1 © 2014 natureworks naturally advanced materials bioplastics what’s really going on in the...

1 © 2014 NatureWorksnaturally advanced materials

Bioplastics

what’s really going on in the market ?

2

Steve DaviesJune 20, 2014

NatureWorks LLCwww.natureworksllc.com

NatureWorks & Ingeo

“rethink what you think you know …”



• about the industry• about feedstocks• about capacity and expansion plans• about cost• about performance• about applications• about ….


Who we are• World’s first and largest

bioplastics producer

• Global customer base and product adaption

• Proprietary portfolio of Ingeo bio-polymers & intermediates

• Peer reviewed, strong eco-profile

• Ingeo applications breadth across markets, geographies, and retail applications

• World-scale plastics facility

• 2002 Winner - Presidential Green Chemistry Challenge


Three Era’s of Bioplastics

• Biobased = exception• Litter focused

• Carbon footprintfocus

• Biobased = expectation• Performance is king• “biodegradable” where

it’s the highest good

“Bioplasticsare for

Biodegrading”

“Bioplastics=

Plastics”

“Bioplastics sequesterCarbon”

2000’s 2010’s1990’s

Forming StormingNorming & Performing

6

Rethink what you think:

about feedstocks …


Resins

Additives (Modifiers)

Adhesives

Coatings

Printing Toners

Specialty Lactates

Surfactants

Intermediates

CO2 CO2

CO2 CO2CO2

NatureWorks is in the business of turning greenhouse gases into performance products


Resins

Additives (Modifiers)

Adhesives

Coatings

Printing Toners

Specialty Lactates

Surfactants

Intermediates

CO2 CO2

CO2 CO2CO2

NatureWorks is in the business of turning greenhouse gases into performance products

Plant

Sugars

Plants Manufacture

1st Generation

Ag feedstocks are a short

termBridging Tool

CO2 + H2O


Q-2, 2013

• NatureWorks Nebraska facility expansion

• From 140,000 to 150,000 ton/year nameplate capacity

We are committed to feedstock diversification:

Investment in innovation and R&D collaboration to grow our Ingeo feedstock portfolio.

Where we are today

Dextrose from corn starch

“Bridging Crop”

GENERATION I: 1st step

Performance materials made by transforming whatever are the right, abundant, local resources




Where we are today


“Bridging Crops”


Where we are going now

Sucrose from locallyabundant materials such as

sugar cane

GENERATION I: 2nd step


NatureWorks Awards Contract for Front End Engineering of Its New Ingeo™ Production Facility

MINNETONKA, Minn., Sept 24, 2013

“NatureWorks announced today that Jacobs (NYSE:JEC) Engineering Group has been awarded the engineering design contract for the company’s next world-scale Ingeo™ production plant in Southeast Asia …”




Where we are today




And next?

CO2 to lactic acid technology?

CH4 to lactic acid technology?

GENERATION NEXT

Next 3-5 years

Lignocellulosics: Sugarsfrom bagasse, wood chips,

switch grass or straw.

GENERATION II



sugar cane




And next?



GENERATION NEXT




Q2-2013 Long Term R&D Partnership Established

…


From Methane to Ingeo

1 2

Methane is supplied directly to specialized bacteria called methanotrophs

NatureWorks converts lactic acid monomers to long polymer chains making a family of Ingeo bioplastics

3

Methanotrophs convert methane into lactic acid through fermentation

It starts with Methane


2 - 3 December 2014, Haus der Technik, Essen, Germany

Industry Wide Engagement


Certification Tools for Ingeo Biopolymers

1 BIOBASED CARBON CERTIFICATIONVerifies that 100% of carbon in Ingeo comes from renewable ag resources via USDA BioPreferred in the US & Vincotte in Europe.

2 GENESCAN CERTIFICATIONIngeo is certified to be free of any genetic material by Eurofins Genescan.

3

4

5 ISCC PLUS & FEEDSTOCK SOURCINGA combination of NatureWorks’ Feedstock Sourcing Certification and the ISCC PLUS program.

