrests Government Policies 5 10 4 2 3 3 4 Support

Transit Permits 5 2 2 2 2 2

Products Ethanol 10 20 5 9 7 5 5 Market Proximity Co-products 10 5 9 7 5 5

Others Land Availability 5 10 4 2 4 4 4

Labor 5 3 3 3 2 3 Availability

Total 100 100 64 68 59 53 55

Source: PwC Analysis

Based on the weighted scores developed using the above criteria, Assam received the highest points and comes out to be the best location for setting up of bio-refinery. Arunachal Pradesh is the second highest ranked state with 64 points. The remaining states are closely ranked with points of 59, 55 and 53 for the Meghalaya, Nagaland and Manipur respectively. 1.6. Site Evaluation Matrix for the Proposed Bio-refinery

After establishing that the proposed bioethanol plant would be somewhere in Assam, the most preferred location for the implementation of the plant has to be determined. Therefore, on the basis of our primary and secondary research we have identified 3 locations for the project i.e. Numaligarh, Jogighopa and Balipara. We have selected these locations as NRL-Chempolis have to buy majority of the feedstock from Arunachal Pradesh, Manipur and Nagaland and less from Assam and Meghalaya and these locations are near to feedstock rich states.

S. No Criteria Total Numaligarh Balipara Jogighopa Points 1 Delivered 30 25 12 10 S. No Criteria Total Numaligarh Balipara Jogighopa Points 2 Transportation 20 15 10 5

3 Power 5 5 4 3

4 Water 5 4 3 5

5 Land availability 20 2 3 5 5 Labor 15 15 12 15

7 Product Dispatch 15 12 8 10 6 External Factors 5 5 2 2

Total 100 83 54 55

1.7. Product Market Assessment

1.7.1.1. Ethanol

Ethanol can be produced from agricultural crops such as sugarcane, corn, wheat etc. which have high starch contents. Internationally, sugarcane, sweet sorghum and sugar beet are used for the production of ethanol as sugar containing feedstock. Corn, wheat and other cereals contain starch that can relatively easily be converted to sugar.

There are three main uses of ethanol in India – potable liquor manufacturing (45%), industrial alcohol in alcohol-based chemical manufacturing (41%), fuel grade ethanol for blending with petrol and other purposes such as use of ethanol as a feedstock to make ethers (14%).

The demand for ethanol is estimated and projected for the following grades of ethanol viz. fuel grade ethanol, industrial grade ethanol and ethanol going into potable sector. As fuel grade ethanol demand is derived from gasoline demand, the first step in estimating fuel grade ethanol is to estimate and project gasoline (Motor Spirit) demand till year 2030.

As per our analysis, fuel grade ethanol demand is derived from gasoline demand, the first step in estimating fuel grade ethanol is to estimate and project gasoline (Motor Spirit) demand till year 2030. (Please refer to “Product Market Assessment” section) Optimistic case 8.58 Base case 7.02

5.00 4.29 4.06 3.34 3.50 2.56 2.70 1.90 2.02 1.57 1.71 1.78

2012 2013 2014 2015 2016 2020 2021 2025 2026 2030

Demand for E10 ethanol in India is estimated to be ~1.8 million tonnes in FY 14, expected to grow to ~2.6 million tonnes by FY 20. Base case demand for E20 ethanol in India is estimated to be ~4.3 million tonnes by 2030 with the top 6 states accounting for 51% of demand. 1.7.1.2. Acetic Acid

In 2012, the global installed capacity of acetic acid was 18 million metric tonnes per annum (MMTPA), while global demand of acetic acid stood at 12.48 MMTPA. This has resulted in an overcapacity of more than 30%.

For 2012-13, 816kT of acetic acid was consumed against a production of 158kT. Most of the demand for acetic acid was met through domestic production earlier. However, due to oversupply of acetic acid in global markets and depressed prices, imports of acetic acid have grown from FY10. Cheap imports have led the domestic manufacturers to reduce their plant capacity utilization.

