CONTENTS 1.0 Operational risk 1.1 Labour supply 1.2 Skilled labour 1.3 License 1.

4 Seed supply 1.5 Equipment supply 1.6 Equipment parts 1.7 Equipment maintenance 1.8 Equipment technology 1.9 Plantation waste 1.10 Management operation 1.11 Plantation appropriation Plantation risk 2.1 Plantation location 2.2 Plantation design 2.3 Plantation pest/diseases 2.5 Known pests to infest Jatropha 2.6 Water supply 2.7 Plant toxicity Logistic risk 3.1 Infrasturcture/logistic 3.2 Off take agreement 3.3 Storage facility 3.4 Grain processing 3.5 CJO shipping Property risk 3.1 Site conditions 3.2 Existing property/equipment 3.3 Lease 3.4 Environmentalist Market risk 4.1 Biodiesal price 4.2 Oil price change 4.3 General economic downturn 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 5 5 5 4 4 4 4

2.0

3.0

4
4 6 6 6 7 7 7 7 7 7

3.0

4.0

5.0

6.0

7.0

8.0

4.4 Competing CJO producer 4.5 Competing Biofuel Environmental risk 5.1 Weather 5.2 Force majeure Financial risk 6.1 Economies of scale 6.2 Tax changes 6.3 Unavailable financing 6.4 Inflation 6.5 Profit forecast and projections 6.6 Exchange rate exposure Political risk 7.1 Changes in law/policy 7.2 Foreign direct investment 7.3 Biofuel support 7.4 Lobby groups 7.5 Corruption Asset ownership risk 8.1 Technical obsolescence 8.2 Default and termination 8.3 Residual value on transfer to the company 8.4 Key personnel

7 7 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 9 10 10 10 10 10

Jatropha risk
1.0 Operational risk
1.1 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 1.2 Skilled labour

There have been documented findings that farmers lack the specific agronomic skills to plant Jatropha 1.2 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 1.3 Seed 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 1.4 Equipment supply

Supplier defaults on agreed arrangement or is unable to fulfill agreed upon demands 1.5 Equipment parts

Unable to source parts in a timely or cost effective basis 1.6 Equipment maintenance

Lack of skilled specialist to maintain equipment in a timely or economical basis

1.7

Equipment technology

The risk of mechanical harvesters not being fully utilized due to the complex variance of fruit ripening intervals 1.8 Infrastructure/Logistics

Kenya lacks reliable infrastructure running the risk of CJO being unable to deliver in a way which is specified/anticipated 1.9 Plantation waste

Plantation waste not properly managed and disposed of efficiently 1.10 Management operation

The subcontracted management team in Tana Delta may fail to provide contracted services to specification 1.11 Plantation appropriation

Kenya is considered high risk country and runs the risk of theft from the populace

Plantation risk
2.1 Plantation location

Jatropha crop is very sensitive to frost and periods of continuous rain. The crop should not be planted in areas where water stagnation is a risk factor. For these reasons, Jatropha curcas will not be cultivated successfully in areas of high elevation and in areas where tropical rainforests thrive 2.2 Plantation design

If mechanized harvesters are chosen to be used proper spacing layout needs to be established in design 2.3 Plantation pest/diseases

Incidence of pests and diseases is widely reported under plantation monoculture 4

2.4 Known pests to infest Jatropha

Species Phytophtora Pythium Fusarium Helminthosporium tetramera Pestalotiopsis Paraguarensis Cercospora Jatropha Julus (millipede) Oedaleus senegalensis (locust) Oedaleus senegalensis (locust) Lepidoptera larvae Pinnaspis strachani (cushion scale) Ferrisia virgate (wooly aphid) Calidea dregei (blue bug) Nezara virdula (green stink bug) Spodoptera litura

effect Damping off, root rot Damping off, root rot Damping off, root rot Leaf spots Leaf spots Leaf spots Total loss of seedlings Leaves seedlings Leaves seedlings Galleries in leaves Die-back of branches Die-back of branches Sucking on fruits Sucking on fruits Larval feeding on leaves

2.3

Water Supply

Insufficient water supply to meet planting and upkeep requirements 2.4 Plant toxicity

Due to the invasive nature of Jatropha, planting the crop in non-native areas could adversely affect habitats and bioregions

3.0

Logistic risk
3.1 infrastructure/logistics

Kenya lacks reliable infrastructure running the risk of CJO being unable to deliver in a way which is specified/anticipated 3.2 Off take agreement

The risk that off take agreements made with purchasers for CJO are not fulfilled by the counterparty 3.3 Grain processing Processing plant unable to meet agreed target The risk of not processing the harvest in time. Some studies have shown the harvest must be crushed for oil extraction within timeframe of 12 months before having a negative impact on oil content 3.4 CJO shipping

The risk of CJO shipping interruption due to human error. CJO itself cannot be stored and must be shipped via ISO or Flexi tank to refinery on a 12-month cycle

