Wood Pellet Manuafacturing Plant

Opportunity Summary

 
The Product:
 
Wood pellets are compressed cylinders of sawdust usually 6mm in diameter and a maximum of 30mm in length. They are used in automated boilers and room heaters. Secondary uses include a growing market for pet and large animal bedding most notably cat litter and stable bedding. Two kilogram’s of wood pellets has the same energy value as a litre of oil but at a reduced cost - a key decision making point for many homes and businesses in rural areas. They have advantages over other solid fuels in that they are:
·        a sustainable form of renewable energy
·        environmentally friendly
·        a carbon neutral fuel
·        lower ash and moisture content than wood chip and logs
·        higher in calorific value per kg than wood chip or logs
·        Easier to handle and store.
 
The Market
Size
Parts of the world have been using wood pellets since 1990s with Sweden and Austria being significant users.
The UK is very different to other parts of Europe and
Scandinavia in that 95% of our domestic heating is fuelled using mains
Natural gas. This has a significant bearing on the immediate market for
domestic pellet appliances.
The UK currently usesRespond to this opportunity tonnes per annum, with most large plants exporting back to parent countries in Europe. The market potential in the UK in 5 years time is estimated to be in the region of 1,000,000 tonnes per year.
 
 
Market location
 
The market will be located within a 100 mile radius of the factory which will be based in Denbigh, North Wales.
 
Percentage of market
 
Our plant will have the capacity to produce 3272 tonnes pa, thus capturing 1.6% of the current UK market.
 
Customers
 
Our first customers will be retail home owners with boilers installed in their homes, together with a percentage of commercial contracts within our 100 mile radius.
 
Competition
 
Clifford Jones – Ruthin North Wales – capacity 20,000 tonnes pa
Bollington Biofuels – Liverpool – wholesaler
 
 
 
 
 
 
 
The Marketing strategy
 
Market niche
 
The niche is the increasing demand of both home domestic and commercial energy customers wanting to switch from fossil fuels to renewable energy
 
We will inform our customers by registering on all wood supplier websites, joint advertising with Treenery in the form of online marketing, wholesale data bases, local newspaper advertising, as well as editorials.
Working with Wood fuel Wales.
 
Our unique selling points are the manufacture and direct supply of good quality wood pellets from locally sourced raw materials, to local retail customers within a 100 mile radius, from a small scalable plant within minimal investment.
 
Sales will be in the form of online website, directly to customers, then using a call round system to fulfil demand from existing customers.
We will formulate a promotional price structure for long term contracts, paid on debit order similar to current energy suppliers.
 
Timescale
 
We would like to order the plant in August 2011, with delivery and installation done in September 2011, to commence production on the 1st of October 2011.
Year 1&2 will see production of wood pellets with other products like briquettes and compost being added in year three.
 
R&D
 
The majority of research and development has been undertaken by David Thorpe of Treenergy, having established the production process, delivery method and profitability of the plant already. He will act as a mentor and potential investor in the project.
 
Risk assessment
Raw material shortage – we will maintain strong g relationships with wood fuel Wales to eliminate this.
 
SWOT
 
Strengths – Strong entrepreneurial start up can do attitude
                   Excellent sales and marketing experience
                   Aware of weaknesses
                   Growing sector supported by government
                   Carbon friendly
 
Weaknesses-         lack of own finance
                             Raw materials – supply chain knowledge – David Thorpe an                          Wood Wales to advise on this
                             Customer knowledge of products
                           
Opportunities        expanding market
                             Renewable incentives and feed in tariff
                             Production of electricity via wood pellets
                             Grants – 40% Capital investment grant is available (WEBS)
 
Threats                  larger players
                             Smaller competitors
 
Investment
 
The working capital of £50,000 will be financed by the directors in year one.
The equipment, valued at £150,000 will financed over a five year period via a capital equipment lease obtained from a bank.
 
 
Financials
 

 
   
Year1
   
%
   
Year2
   
%
   
Year3
   
%
Turnover
   
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Cost of Sales
   
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24%
   
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20%
   
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24%
Gross profit
   
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76%
   
Respond to this opportunity
   
80%
   
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76%
Other costs
   
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Nett Profit
   
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46%
   
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51%
   
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48%
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Funds Required:
 

Security for equipment lease, and cashflow of £Respond to this opportunity for start up. The WEBBS grant will provide £60,000 input once the plant is functional.