Globally, acetic acid market is expected to reach at an estimated volume of 16.72 million tonnes by 2018, signifying a firm annualized growth rate of over 5% from 2012 to 2018. During 2013-14, India imported majority of acetic acid from Taiwan, Malaysia, Singapore and Iran while top export destinations were Bangladesh, UAE, Saudi Arabia, Egypt and Oman.

The overall acetic acid demand is driven by the producers of vinyl acetate monomer (VAM), purified terephthalic acid (PTA), and ester solvents consuming almost 73% of the total demand (2012). Acetic Acid derivatives are applied in various industries such as adhesives, textiles, paints and paper, films and polyester fiber and solvents. 1.7.1.3. Furfural

In commercial terms, the most important intermediate derived from furfural is furfuryl alcohol. This is primarily used to make furan resins. Another chemical of importance that can be derived from furfural is tetrahydrofuran.

Furfuryl alcohol was the largest application segment for furfural market and accounted for more than 86.3% of the total market in 2013. Increasing furan resins demand in foundry applications such as sand binders is expected to remain a key driving factor for this segment. Global furfural demand for solvents is expected to grow at an estimated CAGR of 13.3% from 2014 to 2020. Global furfural market demand was 300 kilo tonnes in 2013 and is expected to reach 652.5 kilo tonnes by 2020, growing at a CAGR of 11.9% from 2014 to 2020. Increasing furfural demand in markets such as Thailand, Indonesia, Malaysia and India is expected to augment the global market growth. Growth of major end-use industries such as chemicals, pharmaceuticals and foundry industries particularly in emerging markets of Asia Pacific is expected to be a major factor contributing to the market growth. Western European furfural market is expected to grow at an estimated CAGR of 10.3% from 2014 to 2020. India currently consumes about 2.5 TMT of furfural and is expected to reach 4 TMT by 2020.

China is the world’s principal producer of furfural, followed by the Dominican Republic. It is anticipated that furfural production will increase in the upcoming years probably lowering its costs and making traditional and new outlets of furfural economically attractive again. In India, Furfural is extracted as a solvent through a lube refining process at various refineries like CPCL, IOCL (Haldia), HPCL (Mumbai). 1.8. Project Economics

1.8.1.1. Project Cost

The cost of the project has been estimated in both the scenarios. Scenario-1, wherein the bio-refinery project has its captive power plant and boiler is assumed to be the base case for financial analysis. The core cost of the project excluding soft costs such as contingency fee, Interest during construction etc. has been estimated to be INR 799.60 crore in Scenario 1 and INR 663.00 in Scenario 2. PwC based on its understanding estimated the soft costs including the interest during construction, contingency etc. 1.8.1.2. Means of Finance

expected to be 70:30 (i.e. 70% debt and 30% equity). In scenario 1, a debt quantum of Rs. 559.74 crore and equity of Rs. 239.89 crore has been considered. In scenario 2, a debt of 464.10 crores and equity of Rs. 198.90 crores have been taken into consideration. It has been assumed that the company will raise the entire debt through Rupee Term Loans (RTL). 1.8.1.3. Cost of Feedstock

Price of green bamboo in the base case in both the scenarios is considered as Rs 3741/ tonne. From the price of green bamboo, the price of dry bamboo is calculated based upon moisture content of approximately 40%. While being delivered at the factory gate, the moisture content is expected to be 10%. The adjusted price (dry basis), which has been incorporated in the model, is Rs 5020/ tonne.

1.8.1.4. Scenario Analysis

The following are the results of the financial model.

