Item 8.01.Other Events
The NAHD Board of Directors hereby acknowledges that NAHD will undertake a
technical, legal and financial evaluation of Asian Fuels Energy Inc (the
"Company") and its sister Company, Hacienda Asia Plantations Inc. (HAPI). The
Company is a Philippine-based Company, incorporated on June 19, 2009, is a
subsidiary company to HAPI of which was incorporated in August 2, 2007, owned by
Alfred Joseph S. Araneta with super majority of the both companies. Based on
information shared with NAHD, HAPI is focused in engaging in the agriculture
business in the Philippines to develop world class plantation and production
systems for Oil Palm, Natural Rubber and Agroforestry crops and AFEI is focused
on the development of Napier Grass plantations to produce renewable energy fuel
and power generation facilities involving biomass and solar farms. HAPI
maintains a Napier Grass plantation and nursery in its 6,652-hectare (HA)
plantation site in Candoni, Negros Occidental and a nursery in Rosario,
Batangas. These plantations and nurseries are a ready source of planting
materials to support its ongoing expansion activities. Napier Grass assets in
Negros and Batangas will be transferred to AFEI as part of the proposed
transaction described herein.
NAHD has executed a Memorandum of Understanding, dated June 14th, 2022,
regarding the acquisition of a 40% of the issued and outstanding shares of the
Company and the rights to secure, through a subsequent investment of a majority
equity stake in the individual Special Project Corporations (SPC) involved in
the production of Renewable Napier Grass fuel in Batangas (first Priority
Project) and future projects in Tarlac. The Batangas Project has secured a
multi-year off-take agreement for the purchase of the Napier Grass product from
a major manufacturing corporation. The acquisition would also grant NAHD the
rights of First Refusal to undertake the development of Napier Grass Renewable
Fuel Supply Projects, as the principal and majority owner/investor for North
America.
Based on information provided by HAPI and AFEI, the Batangas Project projected
financials:
Description Amount (USD)
Total Project Installed Costs $ 5,355,000
Projected Revenues $5,557,500
Projected EBITDA $2,018,200
Projected Equity Free Cash Flows $1,772,319
Project cash flows will commence within 9 to 12 months from
construction
NAHD will immediately undertake a detailed Due Diligence and begin to secure the
additional financing to secure a majority stake in the Renewable Energy Project
in Batangas, Philippines.
Based on information provided to NAHD by HAPI and AFEI:
·the Philippines has large and abundant supplies of biomass resources, including
agricultural crop residues, forest residues, animal waste, agro-industrial
waste, municipal solid waste and aquatic biomass. The most common agricultural
wastes are rice hull, bagasse, sugar plantation residues, coconut husks and
shells and coconut coir. The use of commercially produced agricultural residues
converted into biomass is increasing in the Philippines, particularly as the
push to provide base-load power generation capacity, while endeavoring to reduce
the demand for fossil fuels serves as a driving force. However, due to factors
such as ASEAN integration and other global trade conditions, the importation of
rice and sugar have resulted in reduced quantities of local production and thus
lowering quantities of available biomass such as rice husk and bagasse and
increasing prices.
·Operating power plants are experiencing challenges in sourcing the required
quantities of feedstock for their operations and have seen increased costs for
alternate biomass sources (e.g., wood chips, etc.). Current AFEI's/HAPI clients,
with whom AFEI/HAPI have signed off-take agreements are facing similar
significant challenges in sourcing additional biomass for their boiler systems.
·The Philippine Energy Plan 2017-2040 forecasts that energy demand will
quadruple during this period, representing annual growth of about 5% and
requiring 43,736 MW of additional power generation capacity. It could be that
natural gas -e.g. imported liquefied natural gas (LNG), - coal generation would
satisfy most of the new demand (coal providing the base load and more expensive
natural gas bridging the gap during periods of higher use). However, the
availability of Natural Gas in the Philippines is limited, and the use of
Natural Gas would likely be focused on the importation of LNG. Furthermore, the
need to significantly lower the use of coal (recent Philippine Department of
Energy (DOE) policies stating a moratorium on new Coal Plant construction), and
the need to lower the cost of power generation, clearly promotes an increased
focus on the use of renewable fuels, such as Napier Grass,
·Napier Grass is a key energy crop generator that is renewable, sustainable,
programmable, scalable and easy to cultivate and is considered as the new
generation energy crop that is climate smart, supplying the urgently needed
feedstock for biomass fueled base-load renewable energy power plants, being the
long-term and reliable baseload solution. In addition, the use of Napier Grass
as a renewable supplementary feedstock for coal and biomass plants will be a
very valuable element in the transition to the reduction of the use of coal for
baseload power generation.
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