PAN PACIFIC GREEN FOOD INC.

Pan Pacific Green Food Operational Overview:

PAN PACIFIC GREEN FOOD INC.

PRELIMINARY BUSINESS PLAN

April 2013

REGINA OILSEED CRUSHING FACILITY

Business plan summary and financing

FORWARD-LOOKING STATEMENT

This document is a summary description of Pan Pacific Green Food Inc. (PPGF) and its business and does not purport to be complete.

Investors are encouraged to obtain independent legal advice concerning any investment in securities of PPGF and should not base their decision on whether to invest in PPGF upon the material provided herein. There are no representations or warranties made herein by PPGF. This document is not, and under no circumstances is it to be construed as, an offer to sell or a solicitation of an offer to buy any of the securities of PPGF. No securities regulatory authority or similar authority has reviewed or in any way passed upon the document or the merits of these securities and any representation to the contrary is an offence. Readers are cautioned that this document contains forward looking statements. Such statements are not guarantees of future performance, and actual results realized may differ materially from the forward looking statements. Readers are encouraged not to rely on this presentation as the sole source of information for decision making.

Pan Pacific Green Food Inc.

}  Immediate revenue and positive cash flow secured by 100% off-take contracts;

}  Projected positive cash flow year one is $1,326,459 which is EBIDTA of 2.4% (based on 10 year average industry crush margins;

}  Risk Management and Meal / Oil off-take agreements create a fully funded feedstock supply and guaranteed cash flow;

Industry: Agri-Foods

Technology:  Proprietary mechanical oilseed extraction process (fully scalable to 800MT/day).

Operations: Start-up with immediate revenue/positive cash  flow once operation of crush plant commences (expected start date May 1, 2014). Creation of 20+ new jobs.

Business Model: Own and operate oilseed crushing facility to process and sell crude oil and bulk meal; low efficient use of capital, highly profitable business.

Unique Cash Flow Model: The Company has secured off-take contracts for all the meal and oil it produces.

PROJECT OVERVIEW

Project: 800 MT/day oilseed crushing plant in Regina, SK.

Location: Industrial site in Emerald Park, SK. with favourable on-site access to road and railway network for receiving canola feedstock and shipping oil & meal.

Focus: Conservative capital expenditure, highly profitable oilseed crushing; project is an agri-processing opportunity specifically targeted at bulk sales of both meal and oil to value add customers.

Fully cash flowed: Commitments from various grain brokerage and hedging companies whereby the feedstock is supplied upfront and payment for feedstock is made from the oil off-take contract. Thereby the feedstock supply cash requirements are reduced to zero.

Demand:  High demand due to food demand and widespread use of bio-oil and meal for various products and industries.

MARKETPLACE OPPORTUNITIES

Increasing world population and high demand for human food;

Increasing beef, dairy cattle and aquaculture industry to meet global food demand, which causes a tight world protein supply for animal feed. This will not preclude pursuing additional value added processing opportunities for protein refining.

Lack of commercial oilseed crushing facilities to produce oil in the human consumption and biofuel market, meal for the animal feed industry and protein isolate for human consumption.

Rising cost of fossil fuels and dependence on foreign oil;

Increased market demand for petroleum substitutes.

OUR SOLUTION

Initially operate a 400MT/day (rapidly scalable to 800 in smart design infrastructure)  oilseed crushing facility to supply the food processing, biofuel, animal & specialty feed, and nutraceutical industry.

PPGF’s crushing plant will start pilot scale production May 2014. Facilities and infrastructure testing will continue through May and June, with anticipated achievement of full capacity by

Currently, the demand exceeds our anticipated production capacity, which ensures a successful expansion of the business model.

Sale of canola oil through guaranteed off-take contracts for human consumption (cooking oil), and for processing into biodiesel, and biofuel additives & lubricants.

OILSEED FEEDSTOCK AND SUPPLY: CANOLA

Canola

Canola is a yellow-flowering oilseed plant of the Brassica family and was bred naturally from its parent rapeseed in the early 1970s. Canola, however, is NOT rapeseed - their nutritional profiles are very different. The name "canola" was derived from "Canadian oil, low acid" in 1978.[1] Canola oil is low in saturated fat, has no trans fat, is a good source of omega-3 fatty acids and rich in vitamin E. In October 2006, the U.S. Food and Drug Administration authorized a qualified health claim for canola oil because its high percentage of unsaturated fats may reduce the risk of cardiovascular disease.

Supply

The Company will be focusing on the crushing of canola seeds in its initial phases as there is immediate availability in western Canada. Through cooperation with our established network of grain brokers and due to the excellent access to the road and railway network at the proposed site, the supply of canola (and other oilseeds) is guaranteed. The supply of canola seed is guaranteed through various grain brokerage and hedging companies whereby the feedstock is supplied upfront and payment for feedstock is made from the oil off-take contract.

