ETHANOL HAS ARRIVED

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ETHANOL HAS ARRIVED

• Presented by
• Don Thorpe
• Vice President, Operations
• Panda Ethanol

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Panda Ethanol Overview

• Panda Energy was incorporated in 1982 and is
  headquartered in Dallas, TX for the purpose of
  developing and operating power plants.
• Panda Energy has developed, financed, built and
  operated over 9,000 megawatts of hydro, coal, gas
  and oil power generating capacity. All the way
  from Nepal, China, Arizona, Oklahoma, Arkansas,
  Texas, North Carolina and Maryland
• In doing so, Panda Energy has financed in excess
  of 5 billion worth of projects
• Being in the power generating business, the segue
  into developing and operating ethanol plants
  seemed only natural.

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Portfolio of Developed Energy Projects
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Panda Ethanol Overview

• According, in May 2006 Panda Energy, formed Panda
  Ethanol a subsidiary for the sole purpose of
  developing ethanol projects.
• Panda Ethanol, Inc., through a reverse merger
  structure is now a public company and Panda
  Energy is currently Panda Ethanols largest
  stockholder.
• Panda Ethanol has completed the 188 million
  financing and started on its first ethanol plant
  here in Texas a 100MM gallon per year
  corn-based manure burning facility
• Panda Ethanol has also announced 4 other sites
  with several more possible sites on the drawing
  board
• Panda Ethanols approach to ethanol is much like
  that Panda Energy has successfully applied to
  Power Generation
• Constructed a facility incorporating the best
  available ethanol technology
• Hire and train highly motivated Operating and
  Maintenance staffs

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Panda Ethanol Overview

• Apply the best state-of-the-art management and
  performance software available
• In addition Panda Ethanol, where practical use
  biomass (manure a renewable source of energy)
  versus a traditional fossil fuel (natural gas)
  energy source for steam production
• Biomass (manure), once thought to be a waste
  product, will now be used as a net positive Green
  Energy Source.

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Hereford Financed and Under Construction
President and CEO Todd Carter with Chairman Bob
Carter at Groundbreaking Ceremony September 14,
2006
Site Construction Photos October 17-20, 2006
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Hereford Target Completion4Q-2007
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Hereford Provides ReplicableOperating Model



Rail Interconnection Agreement
Ethanol Marketing Agreement
EPC Contract
Biomass Supply and WDGS Offtake Agreements
Panda Hereford Ethanol, LP
Local Feedyards

Gasifier Purchase Agreement
Manure Transportation Agreement
WDGS Transportation Agreement
Services Agreement and OM Agreement
PGS Hereford, LLC
Local Trucking for Manure
Local Trucking for Distillers Grain
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Unique Project CapturingNation-Wide Attention
The (Hereford) plant will be unlike any other
plant in the country WFAA-ABC slated to
be the largest biomass-fueled ethanol plant in
the country Fort Worth Star-Telegram the
sexiest environmental project being developed in
the United States. Hereford, Texas Mayor Bob
Josserand quoted in The Dallas Morning News
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Panda Process Flow
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Industry Update

• Reports say that the US has not built a new
  refinery in over 25 years.
• In the Ethanol industry, we say we are building
  new refineries everyday!
• There are 106 ethanol facilities in operation
  (approximately 5 billion gallons) and 46 ethanol
  facilities in construction (approximately 3
  billion gallons)
• Originally, ethanol was produced by our Nations
  Farmers in Cooperatives. Today, ethanol is still
  being developed by Cooperatives, but today on
  Wall Street and big business is involved.

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Industry Update

• Ethanol is not new. It powered the original
  Model T Ford. Its strong stuff! This years
  Indy cars will run on ethanol.
• Most of todays ethanol plants are in the corn
  belt and not a single one is located in Texas
• Thats about to change. The first facilities
  will be located in Hereford, TX not too far
  from Amarillo
• Why Hereford? Our plant is different than any
  other. Hereford has an abundance of cow manure
  and we are using biomass (manure) as the energy
  source to fuel our steam production

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Significant Growth Potential
Ethanol represents only a small fraction (3.6)
of todays 140 billion gallon gasoline supply so
the upside as a modest blending component (E10)
is meaningful and as a replacement fuel (E85) is
even more promising.

• Source RFA website, figures updated October 30,
  2006
• Friedman, Billings, Ramsey Co., Ethanol
  Producer Industry Update, published August 9,
  2006
• Calculated as 10 of todays 140 billion gallon
  gasoline market (Source EIA, 2006)
• Calculated as 10 of 167 billion gallon gasoline
  market in 2015 (Source EIA, 2006)

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Ethanol As A Blend Stock

• What is ethanol? Its really moonshine a 200
  proof grain alcohol product
• A clean, powerful and American produced fuel
• Ethanol after being denatured is currently being
  used primarily as a blending component for
  gasoline and will increase gasoline octane
  levels, reduce emissions, and extend supplies.
• Ethanol blends are cleaner burning fuels and are
  mostly used in areas that have pollution issues
  such as Los Angeles, Denver, Dallas, Houston,
  etc.

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Ethanol As A Blend Stock

• With reduced production costs, ethanol is fast
  becoming the fuel of choice in many parts of the
  country.
• Ethanol is being used to replace MTBE (which is
  suspected as being a carcinogen and therefore a
  possible source of ground water pollution).

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Ethanol Blends

• Ethanol Blends
• E-10 (10 Ethanol 90 Gasoline)
• E-85 (85 Ethanol 15 Gasoline)
• E-diesel (10 ethanol and 90 diesel fuel)
• Ethanol is most commonly used as a gasoline blend
  component at 10, but some states also use a 5.7
  or a 7.7 ethanol blend.
• Gasoline blends with up to a 10 ethanol content
  do not have to be labeled and can burn well in
  all existing gasoline applications.
• Any vehicle can use E-10.
• 10 Ethanol blends have a 2 point higher octane
  level that regular gasoline's

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Corn Remains Viable Long-Term Feedstock

• Corn yield increasing due to biotech and cropping
  improvements
• Acreage will shift to corn as ethanol demand
  increases
• Projected demand for non-ethanol use is flat
• Distillers grains usage will partially replace
  corn as livestock feed
• New technologies will squeeze more ethanol out
  of corn

The National Corn Growers Association predicts
that 15.9 billion gallons of corn-based ethanol
can be feasibly produced by 2015 without
disrupting other corn markets.
Source NCGA website, How Much Ethanol Can Come
From Corn? dated 03-May-2006
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Conclusion