Ethanol Project

Overview

Through its subsidiaries Maple Etanol S.R.L. ("Maple Etanol") and Maple Biocombustibles S.R.L. ("Maple Biocombustibles"), Maple commenced operations of the Ethanol Project at the end of March 2012 by beginning to harvest and process sugar cane from its plantation for the production of ethanol. This agro-industrial business consists of: (i) a sugar cane plantation which provides sugar cane feedstock to the ethanol plant and includes main water delivery and drip irrigation systems, (ii) an ethanol plant with capacity to process up to 5,000 gross tonnes of sugar cane per day and produce up to 35 million gallons (U.S.) of ethanol per year (collectively, the ethanol plant and power plant are referred to as the "Ethanol Plant"), (iii) a 37-megawatt ("MW") power plant to supply all of the power requirements of the business with the sale of any excess power, expected to eventually reach up to approximately 17 MW, to the Peruvian national power grid, (iv) a 60-kilovolt electric transmission line to connect the industrial facilities to the power grid and 33/22.9-kilovolt electric distribution systems for the plantation and pump stations, and (v) a third-party operated and owned ethanol storage, loading, and shipping facility near the Port of Paita. Maple believes its ethanol business is well positioned to be a low-cost, globally-competitive provider of ethanol to international and local Peruvian markets. This belief is based on certain unique characteristics of the business, including the specific feedstock, expected sugar cane yields, use of modern farming and ethanol production techniques, and the sugar cane plantation and Ethanol Plant's location. Global demand for this clean-energy fuel source is expected to increase in the coming years as consumers continue to increase their usage of alternative energy fuels while governments globally such as the European Union, United States, Brazil, India, Australia, China, and Peru, among many others, are promoting or mandating the increased use of ethanol in motor gasoline.

Competitive Advantages

The Company's ethanol business possesses significant competitive advantages relative to certain of its competitors, including its use of sugar cane as a feedstock, which is widely regarded as the most efficient feedstock for producing ethanol. Furthermore, the strategic location of the plantation in the Piura Region on the North coast of Peru has a highly-favorable agricultural climate that allows for yearround planting, cultivating, and harvesting of sugar cane which is projected to generate attractive sugar cane yields. The Company utilises modern farming techniques and automation, including the extensive use of drip irrigation, mechanical harvesting which enhances operational efficiency while reducing costs, and significant automation within the Ethanol Plant. In addition, the Ethanol Plant's location close to the export terminal on the Pacific coast allows for relatively low transportation costs to access key international markets. Through international trade agreements, Peru is able to sell ethanol duty-free to both the European Union and the United States markets. All of these factors contribute to Maple competing effectively with ethanol producers locally and globally.

Agricultural Development

As of December 2012, a total of 6,532 hectares were planted with sugar cane on the Company's plantation. During December 2012, the Company received a governmental approval which allowed it to begin expanding its plantation by 877 hectares in order to reach a total of 7,409 hectares. Planting of this 877-hectare area, in which drip irrigation systems were already substantially installed, was completed by the end of March 2013.

As a result of the Ethanol Plant's delayed commencement of operations in late March 2012 and the downtime experienced in 2012 during its initial phase of operations, the age of the sugar cane that was harvested was greater than previously planned. This resulted in certain areas of the plantation with cane of an age of more than 18 months, with yields in excess of 200 gross tonnes of sugar cane per hectare. Mainly due to the large size and correspondingly high weight of such sugar cane in these areas, the Company experienced lower than expected average harvesting rates (as measured in tonnes of cane harvested per hour per harvesting machine) with its fleet of mechanical harvesters.

During 2012, a total of approximately 579,000 gross tonnes of sugar cane (approximately 521,000 net tonnes) were harvested and processed since the Ethanol Plant began processing sugar cane at the end of March 2012. This net amount of processed sugar cane excludes sugar cane "trash", which primarily consists of green and dry leaves of the sugar cane that are ultimately used as fuel to generate electricity. During the Ethanol Plant operational "ramp-up" period, sugar cane delivered to the factory averaged approximately 2,104 gross tonnes per day from 1 April 2012 through 31 December 2012. During the fourth quarter of 2012, after a substantial portion of the "ramp up" period was completed, sugar cane harvested and delivered to the Ethanol Plant increased to an average of approximately 2,424 gross tonnes per day. For 2012, the total recoverable sugars ("TRS") of the sugar cane harvested and delivered to the Ethanol Plant were estimated at an average of approximately 142 kilograms per gross tonne of sugar cane, resulting in an approximate average of 14.2% TRS in the sugar cane processed by the Ethanol Plant for the year.

