Tiger Ethanol International Inc.
OTC Bulletin Board : TGEI

Tiger Ethanol International Inc.

December 08, 2006 09:15 ET

Tiger Ethanol International Inc. to Set Up First Production Facility in China

MONTREAL, QUEBEC--(CCNMatthews - Dec. 8, 2006) - Tiger Ethanol International Inc. (OTCBB:TGEI)

The Company:

The Company announced today it has restructured its activities and acquired a 90% Joint Venture interest in a well-defined opportunity to manufacture renewable fuel, corn-based ethanol, in the People's Republic of China (PRC). The acquisition was made from Gallant Energy International Ltd. for 5,000,000 shares of the Company's common stock. Gallant had previously negotiated various related concessions and licenses within the PRC and delivered to the Company a structured and licensed undertaking. The remaining 10% of the Joint Venture is owned by strategic Chinese partners.

The Company's new name reflects its new business model that focuses on the development of facilities for the production of renewable ethanol in China under the direction of James Leung as President and CEO.

The Important Chinese Market:

China is experiencing a significant economic growth as a result of the government's decision to open its economy to the more liberal policies of the West. This policy shift has resulted in the creation of a great many new business ventures, new jobs and a thriving middle class within major cities. Also, as a direct consequence of this policy change and the resultant economic growth and changes in economic demographics there has been a rapid and somewhat unexpected increase in the consumption of energy and the fuels necessary to produce it.

Demand and prices within the world's petroleum market in large part reflect the increase in Chinese consumption. As can be reasonably expected the PRC's economic policy shift has allowed the creation of private wealth, has significantly improved the quality of life in China's 27 largest metropolitan areas including the rapid increase in private ownership of motor vehicles. In 2004 there were an estimated 27 million motor vehicles in China's on-road fleet and such fleet growth is expected to grow at least equal the rate of economic growth (approximately 9.4% for each of the last five years with unofficial commentators estimating growth for the two most recent years at approximately 12%). As a comparison, the 2004 USA fleet size was 231 million with less than 3% annual growth.

Renewable Energy Development in China:

Recently published statistics show that for 2005, a total of approximately US$38 billion was invested in renewable energy development worldwide. China topped the list with a commitment of US$6 billion, excluding spending on large hydropower projects. This spending was the result of a newly enacted law encouraging limited State experimentation with fuel ethanol production. The success of this experimentation was a State policy decision to roll out ethanol production nationwide and to encourage private sector investment and participation in the newly created alternative fuels sector.

China has compelling reasons to speed up the development of renewable fuels. These include the fact that the country has comparatively limited natural energy reserves in per capita terms. Its remaining exploitable reserves of petroleum and natural gas are merely 7.7 percent and 7.1 percent of world averages respectively and coal reserves, unsuitable for motor vehicle use, are 58.6 percent of the world average. At the current rate of extraction, China's proven reserves of these resources could last 15, 30, and 80 years, respectively, compared with world averages of 45, 61, and 230 years.

The government's energy policy aims to integrate development and conservation, while giving priority to the latter. China could definitely find a "new path" for sustainable development, the Premier said. This new path would reasonably have to include energy from renewable resources that China has in abundance. Two-thirds of its hydropower potential is untapped. Exploitation of wind, solar, and biomass energies has only just started. Although renewable energy may not yet be ready to make a significant contribution to overall energy consumption, Chinese planners expect it to do so in the near term. The pace of China's development and production of energy from renewable sources is noticeable. It has grown at an annual average of 25 percent over the past few years, according to Zhang Guobao, deputy director of the National Development and Reform Commission (NDRC) but the need for substantial additional capacity remains.

China's total production capacity of 508 million kW of power from all generation sources includes the following contribution from renewable sources: 24.3% from hydropower, 0.5% from wind, and smaller amounts for other sources including coal. This leaves essentially unlimited room for the economic development of alternative sources. An incomplete list of exploitable renewable energy reserves puts the country's hydropower potential at 400 million kW, wind at around 3 billion kW, biomass energy at 800-1,000 million tons of coal equivalent a year, and solar energy at a theoretical 1.7 trillion tons of coal equivalent a year. To help realize this potential Premier Wen Jiabao has urged all relevant government departments to take effective measures to accelerate the development of renewable energy in order to "raise the share of quality, clean energies in the total energy mix."

According to the State Renewable Energy Medium- and Long-Term Development Program, renewable energy is expected to account for 16 percent of China's total energy supply by 2020, up from 7 percent in 2005.

China's ensure renewable energy development the PRC adopted the nation's first Renewable Energy Law effective on January 1 of this year. In February, the government issued rules necessary to implement the intent of the law.

Companies across China including state-owned or private, domestic or foreign-funded entities are preparing to undertake renewable energy projects. Foreign companies have been active within the sector as well. The world's leading wind equipment suppliers-Vestas, GE Energy, Gamesa, and Suzlon-have each set up wholly owned manufacturing facilities in China. And seven foreign development banks, including the International Finance Corporation, Germany's DEG, and France's Proparco, have invested in China's renewable energy projects.

While the shortage of conventional energy resources is the principal motivation behind China's push for renewable energy, the country is also pressing the production of renewable fuels out of environmental concern. The nation's coal-dominated energy system has caused conditions believed by certain environmentalists to represent severe pollution in many regions. Reasonable public health concerns have compelled the government to responsibly encourage the development and use of cleaner energy resources. This national concern for responsibility in energy policy is clearly seen in China's pledge to stage a "green" Olympics in 2008. These environmentally friendly games are expected to be a showcase for the nation to demonstrate the vigor with which it has embraced renewable energy.