6 WORKING LANDSCAPE CERTIFICATES3rd party (IATP) certifies both sustainable agricultural production and the use of a non-genetically modified crop.

ISCC PLUS3rd party (ISCC) certifies the sustainable production of renewable raw materials including chain of custody.

FEEDSTOCK SOURCING CERTIFICATIONNon-GM corn volume equivalent to a customer’s needs is purchased by NatureWorks and added to the stream entering the corn wet mill.




Where we are today




And next?



GENERATION NEXT

Next 3-5 years

Lignocellulosics: Sugarsfrom bagasse, wood chips,

switch grass or straw.

GENERATION II



sugar cane




What can you get from one bushel (56 lb) of corn?1.6 Pounds of Corn Oil

Cooking Oil, Margarine, Mayonnaise, Salad Dressing, Shortening, Soups, Printing Ink,

Soap, Leather Tanning

AND

32 Pounds of StarchAdhesives, Batteries, Cardboard, Crayons, Degradable Plastics, Dyes, Plywood, Paper,

Antibiotics, Chewing Gun

AND OR

13.5 Pounds of Gluten Feed21% Protein

Livestock & Poultry Feed, Pet Food

33 Pounds of SweetenerShoe Polish, Soft Drinks & Juices, Jams and Jellies,

Canned Fruit, Cereal, Licorice, Peanut Butter, Catsup, Marshmallows

AND OR

2.6 Pounds of Gluten Meal60% Protein

Amino Acids, Fur Cleaner, Poultry Feed

2.7 Gallons of Ethanol/AlcoholMotor Fuel Additive, Alcoholic Beverages, Industrial

AlcoholOR

22.4 Pounds of Ingeo™ Biopolymer

The US uses one billion lbs of starch in corrugated paper every year. Source: National Corn Growers Association's 2008 World of Corn Report

“It’s not Food Or Bioplastic”

“It’s Food And Bioplastic”

Food sources corn oil, and animal feed products such as gluten feed, and gluten meal co-exist with the starch end uses, regardless of whether or not that starch is used to

make materials like Ingeo.

18


about price, product, and market applications …


Properties

• Broad and adjustable physical property set

Price

Sugars vs oil

Favorable yields,

Economies of scale

Feedstock hedging capabilities

Cradle to cradle economics

Preferences

Lower carbon footprint and energy usage

Renewable feedstock

Health Concerns BPA free Phthalates free Acrylonitrile free

What it’s all about

“The 3 P’s”


comparative cost stability

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep-1

0

Nov-1

0

Jan-

11

Mar

-11

May

-11

Jul-1

1

Sep-1

1

Nov-1

1

Jan-

12

Mar

-12

May

-12

Jul-1

2

Sep-1

2

Nov-1

2

Jan-

13

Mar

-13

May

-13

Jul-1

3

Sep-1

3

Nov-1

3

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-1

4

Nov-1

4$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60 PET PP PS

US

D/lb

Source: IHS 02/14 North America C-M prices


The shale gas boom means energy companies in the United States are boosting their capacity to turn cheap gas into ethylene, a basic hydrocarbon used to make solvents, plastics and detergents….

More complex hydrocarbons derived from crude oil, however, are becoming more expensive and their supply more volatile, adding urgency to a drive by specialty chemical companies to make everyday materials such as synthetic rubber, insulation foam and diaper absorbents from plant matter….

But more than half of what naphtha crackers churn out is ethylene. When the product is made more cheaply elsewhere, cracking naphtha becomes a less profitable business….

.

This environment is likely also to be supportive of renewable chemistry economics," they added.”

Ludwig Burger, Reuters, FRANKFURT | Fri Dec 7, 2012

“Cheap shale gas gives impetus to bioplastics growth

Makers of chemicals and plastics from plant matter are emerging as unlikely beneficiaries of the abundance of U.S. shale gas, which is shaking up the global

petrochemical industry.


