RGVSG RENEWABLE ENERGY PROJECT

Presentation prepared by

INTRODUCTION

RGVSG proposes to construct a $23.8 million Clean Energy and Clean Air Project

The Project will involve partial funding from the North American Development Bank (NADB)

Certification by the Border Environment Cooperation Commission (BECC) is required

PROJECT OBJECTIVES

Project needs to result in a net reduction in the emission of air pollutants

The Upgraded Facility should utilize all of the bagasse for on-site energy production with excess energy available that can be sold

Improve efficiency for existing needs and for future expansion of Mill capacity

BACKGROUND

RGVSG Mill has been in existence since 1973 and employs 188 full-time personnel (approximately 565 personnel during the grinding season)

The RGVSG Cooperative has a membership of 127 sugar growers and is the only Cane Sugar Mill in the State of Texas

BACKGROUND

Project is located 2 ½ miles west of the City of Santa Rosa on Hwy 107

The RGVSG members actively farm up to 47,000 acres of sugar cane (3% of the arable land in RGV) yet provides almost 12% of the GDP in the RGV ($75M/Yr)

PROJECT HISTORY

RGVSG contracted with Schaffer & Associates in 1998 to conduct planning and design work for a two-phase expansion of the Mill

Schaffer & Associates were the original design engineers in 1972 when the Mill was constructed

Phase 1 includes Bagasse & Boiler Upgrade

Phase 2 includes Boiler House Upgrades

PROJECT HISTORY

C-K Associates were contracted by the RGVSG in 2000 to complete the air emissions report, computer modeling and permit applications for the Air Quality Permit

In 2002 RGVSG determined that due to market conditions and past performance, funding for the $23.8 million Project would be sought to implement the design of the Phase 1 Mill Expansion

PROJECT HISTORY

RGVSG contacted NADB to request partial funding under the new mandate program by NADB

Turner Collie & Braden Inc. (TC&B) was contracted by the RGVSG to coordinate and prepare the required Project Certification Documents for BECC approval

NADB contracted Pollutech International Limited to complete the technical review on behalf of the NADB

SUGAR MILL PROCESS

The proposed Mill Operation is 200 operating days based on 100% new boiler capacity and a maximum of 70% old boiler capacity

Plant was originally designed for 7,500 tcd (tons of cane per day) which has been upgraded to 10,000 tcd and will remain at this capacity for the Project

Potential to expand to 15,000 tcd with the implementation of Phase 2 Improvements in the future and change in US Quota (Farm Bill)

SUGAR MILL PROCESS

General Process of Operation includes…- receipt and weighing of cane at the mill

- washing of raw cane to remove soil- heavy duty shredding to prepare for milling- milling (7 mills in tandem) to remove 95% of sugar juice in cane- sugar juice limed and heated for contaminant removal- clarification of heated and limed juice- clarified juice to pre-heaters to produce concentrated syrup- concentration of syrup in vacuum pans to form crystalline sugar- batch centrifugation to separate sugar from liquor (molasses)- storage of crystalline sugar in the sugar warehouse

Receipt of Cane at Mill

Washing/Shredding of raw cane

Milling of Cane (7 mills in tandem)

Heating/Evaporation

Separation of Sugar/Molasses

Storage of Raw Sugar

Storage of Molasses

Bagasse Handling/Storage Area

PROCESS FLOW CHART

MASS BALANCE SUMMARY

NOTE: WATER MAKES UP THE REMAINING 48% LOST TO PROCESS & EVAPORATION

Component Percent of Cane

5 Year Average (%)

Production Data

(tons/year)

Raw Cane 100 1,600,000

Sugar 9.85 157,571

Molasses 3.7 59,283

Bagasse 30 480,296

Filter Mud 6.1 97,642

Cane Wash Sand 1.2 19,192

Ash 1.36 21,823

Air Emissions 0.03 471

PROJECT DESCRIPTION

The proposed project includes…- conversion of all bagasse conveyors to fully automated belt conveyors

- expansion and upgrade of the bagasse storage building

- conversion of the boiler building to handle the modified bagasse conveyor system

- installation of a new high efficiency boiler

- new condensate storage tank

- rebuilt 6,000 KW turbine generator

New Bagasse Handling System

Necessary to remove limitations on the delivery of the primary fuel source for the boilers