 

PRODUCTS

Oil

Each canola seed contains approximately 42% oil, which is extracted for use as a premium edible vegetable oil. The remainder of the seed is processed into canola meal, which is used as a high protein livestock feed.  Research indicates the fatty acid composition of canola oil is most favorable in terms of health benefits and as a part of a nutritionally balanced diet. When canola oil is compared to other oils in today's market, canola oil has the lowest level of saturated fat (7%), it is relatively high in monounsaturated fat (61%), and canola oil has a moderate level of polyunsaturated fat (22%). This makes it perfect for human consumption. Canola oil is also a viable alternative to fossil fuel as a source of energy for diesel engines, and can be processed into biodiesel, fuel additives and lubricants.[2]

Meal

After the oil is extracted, the by-product is a protein-rich meal used by the livestock industry. It has an excellent amino acid profile and is rich in vitamins and essential minerals. Canola meal is used in the beef and dairy cattle industry, as well as for swine, poultry, and specialty (horse, sheep and aquaculture) feeds. Based on nutrient content alone, canola meal is worth, on a unit weight basis, 65 to 70 per cent of the value of 44 per cent protein soybean meal for feeding poultry and about 70 to 75 per cent of the value of soybean meal for feeding swine and ruminants.

Animals are not the only ones who can benefit from the goodness of what is left when the oil is pressed from canola seeds. A process creates a 90% protein isolate that has excellent nutritional and functional characteristics for human consumption.[3]

Hulls

Another (minor) by-product of the canola cold pressing is the hull (outside skin of the oilseed). The hulls can be mixed with the meal in animal feed or sold separately. Due to its high absorbency rate, hulls are ideal animal bedding. This additional market (and revenue stream) has not yet been explored.

MARKET OPPORTUNITIES

Income, population growth, especially in developing countries, and the global trend towards non-petroleum based fuel alternatives are expected to lead to continued strong demand for vegetable oils for human consumption, nutraceuticals, biofuel, fuel additives etc, as well as protein meals used in livestock feeding. Oilseed meal demand is expected to increase by 30% between 2005 and 2015. This trend will positively impact canola production due to its high yield of vegetable oil. China will rely on oilseed imports to fill its increasing need in animal feed and oil for human consumption and is expected to be the largest world vegetable oil (seed) importer by 2015.[4]

A recently published study conducted by the Canola Council of Canada shows the economic benefits of canola to Canada has grown to $15.4 billion annually — about $1.4 billion more than when last measured.[5]

 

CANOLA OIL INDUSTRY

According to the Canadian Canola Council, the Canadian oilseed processing industry currently consists of 13 crushing and refining/packaging plants, owned by five companies. Annual primary crushing capacity for all plants totals about 4.0 million tonnes of canola seed. Four million tonnes of canola seed produces approximately 1.6 million MT of canola oil and 2.4 MT of canola meal.[6]

Crude canola oil is used as cooking oil for human consumption, as feedstock for biodiesel, fuel additives and in the lubricants processing industry.

Human Consumption

U.S. is the major importer of canola oil from Canada importing more than 65% of Canada's exports. China, South Korea, Japan, Mexico, Hong Kong, Malaysia and Taiwan are the other buyers of Canadian canola oil. China is the biggest consumer of vegetable oils in the world and has larger market than the European Union. While accurate data is difficult to obtain, it is estimated that 100 to 150 million Chinese people have moved from rural areas to cities within the past decade. The increasing urbanization of China is supporting a demand for labor saving foods serviced by a growing retail and food processing sector.[7] From 2006/2007 where its consumption was 22.56 mm tons it had grown to 26.85 mm tons in 2009/2010, an increase of over 20% in three years. For 2010/2011 it is forecasted to consume 29.3 mm tons, an increase of over 9% against previous year's consumption. Soybean oil is the most consumed vegetable oil in China followed by palm oil, canola oil and peanut oil. The consumption share for soybean oil in 2009/2010 was around 39%, for palm oil it was 22%, rapeseed oil 21% and peanut oil at 8.30%. China imports almost one-third of its vegetable oil requirements to meet its ever growing demand. Canola oil from Canada makes 8.7% of the total vegetable oil imports of China.[8] 

                                       Figure 2: Global Biodiesel Production by Feedstock[9]

  

Biodiesel Feedstock Market

Total global biodiesel production in 2008 was of the order of 13.6 billion litres whereas the total Canadian production in the same year was 126 million litres.[10] The development of the global biofuel industry has been largely fuelled by governments through mandates, targets and various mechanisms of support such as subsidies, mainly for energy security. Mitigating climate change is another major driver.

