Leading social enterprise supplying wooden fuel to both domestic and regional power, heat and steam boiler customers via a network of mini-producers seeks expansion.
Our enterprise seeks to raise US$1.0 million in equity and US$1.0 million in debt to increase its current trading business and scale up a mini-factory. We aim to increase our domestic wood fuel market share in Thailand and capture emerging and rapid growth wood fuel markets in East Asia over the next 10 years.
Our projects have a target equity IRR hurdle rate of 33.0% and a loan interest rate of 12% per annum for the series A funding. There will also be significant non-financial returns such as delivering quality yet economical wood fuel to customers, helping local Thai farmers earn higher income, creating job opportunities to rural communities and providing a positive social and environmental impact. Investors can exit by selling shares back to the founder after 5th year of operation, sell out to other investors, operate and grow or go IPO.
Progress to date:
• Sales revenue in 2013 was US$0.51 million with US$0.03 million of profit.
• Raised capital US$166,666 from angel investor.
• Rented a 240 square metres factory and invested in mini-wood pellet machine capacity 0.5TPH or 3,700MT/year.
• New factory in Lopburi, central of Thailand is under construction and invested in pellet and chipping machine capacity 1TPH or 7,200MT/year.
• Involved with 2 mini-producers to produce primary products such as wood chips, wood particles from wood waste in Phrae and Uttaradit, in Northern area.
• Involved with 2 cooperatives with at least 1,000 farmers to plant Leucaena trees.
• In business for 4 years
• Diversified supply of raw material
• Strong R&D that can save investment budget 25-30%
• Economic, Social and Environmental impacts
Demand for alternative and renewable energy sources is increasing, with the global wood pellet market expected to grow at an annual average growth rate of 17% from 2014 to 2020, where the market will reach US$10.7 billion. The Asian regional market size is now worth US$0.3 billion, a number that is predicted to increase to US$3.3 billion in 2020 fuelled by high demand in the East Asia region - China, Japan and South Korea.
The emerging wood pellets market in East Asia is largely driven by green policy and financial incentives given by government. Increasing influence from rising fossil fuel prices will also play a larger role in the coming decade. Demand in South Korea alone was US$0.4 million MT which accounted for US$60 million in 2012 and it is expected to be 5.0 million MT worth US$680 million in 2020. In Thailand, the wood fuel market is estimated US$1.2 billion with the growth expected to be an average of 5% each year.
These are the favourable opportunities for our company to fill the gap of these emerging and rapid growth wood fuel market. For wood pellets, the company currently sells to domestic clients and plans to export 39,000 MT per year to power plant customers in South Korea and others in East Asia. The yearly contract has negotiated and ready to be signed.
Invest in a 2nd factory:
• Machines and equipment 54%
• Working capital 21%
• Delivery trucks 5%
• Land for factory 5%
• Building and warehouses 15%
For equity investment:
• Equity at IRR 25-35%
• Payback period of 3 yrs.
For debt investment:
• Annual interest rate of 12%