Earth Pulp & Paper John R. Stahl P. O. Box 64 707 925-6494 Leggett, CA 95585 fax: 707 925-6472 www.tree.org/epp.htm firstname.lastname@example.org January 7, 1999 Private Offering for investment in the development of the New World Pulper
The New World Pulper is a new, highly integrated and efficient design to make pulp for papermaking from a wide variety of source materials, including especially the non-wood fibers such as hemp, kenaf, and flax. The design originated in Ukraine and is based on a drip percolation process with aqueous organic ammonia and sulphur dioxide solutions, using the liquid recovered from a spent solution in a continuous process. In this technology, one closed unit can integrate all the major processes of pulp production, including raw material impregnation and cooking, stock washing and dewatering, recovery of the liquid fraction of a spent solution, collection and utilization of dirty condensates, utilization of secondary steam and condensate heat, and collection and removal of non-condensable gases. This is a closed loop system with a very high level of process integration, providing for a much greater efficiency than conventional systems. Capital investments for a pulp plant can be greatly reduced; the yield of high quality pulp is increased; energy consumption and labor costs decrease 3-5 times. The technology and equipment are environmentally sound. Fresh water in the pulping process is totally excluded. Instead of firing liquors, one can process dissolved solids as valuable market products. The yield and quality of pulp produced is improved by a more precise selectivity of delignification than any other known process. Conventional methods may remove all the lignin and other impurities, but they also typically remove most of the hemi-cellulose in the process. This hemi-cellulose is valuable not only because of the increased yield, but also because it promotes better hydrogen bonding, making a better and stronger paper. Paper samples made from pure hemp hurds pulped in a bench model of this process are much finer than might be expected. Ordinarily, hemp hurds are considered to be of little use in papermaking, in spite of their high level of cellulose, because of the shortness of the fibers. However, the hurds are especially high in hemi-cellulose so that not only may an excellent yield be obtained, but the paper exhibits an unusual strength and integrity. On the other hand, other proposed pulping technologies which may claim higher yields are not as effective in cleansing the raw material, yielding pulp of inferior quality which will more quickly degrade.
Non-Wood Fibers Virgin tree fibers remain the staple diet in paper making. Every time a fiber is broken down by pulping or recycling, it becomes weaker, making the addition of strong virgin fibers a necessity. Until virgin wood pulp is replaced as the primary fiber strengthener in paper manufacturing, the industry will continue to destroy forests and their delicate ecosystems. The challenge is to provide the industry with high quality pulp that can be a cost effective replacement for virgin wood pulp. There have been many recognized renewable non-wood fibers that would make an excellent alternative to virgin wood: hemp, for example, which was the first known plant to be used in the making of paper (around 300 BC), and remains one of the best choices today. Fine paper produced from the long fibers of hemp or flax is the finest quality archival material, far superior to anything made from wood. Hemp is also used as a specialty paper for cigarettes and Bibles. Hemp is one of the oldest of cultivated crops and is now grown once again in almost every country of the world (except for the Land of the Free, where its cultivation is prohibited). However, hemp is not the only choice. There are many other alternatives, such as kenaf, and the straw from flax, cotton, wheat, rice, and other annual crops which could also be pulped with this technology. The finished product is more recyclable than regular wood paper (due to the much longer fibers) and may have a shelf life of 1000 years or more, depending on the fibers used. Wood paper has a shelf life of about 80 years, and, as a tree, requires many years to grow to maturity. Most non-wood fibers are grown annually, many reaching maturity within 120 - 180 days, with about five times greater yields per acre than that of wood, on a sustainable basis. The growing of non-wood fibers are designed to reduce the damage caused by the paper industry, since the trees of the earth have not been able to keep up with the rate of extraction for paper making. Non-wood fibers are not yet grown in sufficient acreage to eliminate the wood pulp industry any time soon; however, as each year passes, we expect to see an increasing share of the world s pulp and paper products being made from non-wood sources.
