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Description

Forbes Energy LLC (“the Company”), is a renewable energy company that will operate in the Dominican Republic. In Phase I, the Company will purchase hydrated (“wet”) sugarcane ethanol from Brazil, dehydrate the ethanol into a fuel grade product at its port facility in the Dominican Republic and export it to the United States market. The ethanol will then be sold on the spot market or to national blenders currently marketing ethanol blended gasoline in the United Sates.

The Company will take advantage of CAFTA (Central American Free Trade Act) and the CBI (Caribbean Basin Initiative), which allows Caribbean countries to export ethanol to the United States duty free. In Phase II, Forbes Energy Dominicana will grow, process, and distill Dominican sugar cane into fuel grade ethanol for sale in the United States, duty free. Because of the sugarcane crop’s significantly higher yields and production costs that are one third the cost of producing ethanol from corn, the Company has a distinct competitive advantage over United States ethanol companies, which produce ethanol from corn, and over Brazil, which pays a 54 cent per gallon tariff on every gallon of ethanol exported to the United States.

Market

Forbes Energy will focus on two target markets: in the United States, national motor vehicle fuel blenders and bio-diesel consumers and the Dominican internal market. Ethanol spot market sales are through the Chicago Board of Trade, prices quoted on a daily basis, and serve the fuel blenders of America, the oil industry, as a source of supply of fuel grade ethanol.

Competition

No other American company is currently growing, harvesting and producing ethanol from sugar cane. The agro-industry in the United States has been investing in the production of ethanol from corn for the past 20 years, with significant growth in the past two. The US currently produces 4.5 billion gallons, with a future shortfall of approximately 5 billion gallons of ethanol, under current legislation. Archer Daniels Midland Co. (“ADM”) and Cargill, two major US agro-industrial conglomerates are the major producers of corn-based ethanol in the United States. ADM has a 25% market share and just announced it will double its capital spending on investments to between $3.5-4 billion over the next few years on investments in new ethanol and bio-diesel plants. Brazil has just announced a major investment by the Japanese government of over $1.9 billion in sugar cane based ethanol production, primarily for the export market. Brazilian ethanol is not competitive due to the current .54 cent per gallon tariff.



Management Team

The founding members of Forbes Energy will provide upper level management. Lucien E. Forbes, the Chief Executive Officer, has extensive experience in the sugar industry and longstanding relationships in the Dominican Republic and Brazil. Robert W. Smith, a highly experienced attorney in both Rhode Island and Massachusetts, is the Company’s Chief Legal Counsel and government liaison. David F. Considine, a C.P.A. with extensive corporate experience, is the Company’s Chief Financial Officer. Civil Engineer and University Professor Carlos Riveros is providing management in the Dominican Republic. Current employees in the Dominican Republic also include Jose Antonio Llamacho, a well known Agronomist specializing in sugar cane hybridization.

Financial Information

It is anticipated that there will be positive cash flow from Phase I trading activities within 8 months. There will be a positive cash flow one month after the dehydration facility becomes operational. Dehydration and trading activities sustain the operation of the Company with income and positive cash flows during the period of constructing the sugar cane processing, distillation and co-generation plant, thereby requiring further financing only for the hard costs of plant equipment.

Phase II: $125 million in long term capital financing is required to build the refinery complex, which includes sugar cane processing, distillation and a co-generation plant in the Dominican Republic, which will allow the Company to grow, harvest, mill, distill and dehydrate sugar cane into fuel grade ethanol and produce electricity sufficient to supply all of the complex’s energy needs and sell to the national grid in the D.R. Due to the Dominican Republic’s chronic energy shortage, the sale of electricity to the national grid will become a large profit center in itself and will substantially offset operating expenses.






Mission Statement

In a U.S. market with explosive and ever increasing demands for ethanol, Forbes Energy will open the door to a previously untapped supply of Caribbean sugarcane ethanol for ultimate use by the American consumer.

Forbes Energy aims to become the US market’s preeminent, supplier of fuel grade ethanol. Forbes Energy’s core business is the production of fuel grade ethanol from sugar cane, the world’s best and most efficient source of non-polluting, renewable energy for the internal combustion engine.

Forbes Energy will expand its supply of sugar cane by investment in Haitian and other traditional Caribbean sugar producing nations.

Forms of Organization

Forbes Energy LLC, is a Rhode Island Corporation with a subsidiary in the Dominican Republic (“D.R.”). The DR Company, Forbes Energy Dominicana S.A. was organized in April of 2006 and has offices in Santo Domingo and in the port of Manzanillo, Province of Montecristi, where the Company operations are centered.




Phase I

The Company has entered into a design-build contract with BE&K Engineering of Newark, Delaware for a skid-mounted dehydration plant to be installed in the Dominican port of Manzanillo. This facility will enable the Company, during Phase I of its operation, to conduct the trading of wet ethanol from Brazil, which will be converted to fuel grade ethanol for sale in the United States.

The dehydration facility will have a capacity to produce up 10 million gallons of fuel grade ethanol per month. Each trade will consist of selling the fuel grade ethanol in one million gallon lots to the United States spot market.



Phase II

Currently, no ethanol from sugarcane is produced in the U.S. In Phase II, the Company will use current ethanol distilling and dehydration technologies to construct refining facilities in the Dominican Republic. The Company will harvest sugar cane and lease sugar plantations to grow and harvest sugarcane for refinement to fuel grade ethanol for export to the United States and for the local transport and bio-diesel market.
The Company has entered into a design-build-install contract with Dedini SA of Piracicaba, SP, Brasil. Dedini has its own technology to supply complete Fuel Ethanol Plants under the turn-key system, manufacturing its own equipment and integrated systems.