According to a recent report, the global biofuels market will achieve a value of $62 billion by 2015; this is equivalent to 26 billion gallons. Europe is currently the largest global biodiesel market and is expected to stay that way during the reporting period, representing 70% of global biodiesel production. The US market is growing at a rate of 12.8% (2010 figures), and is likely to increase its market share as it emerges from the recession.[11] By 2012, the EU is expected to produce over 7.3 billion litres of biodiesel from vegetable oils, with rapeseed continuing to be the foundation feedstock. The fastest growing alternative fuel in the US, production from vegetable oils is projected to exceed 2.7 billion litres by 2012.[12]

The current biofuels mandate from the Canadian federal government calls for 2 percent of diesel fuel to come from renewable sources by 2012. The Canola Council of Canada’s 2015 strategy document predicts that biodiesel demand will account for 2 million MT of canola domestically and another 500,000 MT going to biodiesel production in export markets. [13]

 

Fuel Additives Market

Quality multifunctional diesel fuel additives reduce many of the problems encountered with biodiesel blends, such as fuel system corrosion, water separation and increased fuel foaming. Injector fouling tests show that multifunctional additives can reduce the injector deposit levels generated when biofuel blends are used. Specialized flow improvers are also available to address the challenging low-temperature operability profile of many biodiesel fuels, while specific antioxidants can help to stabilize the fuel against the degradation that may lead to fuel system deposits and corrosion. Fuel additives are not only used in automotive but also marine and aviation transportation.

The fuel additive market in China exceeded $1.5 billion in 2007 with an expected growth rate of over 17% per year which will drive the market to over $17.6 billion by 2022.[14] A recent study by the Freedonia Industry Research Group analyzes the $1.1 billion US specialty fuel additives industry and suggests that the US demand will grow 2.9 % annually through 2012 and beyond.[15]

Lubricants

World lubricant demand will increase 1.6% per year to 40.5 million MT in 2012, which translates into a $48.8 billion world lubricant industry. Increases will be aided by the ongoing expansion of the world motor vehicle park, as well as by a rebound in manufacturing and other industrial activity from the global economic slowdown of 2008 and 2009. Advances will be the strongest in the developing Asian countries due to ongoing rapid industrialization as well as rising car ownership rates, particularly in China. These trends will also favour growth in the Africa/Mideast region and Latin America.[16]

There is an increasing demand for environmentally-compatible lubricants, particularly in areas where they can come into contact with water, food or people. Lubricants derived from vegetable oils such as canola offer biodegradability and low toxicity.       

                                                                                                          

CANOLA MEAL INDUSTRY

Canola meal is used in the beef and dairy cattle industry, as well as for swine, poultry, horse, sheep and aquaculture feeds. By further refining the meal, the isolated protein can be processed into supplements for human consumption.

 

Animal Feed

Livestock Feed

Canola meal is one of the most widely used protein sources in animal feeds. It has an excellent amino acid profile and is rich in vitamins and essential minerals. Growth in the global market for animal feed will stem from increasing population, rising standards of living, growing consumption of meat and meat products in developing countries, and consistent demand from the developed world. Forecasted global demand of canola meal is estimated at 37.3mm MT in 2011.

The global animal feed additives market is growing at a steady pace and has a promising future because of the globally increasing demand for meat and meat products. Feed additives are becoming an important part of feed for animal growth and nutrition. Recently, disease outbreaks such as avian flu and foot-and-mouth diseases have also increased concern over animal health across the world. Environmental concerns, such as reduction of phosphorous content in manure are promoting feed additives consumption for animals. Europe and the U.S. are the largest markets for animal feed additives and Asia is emerging as a high growth market. The global animal feed additives market reached an estimated US$15.4 billion in 2010.[17]

Aquaculture feed

Global aquaculture has grown dramatically over the past 50 years to around 52.5 mm MT (68.3 mm incl. aquatic plants) in 2008 worth US$98.5 billion (US$106 billion incl. aquatic plants) and accounting for around 50 per cent of the world’s fish food supply. Asia dominates this production, accounting for 89 per cent by volume and 79 per cent by value, with China by far the largest producer.  The rapid growth in this region has been driven by a variety of factors, including pre-existing aquaculture practices, population and economic growth, relaxed regulatory framework and expanding export opportunities. Aquaculture development in Europe and North America was rapid during the 1980s-1990s but has since stagnated, probably owing to regulatory restrictions on sites and other competitive factors, although as markets for fish and seafood they have continued to grow.