Fuel Ethanol Production in China:

In 2005 China produced in excess of 10 million tons of Fuel Ethanol blended gasoline (E10). At this level China ranked third behind Brazil and the United States in ethanol blended fuels. The Chinese government has targeted an increase of E10 production to approximately 60 million tons by 2010. To achieve this 2010 goal China will have to both modernize manufacturing methods and equipment and add substantial new production capacity.

Using the 2004 gasoline consumption of 58,700,000 kiloliters as a base it can be reasonably estimated using the recent rate of gasoline consumption increase of 17.4% annually that by the end of 2005 a shortfall of 5,500,000 kiloliters of ethanol existed as compared with the amount necessary to meet the national goal for conversion to E10 blended gasoline.

The National Development and Reform Commission, the PRC's senior planning body, is committed to raising the country's use of the biofuel in order to reduce China's dependency on imported oil and, in doing so, secure the income for tens if not hundreds of millions of Chinese farmers. Xiong Bilin, vice director of the NDRC's department of industry, told a conference on bio-energy that the oil alternative "gasohol" would account for more than half of China's gasoline consumption in 2010.

Deutsche Bank said it expects China's consumption of renewable energy to grow 10 to 36 pct a year in the next five years, with demand for ethanol rising 20 pct per year during the period.

The Venture:

The opening of China to foreign investment represents an opportunity to profitably participate in meeting the clearly defined and rapidly growing national demand for transportation fuels. Accordingly, Tiger intends to become a significant ethanol manufacturer serving the needs of China's rapidly expanding personal and commercial transportation market segments. To do so it will creatively apply existing technology within a planned network of manufacturing plants that benefit from Tiger's established and maturing relationships with both regional governments and specialized army units now engaged in the production of agricultural products suitable for bio-mass use.

Tiger will accomplish its business development and revenue goals working with qualified Chinese partners (10% ownership) in order to take full advantage of the development opportunities provided within existing Chinese laws and relevant well-defined regulations. In doing so it expects to earn an outstanding return on invested capital. Lastly, the Venture will minimize the net impact of its manufacturing on China's food supply by returning to the food production system animal feed that will be a by-product of its fuel ethanol production process thereby demonstrating true partnership with the Chinese people. By comparison, in Brazil the similar by-product is burned to produce energy needed for the manufacturing process.

Through significant study and extensive field research Tiger has identified the western province of Xinjiang as the site of its initial manufacturing operations. The province will be able to easily accommodate the proposed manufacturing plant's projected energy needs. It also has a well-established, comparatively modern agricultural base much of which is under the direct control of the People's Army including large tracts dedicated to corn crops. This agricultural base enjoys extensive land reserves for future crop development as well as the planned crop rotation necessary to meet both food demands and the Venture's bio-mass requirements.

Inbound Foreign Investment and Planning Approvals:

While China is moving away from its former command economy structure, many of the protective controls remain. Accordingly, Tiger applied for and has received on 6 June, 2006 the necessary approvals from the Chinese government for the "Establishment of Enterprise with Foreign Investment in the People's Republic of China" for the purpose of "Production and sale of ethanol". On 7 July, 2006 the Venture applied to the Hami District Development Planning Commission for approval of its initial 20,000 ton annual production ethanol plant with a by-product of 18,500 tons of animal feed (DDGS). Approval of the Venture's application was received on 6 August, 2006. The incorporated name of the plant is Xinjiang Yajia Distillery, Co. Ltd. Pursuant to certificate dated 31 May 2006.

Management:

Leading the Company as President and CEO and Director is James Leung, 50. Mr. Leung is a Geological Engineer with extensive field and management experience. Prior to joining the Company he was President and Director of Gallant Energy International Limited, an enterprise working to develop an ethanol production venture in the Peoples Republic of China. Mr. Leung's other professional positions have included

1.) Senior Scientist and Technology Leader for Noranda Technology Centre in Quebec,

2.) Senior Project Engineer for Bell Mines in British Columbia,

3.) Geotechnical Engineer for Brenda Mines in British Columbia,

4.) Mine Geologist for Mattabi Mines in Ontario,

5.) Engineering Geologist for Muansell Consultants in Hong Kong,

6.) Tunnel Engineer for Mishubatsu Construction Co. in Hong Kong,

7.) Geological Engineer for Santana Associates in Venezuela and,

8.) Technical Manager for Flairbase Inc.

Mr. Leung earned a Bachelors degree in Geological Engineering from Windsor University in Ontario, Canada.

Mr. Leung is surrounded by a very capable team, with broad experience in finance and operation.

A View Toward the Future:

It is the opinion of the management of the Company that Tiger is very well positioned to profitably benefit from a market with significant potential that is underserved in terms of participants, and where the reasonably expected increase in demand is measured in double digit yearly increase. The company has developed a solid plan both with its in-house experts and its Chinese partners that reasonably assures it and its shareholder of an above average return potential return on investment.

As one of the first movers in this important market sector with necessary licenses and agreements in place or under active negotiation for both bio-mass and ethanol fuel marketing together with the excellent response from identified capital sources, Management is highly confident in its ability to execute its plan and achieve success for the Company and its shareholders.

Contact Information

  • Quevest Capital Inc.
    Nada Guirguis
    514-845-4687