In this segment, Dedini is world leader in supplying complete plants, having played an important role in the development of the Brasilian governments "Proálcool" Program which is a model for the change in course of energy policy world-wide. With over 800 Fuel Ethanol Plants installed in Brazil and 17 abroad, it today accounts for 80% of Brazilian alcohol production. In 2004 10 new Fuel Ethanol Plants will be in operation producing over 4 million liters/day.

Forbes Energy will be the first U.S. company to grow, harvest and produce ethanol from sugarcane for the U.S. market. While the corn ethanol industry is just beginning to flourish, the sugar ethanol industry in Brazil has a prosperous and proven track record. Brazil has been producing ethanol from sugarcane for over 20 years and today ethanol accounts for over 40% of the fuel sold in Brazil, where a significant percentage of motor vehicles run on pure ethanol. All automobiles manufactured in Brazil can run on gasoline, pure ethanol, or a gas ethanol blend. The Company plans to implement this time tested Brazilian model in the D.R.

After successfully trading ethanol during Phase I, the Company will have the three items necessary to produce and export ethanol. These items are:

1.   A storage facility capable storing exportable quantities of ethanol.
2.   A port facility sufficient to build the refinery and co-generation plant, capable of storing the tonnage of cane required to produce ethanol.

3.  

A port facility with sufficient draft to accept 50,000 Metric ton fuel tankers.

The Company anticipates that within 3 years it will be able to produce over 500 million gallons of fuel grade ethanol from a during the 180-day sugarcane harvest from the available sugar cane in the Dominican Republic.

Further development of Company-owned sugar cane plantations and Company sugar milling for ethanol production is now feasible, due to the 6,600 hectares of agricultural lands adjacent to the port facility.






The concept behind Forbes Energy LLC was identified in 2003 when Lucien E. Forbes, the Company’s founder, was in Brazil contracting for organic sugar production. The organic sugar plantation was completely energy self-sufficient and sold both ethanol and electricity to the local Brazilian market. This sugar plantation uses ethanol to power all of its internal combustion engines and produced a surplus of electricity from its co-generation plant. Remarkably, the vehicles using ethanol produced significantly more horsepower than their gasoline powered analogues and enjoyed a 15% reduction in their fuel consumption. Mr. Forbes immediately realized the potential of the Brazilian model and began exploring avenues to transform this opportunity into a viable business.

Because of the political, financial and logistical mechanisms encompassing ethanol production, including the Caribbean Basin Incentives offered by the U.S., Mr. Forbes quickly realized that this opportunity would be best achieved if based in one of the Caribbean nations. Mr. Forbes’ longstanding relationships in the Dominican Republic, together with the Dominican Republic’s historical capacity of sugar production, made it an ideal location for this project. Mr. Forbes began cultivating the necessary relationships in Brazil and the Dominican Republic to establish this venture and exploit this timely opportunity.


The Company has done much in its pursuit of this opportunity. The Company has currently negotiated the lease of two sugar mills, Santa Fe and Porvenir, having a combined daily output of 6,259 tons per day or 1,125,000 tons per 180 day harvesting season, leases to be implemented in Phase II. Both sugar mills have owned plantations supplying cane and the Independent Cane Growers are able to supply the remaining crop to meet the production schedule. Incentives offered by the Dominican Republic include a 20 year corporate and personal tax holiday, inclusion in an existing Frontier Status Free Trade Zone, the use of two existing tanker facilities in the two principal ports of the country and other fiscal holidays, in return for the construction and operation of an ethanol refinery and a co-generation plant in conjunction with the two government owned sugar mills.

The Caribbean Basin Initiative (CBI), of which the Dominican Republic is a member, was instituted to promote development and stability in the Caribbean region and Central America. The CBI allows the imports into the U.S. of most products from CBI members, including ethanol, duty-free. The U.S.-Central America Free Trade Agreement (CAFTA) maintains and expands this duty-free treatment.

Exemptions from import and export taxation and income tax holidays are some of the incentives offered by the Dominican Republic for the establishment of new industries. The country currently suffers from chronic power shortages due to the importation of 100% of its energy needs. An ethanol production facility, including a co-generation electrical generating plant, will provide even further government incentives. These are typically negotiated on a case-by-case basis.

The Company has established a subsidiary in the Dominican Republic, under Dominican law, to avail itself fully of the incentives offered by the Dominican government. This subsidiary is protected by the CAFTA-DR legislation against expropriation and accorded the rights and responsibilities as specified in the CAFTA-DR Treaty.






Forbes Holdings, Inc.
580 Thames St.
Newport, RI 02840
Tel 401 619 2770
Fax 401 619 2773

Beaux Lane House
Mercer Street Lower
Dublin 2, Ireland
Tel 353 1 470 0000
Fax 353 1 477 0000

Comosa Bldg. 21st Floor
Samuel Lewis Building
Panama, Rep. of Panama
Tel 507 263 4444
Fax 507 264 5962

Avenida Faria Lima, 3.729
Cep: 04538-905
Sao Paulo, Brasil
Tel 55 11 3443 6404
Fax 55 11 3443 6201

Forbes Energy
Dominicana SA
Calle Rojas Alou, 9
Santo Domingo Oeste
Republic Dominicana
Tel 809 537 5261
email:
DRInfo@
forbesenergy.us

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