4.0

Property risk
4.1 Site conditions

Risk that unanticipated adverse ground conditions are discovered which cause plantation cost to increase and/or cause plantation delays 4.2 Existing property/equipment

Risk of existing property or equipment is inadequate to support expansion

4.3

Lease The Lease and Sub-Lease may be threatened by changes in government policy Kenyas government lacks centralized and computerized records, generating risk of unregistered prior lease agreements Risk of title being affected by undetected encumbrances or defects due to faulty records

4.4

Environmentalist

Lobby groups and select locals have voiced opposition over the development of Tana Delta and may resort to psychical damage

5.0

Market risk
5.1 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 5.2 Oil price change

Oil price decline can reduce the competitiveness and viability of CJO 5.3 General economic downturn

Reduction in economic activity affecting demand for the product 5.4 Competing CJO producer

Risk of alternate suppliers of CJO competing or customers 5.5 Competing Biofuel

Risk of alternative Biofuel technology that is more advanced hence making it more popular

6.0

Environmental risk
6.1 Weather

Adverse weather that can potentially destroy or inhibit proper plantation growth 6.2 Force majeure

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

6.0

Financial risk
6.1 Economies of scale

The business model of Jatropha cultivation relies on economies of scale to lower costs. Insufficient funding to plant sufficient crop would limit the companys ability to achieve economies of scale 6.1 Tax changes

The risk that before or after completion the tax impost on the private party, its assets or on the project will change 6.2 Unavailable financing

The risk that when debt and/or equity is required by the project and is not available 6.3 Inflation

Risk that value of payments received during the term is eroded by inflation

6.4

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. 6.5 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

7.0

Political risk
7.1 Changes in law/policy

The risk of a change in law/policy which could not be anticipated 7.2 Foreign direct investment

Kenya government has various incentives to attract foreign investments, changes to these incentives could be detrimental 7.3 Biofuel support

Change in ownership or control of the company could result in weakening its financial standing or support by previous advocators 7.3 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 protect wildlife and maintain biodiversity. There have been calls for legislation over the Tana Delta 7.4 Corruption

Kenya, being one of the poorest countries in the world is exposed to corruption regularly

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 mature

10

Bedford risk matrix

Operational Risk Risk category Labour supply Description The Project is on a very large scale and the labour force necessary to carry out the Project may not be readily available There have been documented findings that farmers lack the specific agronomic skills to plant Jatropha 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 suspend 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 Consequence Delay in commencement or completion and/or cost increases Lower than anticipated yields and/or depressed life of plant Loss of the EIA license would render the Project infeasible. Mitigation

Skilled labour

[Training programs teaching farmers proper agronomic practices by Jatropha experts]

License

Seed supply

Equipment supply Equipment parts Equipment maintenance

Failure from Quinvita to deliver may result in production delay, alternate arrangements for product delivery will incur cost consequences Supplier defaults on agreed arrangement or Delay in completion is unable to fulfill agreed upon demands and/or cost increases Unable to source parts in a timely or cost Delay production and/or effective basis cost increases Lack of skilled specialist to maintain Delay production and/or equipment in a timely or economical basis cost increases

[carry out due diligence on principal supplier for probity and financial capacity and commission a legal review of the supplier including the guarantees or other assurances taken by the private party]

11

Equipment technology

The risk of mechanical harvesters not being Delay production and/or fully utilized due to the complex variance of cost increases fruit ripening intervals

[Until harvesters are perfected, the solution to reduce risk and manage harvesting cost is to establish operations in a region with availability of cost efficient labour]

Plantation waste Management operation

Plantation waste not properly managed and disposed of efficiently The subcontracted management team in Tana Delta may fail to provide contracted services to specification

Plantation appropriation

Kenya is considered high risk country and runs the risk of theft from the populace

Delayed production and/or cost increases The failure may result in plantation delay, an inability for the company to deliver CJO and a need to make alternate arrangements for product delivery with corresponding cost consequences Losing plants and/or harvest, delaying production and replacement costs

[carry out due diligence on management team for probity and financial capacity and commission a legal review of the team including the guarantees or other assurances taken]

12

Plantation Risk Risk category Plantation location

Plantation design

Description Jatropha crop is very sensitive to frost and periods of continuous rain. The crop should not be planted in areas where water stagnation is a risk factor. For these reasons, Jatropha curcas will not be cultivated successfully in areas of high elevation and in areas where tropical rainforests thrive. If mechanized harvesters are chosen to be used proper spacing layout needs to be established in design.