With the growth of aquaculture, commercial aquafeed production has seen consistent double-digit growth over the past 20 years. Rising demand for fish, pressure on wild-catch, new farming methods and species will drive growth even faster in coming years.[18] The aquafeed market reached an estimated 27 million MT of feed globally in 2010.[19]

Pet Supplement Market

Supplements for animals have become a fast-growing market niche. Research published recently by Packaged Facts estimated US retail sales of pet supplements and nutraceutical treats at $1.2 billion in 2007, with 74% of this figure representing supplement sales. According to the Packaged Facts report, the majority of pet supplements (51%) are purchased for horses, while dog supplements represent 38% of the market and cat supplements represent 6%.

 

Human Consumption

This is the most profitable market for processed canola meal.  According to a report by Global Industry Analysts Inc., the world market for food additives is projected to exceed $33.9 billion by the year 2015[20] with protein supplements counting for about $25 million of it. The strong market demand for plant-based protein supplements is driven by consumers’ allergenicity, vegetarianism and sustainability. Currently, the majority of plant-based protein is derived from soy. Due to canola’s excellent nutrition and protein value - the protein efficiency rate for canola is superior to soy concentrate and even milk casein - it is an excellent solution.

 

                                       Figure 3: Global Protein Supplement Market[21]

The sale price for canola protein isolate is about $12,000 per MT, compared to about $240 per MT when sold as bulk meal to the animal feed industry.

COMPETITIVE LANDSCAPE

According to the Canadian Canola Council, the Canadian oilseed processing industry currently consists of 13 crushing plants owned by five companies.[22] Annual primary crushing capacity for all plants totals about 4.0 million MT of canola seed.  This capacity is complemented by producers of biodiesel, which often crush their own oilseeds for use in the refineries. Currently, there are 23 biodiesel production companies in the planning and operating status listed in Canada.[23]  Only 6 of them are operational as of August 2011. Although the Company is not a biodiesel producer, it does compete for the supply of feedstock (canola seeds), as well as for the canola meal market.

The Company’s unique location with its superior access to the national road and railway network is a clear advantage not only for the efficient supply of canola seeds, but also for shipping its products to the major ports on the West Coast and elsewhere.

 

REVENUE GENERATION

Sale of canola meal for animal feed and for processing in the specialty feed and nutraceutical industry (as protein isolate for human consumption).

SOCIO-ECONOMIC IMPACT OF CANOLA IN CANADA

Economic benefits of canola to Canada has grown to $15.4 billion annually.*

Canola provides 228,000 Canadian jobs and is responsible for $8.2 billion in employee wages annually. These jobs include work in seed supply, farming, canola seed handling, transportation, crushing and refining.

The canola crushing sector generates $983 million of economic activity per year in Canada. The crushing industry employs an average of 1,800 people per year and represents almost one‐third of Canadian economic activity in the milling and grain processing sector.

BENEFITS TO COMMUNITY

The canola seed crushing facility will create

}  $5 million in direct investment into the community;

}  25+ new full-time jobs year one and 40+ new full - time  jobs beginning year two;

}  indirect economic benefits as direct stimulus to the economy of Regina;

}  $65,000,000 per year in gross revenue and directly increase contribution to the canola industry by 12% in the first year and rise to 25% in the second year.

}  the beginning of a green industry which will attract development that will increase jobs, tourism, and revenue for a sustainable future.

}  SYNERGISTIC INDUSTRY ATTRACTION

PPGF has been involved in negotiations with a number of synergistic industries that are carefully reviewing the opportunity presented by the oilseed crushing plant in Regina. Some of these are:

}  Biofuel additives and lubricant manufacturing from canola oil; approx. 7 employees at start-up

}  Equine and pet bedding manufacturing ; approx. 4 employees at start-up

}  Cattle feed processing facility; approx. 4 employees at start-up

}  Canola-based nutraceutical processing facility; approx. 5 employees at start-up

}  SYNERGISTIC INDUSTRY ATTRACTION

}  Small biodiesel refinery; Approx. 7 employees at start-up

}  Medium-sized grain handling facility; Approx. 7 employees at start-up

As is evidenced in the preceding information, it is conceivable (and highly probable) that these synergistic industries will locate in Regina, SK. Should that happen, Regina would realize the direct benefits of nearly $10 million in capital expenditures, 30+ new full-time jobs and all the indirect economic benefits. In addition, Regina would be the hub of the agricultural processing and green industry sectors in Western Canada.

STAFFING

The labour operations complement would consist of 20 full time employees to cover initial 24 hours per day operations

MILESTONES TIMELINE

Begin pilot stage production to test the upgraded equipment May 2014.

LOI with Clean Power Concept Inc  (PPGF) for oil off-take in order to facilitate PPGF’s 50,000MT/year contract with Chongqing Grain Group Co Ltd in accordance with the Joint Venture agreement.

LOI with CPOW for oil off-take contract used as feedstock for additives, lubricants and nutraceuticals.