Industrial Development

The Ethanol Plant is located within the sugar cane plantation to minimise transportation costs and reduce the deterioration of fermentable sugars in transit. During 2012, all facilities necessary for the processing of sugar cane and the production of fuel-grade ethanol were completed and placed into operation in late March 2012. In addition, the 37-MW power plant and related equipment were fully commissioned and placed into operation in July 2012.

During the initial phase of operations of the Ethanol Plant, plant availability was lower than the expected availability over the long-term primarily due to higher levels of unplanned maintenance. Such lower plant availability is not unusual during the start-up and initial operations of a new plant facility of this type. During the operational "ramp-up" period, Ethanol Plant availability continued to increase and for the 60-day period ended 31 December 2012, the Ethanol Plant was available to process sugar cane and produce ethanol for approximately 85% of the time on average. The approximate 15% of downtime during this 60-day period resulted from a combination of both planned and unplanned maintenance activities.

During 2012, approximately 42,266 cubic metres (approximately 11.2 million gallons) of fuel-grade ethanol were produced at the Ethanol Plant resulting in an average ethanol yield of approximately 81.3 litres (approximately 21.5 gallons) per net tonne of sugar cane processed. The average ethanol yield during the 60-day period ended 31 December 2012 was approximately 87.2 litres (approximately 23.0 gallons) per net tonne of sugar cane processed.

Once the power generation facilities of the Ethanol Plant commenced operations in July 2012, these facilities began supplying a substantial amount of the electrical energy required for the agricultural and industrial operations, and any "excess" electricity was sold to the national power grid. A total of approximately 40,700 megawatt-hours ("MWh") were generated at the Ethanol Plant during 2012. Electrical energy purchased from the national power grid during the period from July through December 2012 was approximately 19,700 MWh, and electrical energy sold to the national power grid during such period was approximately 11,450 MWh.

Storage and Loading Facility

The Company transports the majority of its produced ethanol by truck from the Ethanol Plant to the storage and loading facility located in Paita on the North coast of Peru. In 2010, the Company entered into an agreement with Penta Tanks Terminals S.A. ("Penta"), a third-party contractor, to build, own, and operate this storage and loading facility which is for the exclusive use of Maple. The storage and loading facility has a storage capacity of 30,000 cubic metres. The loading facilities consist primarily of a subsea pipeline and mooring buoy. In August 2012, Penta placed into operation all of the storage and loading facilities, and the first loading of a ship with Maple´s fuel-grade ethanol occurred that same month.

Ethanol Sales and Marketing

Maple entered into an ethanol distribution agreement in July 2010 (the "Sales Agreement") with a subsidiary of Mitsui & Co., Ltd. ("Mitsui"), an international group with a significant commodity trading operation for products including fuelgrade ethanol, to purchase ethanol produced by the Ethanol Plant. Under the terms of the Sales Agreement, Maple's subsidiary has agreed to sell to Mitsui all of the production from the Ethanol Plant for a period of five years beginning on the date of initial deliveries, except for up to 20% of the production which Maple may sell in Peru. The ethanol is sold to Mitsui FOB at a delivery point at the ethanol loading terminal at Paita, Peru where Mitsui assumes risk and responsibility, except as to a limited amount of transit losses. Mitsui is responsible for the transportation of the ethanol to the international markets, and export shipments during 2012 were delivered to the European Union. Eventually, the Company also expects to sell ethanol to Mitsui for deliveries to the U.S. and other international markets. The price paid by Mitsui is based on a net back price based on Mitsui's resale agreements with customers and the costs to deliver the ethanol product to the final customers, less a marketing fee paid by Maple to Mitsui. Under the Sales Agreement, as of 31 December 2012, the Company had completed a total of eight export sales of fuel-grade ethanol to Mitsui since commencing exports in August 2012. These sales were for an aggregate volume of approximately 30,275 cubic metres (approximately 7.999 million gallons) of ethanol. Maple also sells a portion of its production into the local Peruvian market. As of 31 December 2012, Maple had sold a total of approximately 8,571 cubic metres (approximately 2.264 million gallons) of ethanol to the local Peruvian market since commencing sales in May 2012. Domestic sales of ethanol in Peru reduced substantially once the Company began exporting in August 2012.