$0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60$0

$50

$100

$150

$200

$250

Cost of sugar (c/lb)

Cost

of O

il ($

/bbl

)PET/PS/Ingeo Feedstock Cost Comparison

Above lines, Ingeo wins

Below lines, PET/PS wins

PET

PS

MaterialIndifference Curve

PET Analysis from McKinsey margin models, CMAI, February 2006


$0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60$0

$50

$100

$150

$200

$250

Cost of sugar (c/lb)

Cost

of O

il ($

/bbl

)PET/PS/Ingeo Feedstock Cost Comparison

Above lines, Ingeo wins

Below lines, PS wins

PS

For Example• When sugar cost ~$.17/lb, the cost

of feedstock per lb of Ingeo is the same as the cost of feedstock per lb of PS when oil is ~$50/barrel

• OPEX and CAPEX are similar.• The rest is scale…

Cellulosic sugarsGen 3 sugars PET Analysis from McKinsey margin models, CMAI, February 2006


Clarifying Sugar to Polymer Yields

Polymer Technology Overall Process Yield

Kg sugar for 1 kg polymer

Bio PLA (Ingeo) Sugar to PLA via lactic acid and lactides

80% 1.25

Bio PP Sugar to ethanol to propylene to PP

47% 2.14

Bio PET Bio MEG + Bio PTA from sugar

36% 2.77

Bio PE Sugar to ethanol to ethylene to PE

31% 3.22

25


about properties & performance …


Food ServicewareFood Serviceware

Nonwovens / FibersNonwovens / Fibers

RigidsRigids FilmsFilms

DurablesDurables

Where we are in the Market

LactidesLactides Bus. Dev.Bus. Dev.


Ingeo Technology Platforms

8-series

Foam

7-series

Blow Molding

6-series

Fibers/Non-woven

4-series

Film

3-series

Injection Molding

2-series

Thermoforming

Lactide Monomer


Food ServicewareFood ServicewareNonwovens / FibersNonwovens / Fibers RigidsRigids FilmsFilmsDurablesDurables

Key Properties

Range of melting points/crystallinity levels

Tunable hydrolysis

Hydrophilic / moisture wicking

Inherent odor resistance

UV resistance

Low bonding temp

Key Properties

Stiffness

Gloss, transparency

Printability

Weight reduction (vs. PET)

Key Properties

Stiffness

Miscibility

Improved flow

Chemical resistance

Key Properties

Stiffness

Compostability

High versatility for injection, extrusion and coating processes

Key Properties

Stiffness

High gloss and transparency

Dead fold / twist retention

Grease, oil and aroma barriers

Chemical resistance

High throughput

Performance features depend on application


2012 Design Table – 15 Distinct Ingeo Grades

2500HP1

grade3

grades2

grades

3100HP6100D

3grades

3grades

1grade

3260HP6260D

2grades

Incr

easi

ng

Mo

lecu

lar

Wei

gh

t

Fiber and Injection Molding Grades

Extrusion Grades

Varying Lactic Acid co-monomer ratio


2013 Expanded Design Table – 21 Ingeo Grades

1grade

1grade

3grades

2grades

2grades

3grades

3grades

1grade

2grades

2grades

1grade

Incr

easi

ng

Mo

lecu

lar

Wei

gh

t

Fiber and Injection Molding Grades

Extrusion Grades

Varying Lactic Acid co-monomer ratio


Improved Stiffness for Heat Resistant Ingeo Parts

60 70 80 90 100 110 1200

20

40

60

80

100

Improved Stiffness with Crystalline Ingeo for Practical Temperature Range of Hot

Foods

Temperature, °C

Mo

du

lus

(M

pa

)~40% increase

in stiffness

Incumbent Grade

High Productiv-ity

Grade


With related reduction in the manufacturing time required to produce the heat resistance part …

Existing Ingeo Grades

Temperature

New High Productivity Ingeo Grades:~ 70% shorter cycle times

Decre

asin

g

Cycle

Time

33


about applications & markets …


Properties

• Broad and adjustable physical property set

Price

Sugars vs oil

Favorable yields,

Economies of scale

Feedstock hedging capabilities

Cradle to cradle economics

Preferences

Lower carbon footprint and energy usage

Renewable feedstock

Health Concerns BPA free Phthalates free Acrylonitrile free

What it’s all about

“The 3 P’s”