Scenario 1 – Bio-refinery project has its captive power plant and boiler

Project IRR Equity IRR Payback Period DSCR Project NPV

16.42% 17.52% 6.50 1.94 12.87

Scenario 2 – Biorefinery project buys power from NRL’s existing Gas Turbine and steam generation from boiler

Project IRR Equity IRR Payback Period DSCR Project NPV

14.05% 12.67% 7.23 1.71 -49.59

Detailed breakdown of project costs, and scenario analysis is presented in “Project Viability and Economics” section of this report. 1.9. Incentives available for the project

1.9.1.1. Incentives under North East Industrial Investment Promotion Policy (NEIIPP)

NEIPP is applicable only to new and existi5ng units which commence production within 10 years from the date of notification of NEIIPP eligible for incentives for a period of 10 years from the date of commencement of production.

Fiscal Incentives

• 100% excise duty exemption including refund of CENVAT credit

• 100% Income tax exemption as per the Income tax Act, 1961

Central Transport Subsidy

• 75% subsidy on the transportation cost incurred for transporting raw material and finished goods for a period of 5 years from date of commencement of production

Central Capital Investment Subsidy

• At the rate of 30% of the enhanced investment or additional investment in plant & machinery under automatic and approval route, as applicable

Central Interest Subsidy

• Interest subsidy to the extent of 3% on working capital advanced by the scheduled bank, State/Central financial institutions for a maximum of 10 years from date of commencement of production

• Reimbursement of 100% insurance premium under the comprehensive insurance scheme for new existing manufacturing units taking substantial expansion in the NER

With effect from December 12, 2014, the Central Government suspended registration of new schemes under NEIIPP. In the letter by Department of Industrial Policy and Promotions (DIPP) dated 5th the allocations for the schemes under NEIIPP had been fully utilized and liability incurred far in excess of plan and annual allocations.

Subject to NEIIPP, 2007 being revoked, under NEIIPP 2007, a new industrial unit is defined as “ An industrial unit for the setting up of which effective steps were not taken prior to 1st April 2007 ”.

As the first concrete steps towards development of this project were taken in September 2014 (i.e. post April 2007) with signing of MoU between NRL and Chempolis for establishing a bio-refinery in North-East India, it follows that the biorefinery project of NRL-Chempolis JV maybe considered as a new industrial unit.

However, according to the eligibility provisions of NEIIP, the policy is applicable only to new units which commence production within 10 years from the date of notification of NEIIPP. Thus, it follows that NEIIPP being notified in 2007 is applicable to units commencing production till 2017. As the proposed bioethanol project is expected to commence production from year 2018 onwards, prima facie, it may be interpreted that NEIIPP may not be applicable to the proposed project. 1.9.1.2. Incentives under the National policy on Biofuels, 2009

The financial and fiscal incentives under National policy on Biofuels have been summarized as follows: Financial incentives, including subsidies and grants, may be considered upon merit for new and second generation feedstocks; advanced technologies and conversion processes; and, production units based on new and second generation feedstocks.

Biofuels derived from renewable biomass resources will be eligible for various fiscal incentives from Central and State Governments.

Bio-ethanol already enjoys concessional excise duty of 16% and biodiesel is exempted from excise duty. No other Central taxes and duties are proposed to be levied on bio-diesel and bio-ethanol. 1.9.1.3. Incentives under the National Clean Energy Fund

The NCEF is open to all to apply. Project proposals can be submitted by individual/consortium of organizations in the Government/public sector/private sector. However, all projects must be sponsored by a Ministry/Department of the Government.

Projects are eligible to receive support in the form of loan or viability gap funding. However, NCEF assistance shall in no case exceed 40% of the total project cost. Participating organizations must put a minimum financial commitment of at least 40% of the project cost. Projects funded by any other arm of the Government of India or those that have received grants from any other national/international body are ineligible for funding under the NCEF.

Given that the proposed biorefinery project is based on bamboo (biomass) as primary feedstock, it qualifies as a biomass based project. Also, the ethanol produced from this project is a renewable energy fuel (clean energy fuel compared to gasoline) which will be blended with gasoline thus reducing crude oil imports. Hence, the project is a renewable energy project which is eligible for funding under National Clean Energy Fund (NCEF).

