Development of Raw Materials Base for Alternative Sources of Energy (Biofuels)

1. Development of Raw Materials Base for Alternative Sources of Energy (Biofuels)

2. Necessity for Development of Synthetic Fuels Production Technologies With the Use of Biomass • ICAO requirements: • European system of trading quotas for greenhouse gas emissions (EU ETS): airlinesrelocating money to EU budget to purchase certificates on emissions, threat of sanctions upon disobedience • (for example, Aeroflot Airlines estimated the projected costs of CO2 quotas for the 1st year of their use to comprise the amount of around 40 million euros, and their cumulative value up to the year 2025 is approximately 800 million euros, Transaero: more than 4.5 million euros per year) • Perspective for coming into force of environment standard ISO 14064. 2010 2020 2050 ensuring annual increase in fuel efficiency by 1.5 % within the period up to 2020 decrease in netto emissions of CO2 by 2050 to a 50% level of the year 2005. lack of carbon growth Necessity for biotechnology development for the purpose of reducing greenhouse gas emissions and minimization of operating costs on CO2emission quotas.

3. International Experience of Use and Maintenance of Aircraft Units Powered by Biofuels • Equating fuels produced using methods of Fischer-Tropsch and hydroprocessing of esters and fatty acids (HEFA), which comply with the ASTM D7566 standard, to fuels of ASTM D1655 standard (Jet A or Jet A-1). • Advanced developers in Europe: Honeywell (UOP), Neste. • Lufthansa airlines made1,187 flights between Frankfurt and Hamburg + connecting flight over the Atlantic in the period between July 15 and December 27 of the year 2011. Engine fuel composition No.1: 50% is 1,557t (80% of saffron milk cap, 15% of Jatropha and 5% of adipose), and 50% of Jet-A1. Engine fuel composition No.2: 100% ofJet-A1. • Keeping CO2 emissions at the level of1,471t owing to biogenic components of fuel. • High density of biokerosene allows for less fuel consumption, does not influence structural characteristics of engine's turbine. Indicators of Engine Performance Fuel consumption analysis on example of Rolls Royce RB211 engine testing Engine operation with fuel of 100% Jet A1 Gall/hour Engine operation with fuel of 50% content of biokerosene Engine operation with fuel of 50% content of biokerosene • In April 2012, the turboprop plane Bombardier Q400 (Рorter Airlines) made a commercial flight Toronto - Ottawa using biofuels. A composition of traditional aerial kerosene and biofuel in proportion 50%:50% was used for the fuel. Biofuel, which was consumed during that flight, is of vegetative origin and certified - ASTM International. Time (seconds)

4. Comparative Characteristics of Traditional Aerial Fuel and Biofuel, According to UOP (Honeywell) Data In 2011, the Federal Aviation Administration issued a Special Airworthiness Information Bulletin (SAIB), in which it is stated that the fuels for jet engines produced by methods of hydroprocessing of esters and fatty acids (HEFA) or Fischer-Tropsch (FT) comply with ASTM D7566 requirements and are suitable for use in those aircraft units and aircraft engines, which are certified according to the D1655 rules and which consume fuels Jet A or Jet A-1.

5. Economic Efficiency of Aviation Fuel Use for Airlines 1 ton of aerial kerosene burned produces 0.8 tons of СО2.emissions to atmosphere. Let's examine airline costs (on example of Aeroflot) for the flight of Moscow-Barcelona-Moscow route using the plane of 737-800w with CFM56-7B26 engines which consume 28 tons of fuel in three-times-a-week flights (156 flights per year). When calculating the cost of flight using aerial kerosene, it is necessary to include the costs of purchasing quotas. 1. The cost of flights taking into account the use of aerial kerosene: 156 * ( 28tons* Стс-1 +0.8*28tons*Ссо2 ) = 144,501,826.56 rubles 2. The cost of flights taking into account the use of biofuels/aerial kerosene in proportion 50/50: 156 * (14tons * Сбт + 14tons* Стс-1 +0.8*14tons*Ссо2 ) = 115,930,913.28 rubles 3. In total: 28,570,913. 28 rubles saved per year

6. Investment Potential of Saffron Milk Cap Crops as Major Raw Materials for Biofuel Production • Saffron Milk Cap is the most suitable agricultural crop for production of environmentally friendly aerial biokerosene (biofuel), quality characteristics of which are significantly better than those of aerial kerosene derived from traditional sources of energy. • In 2012, following the initiative of the government of Penza Oblast,Lufthansa Airlines started to considerPenzensky district to be a raw materials base for biofuel production for personal needs. • European plants experience lack of raw materials for biofuel production due to its competition with food crops, which is banned by EU standards. • In Northwestern region of Russia, it is possible to produce 480 thousand tons of biofuel using 2.5 million ha. Annual needs of only Lufthansa Airlines are 530 thousand tons. • Following the novations of air industry, CJSC “IFK Tekhnik” initiated the project LLC “Green Fuels”on creating and processing raw materials for production of biofuel in Tver Oblast.

7. LLC “Green Fuels” Project Description: Raw Materials Base in Tver Oblast • Project operator: LLC “Green Fuels”. • Project core: thefoundation of modern agricultural enterprise for cultivating and processing of oil crop of saffron milk cap (camelina sativa) in the territory of Tver Oblast, as well as for creating raw materials base for biofuel production in the territory of Russia. • introducing the use of up to 30,000 ha of spare agricultural lands; • cultivating up to 16,000 tons of saffron milk cap per year with further processing of this volume into 5,100 tons of oil per year. • Cost of project: Total cost of project, 300 million rubles, includes: • 210 million rubles: capital expenditures, • 90 million rubles: investment phase operating costs.

8. LLC “Green Fuels” Project Description: Raw Materials Base in Tver Oblast • Completedstages: • InFebruary 2012: InvestmentAgreementwithTverOblast; • InAugust 2012: MemorandumofIntentwithNESTEOIL (majorconsumerofsaffronmilkcapoil. Memorandumimpliesthefollowingvolumesofsaffronmilkcapsupplies: • Agriculturalequipmentwaspurchasedtopreparethesoilandsowing; • Productionbuildingoftotalareaof 4.2 thousandsq. meterswaspurchasedforthepurposeofplantconstruction, itsmodernizationwasstarted; • Thecontractsonsuppliesofequipmentforoilprocessingplantanddryingfacilities (OJSC “Voronezhselmash”, Farmet S.A.) were signed; • 5,500 haofagriculturallandwascultivated. Startingtheyear 2016, totalareaoflandassignedforcroprotationwillincreaseupto 30,000 hawithannualsowingofsaffronmilkcapintheterritoryofover 10,000 ha; • Withintheyears 2012 and 2013, LLC “Green Fuels” made projectinvestmentsofmorethan 110 millionrubles.

9. Major Project Findings • Foundation of agricultural enterprise for cultivating and processing of saffron milk cap. Up to 30,000 ha of land in use in Tver Oblast. Growing up to 16,000 tons of saffron milk cap seeds and production of 5,100 t of oil per year. • Project investments of 300 million rubles, including 210 million rubles of capital expenditures, 90 million rubles of investment phase operating costs. • Project demands additional investments of 190 million rubles in monetary terms. • Major suppliers of oil pressing equipment and drying technology: companies Farmet (Czech) and OJSC “Voronezhselmash” (Russia). • Export sales of saffron milk cap oil to the suppliers of biofuels made from vegetative raw materials (Neste Oil Finland). Oil meal is sold to cattle breeding farms.