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Jatropha risk

1 Property risk
1.1 Site conditions

Risk that unanticipated adverse ground conditions are discovered which cause plantation cost to increase and/or cause plantation delays 1.2 Existing property/equipment

Risk of existing property or equipment is inadequate to support expansion 1.3 Lease

The Lease and Sub-Lease may be threatened by many factors, including changes in government policy, changes in government control, prior unregistered agreements or transfers or land claims, and title may be affected by undetected encumbrances or defects. Kenyas government records covering the title records for the Lease may be incomplete since Kenya does not have centralized or computerized records. 1.4 Malicious damage

Lobby groups and select locals have voiced opposition over the development of the Tana Delta and may resort to psychically destroying property

Plantation risk
2.1 Plantation pest/diseases

It is popularly reported that pests and diseases do not pose a significant threat to jatropha, due to the insecticidal and toxic characteristics of all parts of the plant. However incidence of pests and diseases is widely reported under plantation monoculture 2.2 Water Supply

The risk of insufficient water supply to meet planting and upkeep requirements

Operational risk
3.1 Labour

The Project is on a very large scale and the labour force necessary to carry out the Project may not be readily available or adequately skilled

3.2

License

The EIA (environmental impact assessment) License contains numerous and ongoing conditions which must be satisfied by the Corporation. In the event the Corporation is unable to satisfy any conditions, the EIA License will likely be cancelled, revoked or suspended 3.3 Supply

The company is currently dependent on a sole supplier (Quinvita) of Jatropha seeds under the Sub-License from which to grow the Jatropha crop and limited alternatives are available 3.4 Equipment

Mechanized equipment for the Plantation will likely be purchased or leased from sources outside of Kenya. Therefore parts and services may not be readily available on a timely or cost effective basis and could therefore hamper efficient Plantation operations 3.5 Infrastructure/Logistics

Kenya lacks reliable infrastructure running the risk of CJO being unable to deliver in a way which is specified/anticipated 3.6 Management operation

Risk that the subcontracted management team in Tana Delta may fail to provide contracted services to specification

4.

Market risk
4.1 Biodiesel price

Bio-diesel and its related feedstock, are emerging commodities and do not have a published market or an established trading platform. The rapid growth of biodiesel market has been supported by dramatic surge in price of fossil fuels 4.2 General economic downturn

Reduction in economic activity affecting demand for the product 4.3 Competition

Risk of alternate suppliers of CJO competing for customers

Financial risk
5.1 Tax changes

The risk that before or after completion the tax impost on the private party, its assets or on the project will change 5.2 Unavailable financing

The risk that when debt and/or equity is required by the project and is not available 5.3 Inflation

Risk that value of payments received during the term is eroded by inflation 5.4 Profit forecast and projections

Profit projections are based on various assumptions with respect to the levels and timing of revenues, cost, interest rates, exchange rates and various other matters of an operational or financial nature, which assumptions are believed by the directors of the company to be reasonable. These assumptions are nevertheless subject to uncertainties and contingencies. 5.5 Exchange rate exposure

Kenya has its own national currency (Shillings), however U.S. dollars are still predominantly used in Kenyan business dealings and are widely accepted

Political risk
6.1 Changes in law/policy

The risk of a change in law/policy which could not be anticipated 6.2 Company support

The risk that a change in ownership or control of the company would result in weakening its financial standing or support by previous advocators 6.3 Lobby groups

Environmental and land lobby groups, conservationists and select locals of the Tana Delta consider the lands to be part of a natural habitat which should be protected in order to protext wildlife and maintain biodiversity. There have been calls for legislation over the Tana Delta

Environmental risk
7.1 Weather

Adverse weather that can potentially destroy or inhibit proper plantation growth 7.2 Force majeure

The risk that inability to meet contracted product delivery/harvest (pre or post completion) is caused by reason of force majeure events

Asset ownership risk


8.1 Technical obsolescence

The risk that design life of the facility proves to be shorter than anticipated accelerating refurbishment expense 8.2 Default and termination

Risk of 'loss' of the property or other assets upon the premature termination of lease or other project contracts upon breach by the company 8.3 Residual value on transfer to the company

The risk that on settlement or earlier the asset do not have the value originally estimated by the company 8.4 Key personnel

The competition for such skilled technical professionals/workers may pose a challenge for the business to attract and retain them as the industry matures