1.10. Benefits of proposed bio-refinery project

Contribution to nation’s energy security: The proposed biorefinery project will contribute to country’s energy security. The Government of India mandated blending of 5 per cent ethanol with petrol in 9 States and 4 Union Territories in the year 2003 and subsequently mandated 5 per cent blending of ethanol with petrol in 20 States and 8 Union Territories in November 2006 on an all-India basis except a few North East states and Jammu & Kashmir. This project is a step in utilizing renewable and environment-friendly sources of energy like ethanol to supplement fossil fuels.

Employment Generation: The potential of bamboo as an economic resource capable of generating employment for the rural poor and the skilled and semi-skilled labour in plantation and others in various value addition activities has remained largely untapped due to lack of an appropriate policy and institutional framework, covering plantation with community involvement, technology up gradation, product and market development.

Sustainability: The direct purchase of bamboo by the proposed bio refinery from the NE states in the next 3 years’ time will have tremendous impact on the ecology, economy, poverty alleviation and employment and import substitution. Bamboo, once planted, the clumps will go on producing culms and shoot for about 20 years. In other words, bamboo plantation will act like banks where people deposit money on fixed term and enjoy the returns in the form of interest.

Value Addition: The added value of a bamboo plantation can be viewed from at least two perspectives. First there is the financial aspect of generating monetary returns from the cultivation and use of land. The value added should also be considered in ecological terms. Bamboo is an effective crop for environmental protection. Bamboo produces a full green canopy within three to four years after planting. So long as selective harvesting is practiced, the canopy will remain green. This distinguishes bamboo from other forestry species where harvesting implies a reduction in forest cover. 1.11. Risk Mitigation

The main categories of risks associated with the development and commissioning of the project are as follows:

• Design risks • Project related • Construction related • Operations related • Revenue risks • Financial risks • Force majeure risks • Insurance risks • Environmental risks

The proposed mitigation measures shall be the basis for development of adequate strategies in the contractual framework of the tendering documents and later in the contracts with the construction contractors, subcontractors and in the O&M contractual documents. A detailed analysis of the risks and the mitigation strategies is present in “Risks Analysis and Mitigation” section of this report.

1.11.1.1. Risks related to bamboo

The following factors may impact availability of bamboo for the proposed project:

Fires: Bamboo Forest fires are a risk that can be minimized through proper management, which includes clearing dry vegetable material. In the case of bamboo, fire management is achieved through the good management of clumps, which at the same time facilitate harvesting.

Bamboo Flowering: Flowering is a major risk for bamboo plantations. Sporadic flowering occurs to individual bamboos and therefore usually affects only part of the plantation. Gregarious flowering, on the other hand, occurs to all plants of the same genotype. Using several genotypes of each species can minimize the loss resulting from flowering even further. To achieve this it is necessary to know the provenance of the species and to know when it last flowered. Alternatively, genetic fingerprinting using molecular markers is a way of identifying genotypic variations.

Pests and Diseases: The most common pests are the powder-post beetles Dinoderus minutus and D. brevis, which cause considerable damage to harvested culms. Traditional methods of protection include soaking the harvested culms in water or mud in order to reduce their starch and sugar content. Chemical treatments involving the use of a boric acid/borax mixture are effective and widely used in tropical countries.

Price Risks: Fluctuations in the price of bamboo poles and shoots may have an impact on revenues and the consequent rate of return of the investment. Since there is a gap of several years between establishing the plantation and harvesting, there is a risk that bamboo may not be sold at the forecasted price.

Cost Efficiency Factor: Increases in the cost of labor and materials are a major risk in a competitive market. The business will have to survive on thinner margins when the level of competition inhibits sales prices increases. The present feasibility study assumes constant sales prices over a ten year period with an annual increase of 2% on all cost elements.