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