Innovation in Form-Fill-Seal Packaging


• Carbon savings• 75% reduction in CO2 emissions• Equivalent to 1,320 MT CO2/year savings

• Ingeo out performs polystyrene• Stronger/less breakage• Better lid adherence• Lower temperature filling (less energy use)• Maintained line speed and shelf life

• Addresses consumer concerns• Well received by key opinion leaders• Reduction in human toxicity• Did NOT increase our retail price

Danone’s Stonyfield - in their own words:

“IMPACT OF INGEO CONVERSION”

Stonyfield CEO Gary_Hirschberg, Innovation Takes Root Conference Keynote:“Inventing a WIN- WIN- WIN- WIN- WIN FUTURE”, February 21, 2012

Environmental

Performance

Consumer& Cost


3D Printing


0

20

40

60

High impactPMMA

ImpactPMMA

10%PLA

ImpactPMMA

20%PLA

ImpactPMMA

40%PLA

ImpactPMMA

60%PLA

PETG PC

Impa

ct s

tren

gth

(J)-

Acrylic

--------------- Acrylic / Ingeo Alloys ----------- PETG

PC

Improving Plexiglas PMMA Impact Performance with Ingeo

Source: Altuglas International a subsidiary of Arkema International

Impact performance comparable to PETG and PC


In Food Service, Ingeo provides a tool for organics diversion


Ingeo Sunshades

www.revolution-fabrics.com/index_en.html

http://www.revolution-fabrics.com/index_en.html

43


About market presence


2005

2006

2007

2008

2009

2010

2011

2012

2013

6 X

Market Presence

Sales CAGR: 24%

2005 – 2013 Footprint in the market

aggregate volume in the market

as of 2013

1 Billion lbMilestone


Market Presence

2005

2006

2007

2008

2009

2010

2011

2012

2013

6 X

2005 – 2013 Footprint in the market

aggregate volume in the market

as of 2013

1 Billion lbMilestoneTechnology & Intellectual

Property Established

Startup & Market

Seeding

Operations Established

Today

1990-2001 2002-2005 2006-2013 2014 - forward

Sales CAGR: 24%

Mile

ston

es

4k -8k mt pilot plant

2002 -140k mt facility @ Blair.

2003 -largest lactic acid plant

Expanding customer & product base.

Plant 2

2006 - 24/7 Blair operations at Blair 2013 – 150k ton expansion

Poised for Strong Growth

Market Presence – in the bigger picture

Sales CAGR: 24%

46


About end-of-life …


Global-scale adoption: Where are we geographically



“What is the right end-of-life”



With this breadth or products & Geographies - for us, it’s about being cognizant of all

relevant end-of-life opportunities, for all

applications, in all geographies we sell into . . .

50

How we look at things . . .


“Technical nutrients” • basically inorganic or

synthetic materials manufactured by humans—such as plastics and metals--that can be used many times over without any loss in quality, staying in a continuous cycle.

“Biological nutrients”• Biological nutrients and

materials are organic materials that can decompose into the natural environment, soil, water, etc. without affecting it in a negative way, providing food for bacteria and microbiological life

Ingeo recycle Ingeo composting

Source: Cradle to Cradle: Remaking the Way We Make Things by William McDonough & Michael Braungart

“Nature doesn’t have a design problem, people do”

William McDonough and Michael Braungart, 2002

Ingeo From A Cradle-to-Cradle Perspective


IngeoCradle

toCradle

Options

MechanicalRecycle FeedstockRecovery Compost AnaerobicDigestion EnergyRecovery

Landfill X X

Incumbent Plastics Ingeo


Ingeo: Myths, Realities and Misperceptions

• “Since PLA is a compostable resin, all items made from Ingeo are compostable and should be composted at the end of life”

Not Necessarily

• Compostability makes sense for diverting food and agricultural material. If the product doesn’t do that then composting isn’t the best end of life

option.