Stages of Development We are now ready to build our first pilot project. The design was originally engineered with a capacity of 15 tons per day, and we feel this is an appropriate level to start with. A smaller unit would not cost much less to build, and would be hard to operate profitably. On the other hand, a larger unit, while perhaps offering some advantages of scale, would be premature at this time. It is only prudent to be prepared for the possibility that modifications and improvements may be made to the design after the first unit is built. Later on we may want to scale up the design to larger units to suit commercial requirements, but there are advantages to a small unit: it may be advisable to install more small units close to the sources of supply rather than one larger unit located at some distance, since the cost of transporting the raw material must be considered. It is far more economical to transport finished pulp to a paper mill because the weight and bulk will be substantially reduced and the value increased. Our first step is to submit our designs to a review by Canadian engineers, both to verify the process calculations, and also to modify the design as needed to conform to Western standards and specifications. At the same time, we will obtain a detailed cost analysis so that we will know just exactly what it will cost to build. We have already made arrangements for this work to be done. The cost estimates will be guaranteed to within 10%.
The next step is to determine the best way of conducting business in Canada. (Canada has already been selected for the pilot project for a number of reasons, chiefly the availability of hemp and flax, and the cooperation of the Canadian government.) We are considering the following options: 1. Separately incorporating a Canadian company to operate the project. 2. Selling our first pulper to an existing Canadian company, most probably in exchange for owning a share of the company. 3. Purchasing, in whole or in part, a small Canadian paper mill (mainly with the contribution of our pulp mill) so that the whole project can be vertically integrated all the way to the market place with finished paper products. Our initial course of action will be to contract with farmers to supply fiber so that we can supply pulp to existing paper mills in North America. A single wood pulp and paper facility has the capability of generating 250,000 tons of paper a year or more, making our initial project small in comparison, but, given the fact that we are able to reproduce our fiber from renewable resources yearly, in the long term the industry will become more productive and beneficial to a larger population at less cost to the environment. Our expectations are to produce approximately 3000 tons of pulp in our first year of operation, with which we expect to generate conservatively $3,750,000 in sales from a small 15 ton per day unit. This is based on pulp being sold for a $1000 a ton and the pulper being operated for 250 days in the year. This time frame allows for machinery problems and prototype developments. The next stage would be to develop additional units for North America, Europe and the rest of the world. It is expected that a minimum of 10 units will be operational within 2 years, generating sales of $40,000,000 US dollars, and 60 units within 5 years. This would generate approximate sales of $265,000,000 a year. During these stages, we would be in a firm position with European and North American farmers to provide significant supplies of non-wood fiber for the pulp and paper industry and for the development of alternative industries. At this point, we would be in a position to acquire a number of mills to produce paper for the commercial market place. This would put industrial hemp and other non-wood fibers into the mainstream of the pulp and paper industry, providing a competitive alternative to wood paper. The goal would be to achieve a moderate but continually growing percentage of the market place in a multibillion dollar industry.
Potential Revenue (US dollars) Ist Year 2nd Year 3rd Year 4th Year 5th Year Units in Construction 10 20 30 Units Operational 1 1 11 31 61 Price per Ton: $1,000 $1,000 $1,000 $1,000 $1,000 Tons per Day: 15 15 165 465 915 Days per Year: 250 250 265 275 290 Revenue: $3,750,000 $3,750,000 $43,725,000 $127,875,000 $265,350,000 Cost of Business: $2,250,000 $2,250,000 $24,048,750 $76,725,000 $159,210,000 Annual Gross profit: $1,500,000 $1,500,000 $19,676,250 $51,150,000 $106,140,000
This reflects the sale of pulp only. The sale of additional units and the operation of additional units will generate a substantial increase in revenue potential. This also excludes revenue from the manufacturing and selling of finished paper products or additional market products from the waste material (either a high grade fertilizer, or more valuable products formed by further processing).
Marketing Considerations We are expecting to make “Better Paper, Cheaper” due to a variety of factors: the increased efficiency of our pulping technology, and the use of materials which are now typically burned off the fields, hence available to us for about $10 per ton, or the cost of taking away, and this will obviously provide a principle incentive for customers to use our product, but the environmental considerations are also very important and not to be underestimated. We will be recycling and utilizing materials which are now burned or discarded, and these materials will typically contain about double the cellulose of wood products with far less lignin, making the processing easier and cleaner without the use of chlorine bleach or other toxic materials, and with no toxic sludge diverted into our water supply. The pulp and paper industry is already under considerable pressure to conform with ever stricter environmental standards, and many mills are electing to simply close their doors rather than deal with the expense of upgrading their old facilities. The industry is trying to protest against some of these restrictions, saying that the goals are unattainable without huge expenditures, rendering their products uncompetitive with foreign manufacturers, but if we are able to produce pulp cleanly and efficiently, there will be no reason for governments to relax their demands, and our technology will inherit the industry. But even without these considerations, the marketplace is eager to embrace environmental improvements. Since the pulp and paper industry is one of the dirtiest industries in the world, and is causing the rapid destruction of our remaining heritage of ancient forest, we expect the marketplace to support our enterprise with enthusiasm. Since our capacity will start out very small by industry standards, we will probably have to sell our pulp to a waiting list, as we try to expand our capacity to keep up with the growing demand for environmentally appropriate paper products. We expect to be filling that demand at a lower and lower cost to the consumer as our industry matures.