Significantly reduce or eliminate the need and associated costs of the front end loaders and operators

New Boiler

The addition of a new boiler to increase steam capacity by 300,000 lbs/hr for total capacity of 800,000 lbs/hr (60% increase)

A wet scrubber and mechanical dust collector to reduce air emissions

Since the Plant only needs 540,000 lbs/hr to operate, existing boilers are operating at reduced capacity (reduced air emissions from both existing and new boilers)

TURBINE GENERATOR

New Boiler will be coupled with a Topping Steam Turbine (already purchased) and a new 6000 KW Turbine Generator

Will bring installed power to 11,000 KW

Will enable the Plant to produce energy for operation and export (sell) excess energy

PROJECT BENEFITS

Reduction in use of fossil fuels through the implementation of a renewable energy source through production of 11 MW leaving 5 MW for sale

Eliminates the need for purchase of 1.7 MW of outside energy that will be available for use by others

A 42% reduction in total mass of air pollutants

Increased level of service to RGVSG members

PROJECT COSTS

Source: NADB Pollutech Report

Note: Payback does not show any cost recovery from the sale of power

Process Upgrade

(10,000 tcd)

Capital Cost Annual Cost Savings

Payback Period

(years)

Bagasse Handling $6,442,532 $247,478 26.0

Boiler Upgrades

And Turbine Generator $17,384,405 $1,853,120 9.4

Total Upgrade $23,826,937 $2,100,598 11.3

PLANT POWER BALANCE

Year Natural Gas Purchased

Electricity Purchased

Purchased

MW

Average Day

Total Demand

MW

Bagasse Power

MW

Grid Power

- Sale

+ Purchase

1998 Mft3 160,332

$438,278

KW 6,942,600

$423,731

2,042 hrs

3.40 MW

239,211 tby

0.12 MW +3.40 MW

1999 Mft3 228,638

$536,114

KW 8,354,400

$486,289

2,939 hrs

2.85 MW

346,033 tby

0.12 MW +2.85 MW

2000 Mft3 268,171

$701,962

KW 8,841,600

$550,183

2,485 hrs

3.56 MW

316,836 tby

0.13 MW +3.56 MW

2001 Mft3 324,482

$2,005,955

KW 17,906,400

$1,363,775

4,076 hrs

3.80 MW

457,573 tby

0.13 MW +3.80 MW

2002 Mft3 23,210

$52,723

KW 10,661,592

$697,058

3,936 hrs

2.71 MW

457,573 tby

0.14 MW +2.71 MW

Typical Day 6 MW 4.3 MW +1.7 MW

Future KW 0

$0

3,600 hrs

0 MW 6 MW 11 MW - 5 MW

PLANT POWER SUMMARY

Note: based on 24/hr day, 150 days per year (3,600 hours/year)

Source: NADB Pollutech Report, January 2003

Operating Capacity Supply

(kw/hr)

Demand

(kw/hr)

Deficit (-)

Excess (+)

(kw/hr)

Power Purchased ($0.051/kw)

Power Sold

($0.025/kw)

Current production (10,000 tcd)

11,000 6,000 +5,000 $450,000

Bonus for reduce grid draw

+1,700 $312,120

AIR QUALITY

The RGVSG expect to receive the draft permit from the TCEQ for the Mill Operations – issuance of final permit within 60 days after public comment period (Consolidated Permit No. 114)

The RGVSG is defined as a “major stationary source” under the Federal Clean Air Act

The RGVSG also has a Cane Burning Permit

AIR QUALITY

RGVSG is permitted for…- 2,490.4 tpy CO

- 0.54 tpy SO2

- 233.2 tpy Nox

- 222.08 tpy CO- 443.88 tpy VOC

As a result, the RGVSG Mill is subject to PSD Regulations (Prevention of Significant Deterioration) thus must conduct analysis of BACT

AIR QUALITY

The proposed air quality permit limits the operation of the existing boilers at 70% capacity and the new boiler at 100% capacity (note power required for 10,000 tcd results in 29% capacity for old boilers)

The reduction in total air emissions for the upgraded facility results from the reduced operation of the existing boilers and increased efficiency of the new boiler