YES NO

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=-y30cz0e9FbHFM&tbnid=seO34JSCPRGukM:&ved=0CAUQjRw&url=http://inhabitat.com/world-centric-launches-worlds-first-compostable-toothbrush/&ei=o8hEU9LENenWyQHOn4DgBw&bvm=bv.64507335,d.b2I&psig=AFQjCNGyU98DlJdt0vKoyIJF5oK4sY2vQQ&ust=1397103104748353


Incumbent Plastics Ingeo

MechanicalRecycle FeedstockRecovery Compost AnaerobicDigestion EnergyRecovery

Landfill X X

RecycleOptions


Recycling Post Consumer Ingeo

Collecting Converting End Markets


In a nutshell - NatureWorks approach

Develop Business by:

• Selling Ingeo grades into consumer products where the potential for recycle stream contamination is minimal

• Targeting products which today, have little or no recycle yet occurring

• Achieving scale “safely”







Implications . . .

• Constrained sales intocertain applications &geographies







All the while simultaneously

1. Developing end markets

2. Characterizing Ingeo presence in recyling system today– where is it, (which streams), – how much is there– what’s the economic potential

3. Working with recyclers to address sortation challenges


NatureWorks’ Approach to the Post-ConsumerPLA Collection & Recycling Challenge

• Foodservice Packaging Institute (FPI) – Plastics Recovery Group

• AMERIPEN

• Secondary Processing of Mixed Plastics and MRF Residuals

• Sports Venues

• Concerts/Music Festivals

• Other Events/Venues

•Corporate Campuses

Closed Loop Public Venue Collection Programs

Municipal RecyclingInitiatives

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=KOCFNOMAgHjPrM&tbnid=wx4WrAuq3Y8ClM:&ved=0CAUQjRw&url=http://doclawrencenews.blogspot.com/2013_04_01_archive.html&ei=aTlsUqvxH4jtkQfFhYB4&psig=AFQjCNHyLGjkDsWJSeZhpIqF8UW_8TwTVA&ust=1382910383799305

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=lvveUqsTDTTvjM&tbnid=SQk46Apy6J-SDM:&ved=0CAUQjRw&url=http://www.ilosaarirock.fi/2004/english/accommodation.html&ei=2j5sUurgLsHWkQez3IDwBA&psig=AFQjCNEYIEhjQkAS5B3DrformScAdGJ7Hg&ust=1382912062899878

http://www.google.ca/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=xp92zhckleEzlM&tbnid=wK-XdYIG1rwCYM:&ved=0CAUQjRw&url=http://www.wandsworth.gov.uk/blog/ourgreenblog/post/19&ei=thNCU9iLDYGO2AX-moDQBw&psig=AFQjCNF0t7hPh0d4uOllvcRrbhIM4P_Iyg&ust=1396925476917212

60

Steve DaviesJune 20, 2014

NatureWorks LLCwww.natureworksllc.com

NatureWorks & Ingeo


61

Questions ?


Cargill Lactic AcidNatureWorks LLC - Ingeo Plant

640 acres - 1 sq. mile – 263 ha.

Missouri River

Cargill Corn Mill

Cargill Sugar Refinery

Cargill Ethanol

Evonik (lysine)

Cargill Erythritol

Cargill Corn Oil

Purac (lactic acid and lactic salts)

Novozymes

56 lbs Corn $6.00/bushel

1.6 lbs Oil $1.25*13.5 lbs gluten feed $1.00*2.6 lbs gluten meal $0.65*33 lbs starch $0.10 (0.10-0.15/lb)

*Based on WSJ/CBOT prices 2008


•Source: 2011 World of Corn report from NCGA

~28%for

ethanol

< 0.11% forIngeo

Corn inNorth America

150,000 ton Ingeo/year ?How do corn

supply & ingeo

demand compare?

Feedstock Generation I

– Our footprint is small: At full capacity, Ingeo represents:• < 0.11% of the starch associated with US corn production (<.04% of global production)• “The corn oil, gluten feed, and gluten meal markets for that 0.11% of US corn remain

unaffected.”

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