Future Potential The future potential of this technology is enormous. Most insightful professionals in the pulp and paper industry are agreed that the future of paper lies with the non-woods. If our technology is proven to be effective technically and financially, we envision explosive growth all over the world. We have already accumulated an enormous file of potential projects worldwide, and new ones are proposed to us at the rate of about two per week. These include large projects and small ones. We may consider each project separately, setting up financial arrangements as appropriate. For example, in some cases we may simply sell the mills outright; or we may sell mills for any combination of cash, equity in the project, or private loan; or we may lease a mill to the operators either indefinitely or on a lease-purchase arrangement or some other terms; or we may elect to install and operate selected pulp mills ourselves. In any of these cases, we would expect to obtain the bulk of financing from bank loans, once our technology were proven.
Management Richard Herbert Managing Director Richard brings 15 years of Agricultural business experience to the company. His experience stems from operating successful large scale agricultural concerns in Europe and East Africa. His experience in agro-business provides the necessary foundation for the company to grow into a successful multi-faceted corporation.
Mebs Tejpar Financial Director The former CEO of one of East Africa s largest financial Institutions, the Southern Credit Finance Group and the former Managing Director of Avior Technologies and Kenya Teas Limited, Mebs brings twenty years of European and African banking and business management to the company. His financial background in managing multi-million dollar companies and financial institutions provides the necessary foundation to build a strong financial company.
John Stahl Technical Operations Director John is responsible for the development of the New World Pulper and will provide technical and market support for the company s growth. John has been making paper since the early 70 s and has considerable experience making paper with a wide variety of alternative (non-wood) fibers, including cotton, abaca, hemp, kenaf, flax, spartina grass, sow thistle, yellow dock, and numerous other agricultural by-products and roadside weeds. He acquired the rights to the present pulping technology in 1994 and has funded and supervised the development of the engineering work. All of this work, together with extensive documentation, has been translated from the Russian language under his supervision and the project is now fully ready for construction. The Company will be searching for additional qualified employees and consultants to fill other key positions in information technology, marketing and sales, public relations, general counsel, and, as the company grows, human resources.
Capital Requirements Since our project should be self supporting almost from the time of installing our first mill, we should not require much more funding than needed to build the first mill, along with supporting administrative expenses. While we will not have precise cost figures in hand until after obtaining the results of the work outlined in “Stages of Development” above, our estimates at this time run to about $2,000,000 for actual construction. With additional funding for administration and contingencies, we are looking at raising $5,000,000 in exchange for 40% of the company. Shares will be issued in $1000 increments.
Outstanding Obligations At the present time, Earth Pulp and Paper has only two obligations. One is to an attorney in Kiev, who assisted us in the preparation of our contracts with the Ukraine partners for the acquisition of the rights to the technology. The amount owed is $8963. The other debt is to a private party in the amount of $3200.
Exit Strategy for Investors Within two to three years of operation, we should have a solid company with a high rate of profitability and a predictable rate of expansion into new markets. Our future growth projections ought to establish a high value for our company. At this point, it should be a good time to take the company public on any one of the major exchanges, providing an easy liquidity for any investor who may wish to withdraw for any reason, and at the same time providing the company with access to additional capital to finance our expected explosive growth as we extend our activities to projects world-wide.
Current Costs and Industry Statistics ú Hemp bast fiber pulp from European sources is currently being sold in the United States for about $2800 a ton. ú Wood pulp is currently being sold for about $700 dollars a ton. ú One US mill produces about 250,000 tons of paper a year. ú Non-wood fiber production worldwide is approximately 120,000 tons per year.