PSD EVALUATION

Growth Analysis – No additional air emissions from off-site growth Air Quality Impact Analysis – modeling analysis adequately

evaluates the total ground level concentrations of NO2 from improvements

Soils/Vegetation Analysis – the projected NO2 concentrations are below the standards and significant level thus no adverse impact

Visibility Impairment Analysis – plant is located in sparsely populated area with no scenic vistas or airports thus no impairment

Area Impacts – the plant is located 1,110 km from the closest Class 1 Area (Big Bend) thus no impact (>100 km separation)

PROJECTED EMISSIONS

1 – Actual reported emissions based on stack testing of October 20012 – Projections from Pollutech Analysis – Boilers #1 to # 4 at 34%, new Boiler at 90%

Current Emission

Rate (tpy)1

Old Boilers at 34% Cap

(tpy)

New Boiler at 90% Cap

(tpy)

Total Plant Emissions2

Emissions Change

(tpy)

Emissions Change

(%)

CO 2458 1091 229 1320 -1138 -46.3

SOx 2.1 0.9 0.01 0.91 -1.2 -55.3

Nox 482 214 225 439 -43 -9.0

PM10 385 171 27 198 -187 -48.6

VOC 157 70 9 79 -78 -50.0

Total 3484 1547 489 2036 -1448 -41.6

CROP BURNING

In addition to the Air Quality Permit for the Plant, the RGVSG also has a Crop Burning Permit under Order 94-35

The cane burning is authorized only until such time that an alternative method of harvesting becomes technologically practicable and economically reasonable and which would not require outdoor cane burning

CROP BURNING

Permit was developed through input of the “Sugarcane Burning Task Force” which included the Sierra Club

There are a number of conditions that must be met that include…- RGVSG shall report each year on program to stimulate development of harvesting methods that eliminate outdoor burning- Submission of a comprehensive map of burn areas prior to harvesting- A series of preharvest burning conditions that limits burns to specific times and conditions and maximum number of acres per day in

each quadrant (200 acres)- RGVSG was required to monitor cane burn for a 1 year period after

permit was issued in 1994 by an environmental firm for PM10 emissions before, during and after burns to set the baseline.

CROP BURNING

RGVSG is continuing to evaluate alternative technologies to cane burning at this time

This past year the RGVSG reported that almost 30% of the cane was “green harvested” and that they project this to increase in the future

ENVIRONMENTAL ASSESSMENT

TC&B has provided an environmental assessment of the project in support of the Step 2 Report

These findings are summarized below:- Air Quality impacts are significantly reduced - Project promotes the use of renewable energy sources- Project reduces reliance on fossil fuels- There are no water/wastewater issues, Plant is effectively

Zero Discharge although a Discharge Permit is in effect

ENVIRONMENTAL ASSESSMENT

RGVSG has a Stormwater Pollution Prevention Plan with proactive monitoring

Cumulative Impacts are positive to the environment

Positive socioeconomic impact through short-term impacts due to construction and long-term due to increased sustainability and efficiency

RGVSG is proactive towards environment as evidenced by P2 Site Assistance Visit/Small Business Compliance Audit/TCEQ Pilot EMS Program

BECC CRITERIA

BECC CRITERIA COMPLIANCE

Alternative Analysis

International Treaties and Agreements

Human Health and Environment

Compliance with State and Federal Regulations

Environmental Impact Assessment

Technical Feasibility

Appropriate Technology

Operation and Maintenance Plan

Design Regulations and Standards

Financial Feasibility

Community Participation Plan

PROJECT STATUS

Currently, the design has been completed for the Phase 1 and Phase 2 Expansions with some portions of Phase 1 already being bid with analysis of contractor bids

RGVSG is seeking certification approval by the BECC in March 2003

The Step 2 Report and Technical Evaluation by NADB will be completed by February 3, 2003

PROJECT SCHEDULE

Project approval on March 27, 2003

Completion of PPA and Loan Closings in late 2003/early 2004

Completion of Bagasse Handling Facilities in 2004

Completion of Boiler/Generator Facilities by April 2005 (12 months lag time from order to delivery of boiler)

PUBLIC COMMENT

Remember to sign the attendance log and survey If you do not wish to speak, written comments may be

submitted to:

Rio Grande Valley Sugar Growers, Inc.

P.O. Box 459

Santa Rosa, Texas 78593

Attention: Jack Nelson, President Comments will be accepted up to February 3, 2003