Consequence Improper soil test could render plantation useless

Mitigation [Due diligence on prospective land to ensure all successful planting criteria are met]

Plantation pest/diseases

If tree spacing does not support farming equipment these cost reducing efficiencies cannot be capitalized on Incidence of pests and diseases is widely Below expected yield reported under plantation monoculture and/or delay in harvest Phytophtora spp. Pythium spp Fusarium spp Helminthosporium tetramera Pestalotiopsis paraguarensis Cercospora Jatropha Julus sp. (millipede) Oedaleus senegalensis (locust) Lepidoptera larvae Pinnaspis strachani (cushion scale) Ferrisia virgate (wooly aphid) Calidea dregei (blue bug) Nezara viridula (green stink bug) Spodoptera litura Damping off, Root rot Damping off, Root rot Damping off, Root rot Leaf spots Leaf spots Leaf spots Total loss of seedlings Leaves seedlings Galleries in leaves Die-back of branches Die-back of branches Sucking on fruits Sucking on fruits Larval feeding on leaves

[Design questions will need to be addressed before mechanical planters and harvesters are viable]

Known pests to infest Jatropha

13

Water Supply

Insufficient water supply to meet planting and upkeep requirements Due to the invasive nature of Jatropha, planting the crop in non-native areas could adversely affect habitats and bioregions

Plant toxicity

Delay in commencement or completion Threatening or killing local wildlife

[Develop, implement and maintain Water Supply Strategy and Emergency Plan]

Logistic Risk Risk category Infrastructure/ Logistics

Description Kenya lacks reliable infrastructure running the risk of CJO being unable to deliver in a way which is specified/anticipated The risk that off take agreements made with purchasers for CJO are not fulfilled by the counterparty The risk that the storage facility of harvested fruit is compromised Processing plant unable to meet agreed target The risk of not processing the harvest in time. Some studies have shown harvest must be crushed for oil extraction within timeframe of 12 months before having a negative impact on oil content The risk of CJO shipping interruption due to human error. CJO itself cannot be stored and must be shipped via ISO or Flexi Tank to refinery on a 12-month cycle

Consequence Non-delivery of CJO

Mitigation [LAPPSET project will provide infrastructure]

Off take agreement

Delayed revenue and/or financial losses Delayed production and/or financial losses Delayed production and/or cost increases Financial losses and/or decreased oil yield

Storage facility

Grain processing

CJO shipping

Financial losses and/or cost increases

14

Property risks Risk category Site conditions Description risk that unanticipated adverse ground conditions are discovered which cause plantation costs to increase and/or cause plantation delays Consequence additional plantation time and cost Mitigation/solution [Reliance on expert testing and due diligence]

Existing property/equipment

risk of existing property or equipment is inadequate to support expansion

additional construction time and cost

[private party will pass to builder which relies on expert engineering reports]

Lease

The Lease and Sub-Lease may be threatened by changes in government policy Kenyas government lacks centralized and computerized records, generating risk of unregistered prior lease agreements Risk of title being affected by undetected encumbrances or defects due to faulty records Lobby groups and select locals have voiced opposition over the development of Tana Delta and may resort to psychical damage

Delay in commencement or completion Delay in commencement or completion Delay in commencement or completion Delay plantation or completion

Environmentalist

[Lobby group with Kenyan Government]

15

Market Risk Risk category Biodiesel price

Description 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. Oil price decline can reduce the competitiveness and viability of CJO

Oil price change

Consequence Fluctuations in price of fossil fuels would have detrimental effect on global biodiesel demand, potentially affecting expected revenue Drive down Biofuel prices and competitiveness Revenue below projections Revenue below projections arising from a need to reduce the price and/or from a reduction in overall demand, because of increased competition Revenue below projections arising from a need to reduce the price and/or from a reduction in overall demand, because of increased competition

Mitigation/solution

[Oil price declines should be viewed as part of the variables that require attention and responsiveness on an ongoing basis]

General economic downturn Competing CJO producer

Reduction in economic activity affecting demand for the product Risk of alternate suppliers of CJO competing for customers

[review likely competition and barriers to entry]

Competing Biofuel

Risk of alternative Biofuel technology that is more advanced hence making it more popular

[review likely competition and barriers to entry]

16

Environmental Risk Risk category Weather Force majeure

Description Adverse weather that can potentially destroy or inhibit proper plantation growth The risk that inability to meet contracted product delivery/harvest (pre or post completion) is caused by reason of force majeure events

Consequence Delay in harvest and completion Loss or damage to asset, produce discontinuity for business and loss revenue or delay revenue commencement for company

Mitigation [reliance on expert reports and insurance] the [If certain assets uninsurable, the company may establish a reserves the fund] of in the

Financial Risk Risk category Economies of scale

Tax changes

Description The business model of Jatropha cultivation relies on economies of scale to lower costs. Insufficient funding to plant sufficient crop would limit the companys ability to achieve economies of scale The risk that before or after completion the tax impost on the company, its assets or on the project will change

Consequence Negative effect on the companys financial returns

Mitigation/solution

Unavailable financing

Inflation

May undermine the financial structure of the project so that it cannot proceed in that form The risk that when debt and/or equity is No funding to progress required by the project and is not available or complete construction Value of payments received during the Diminution in real term is eroded by inflation returns of the company

[Seek appropriate mechanism to maintain real value e.g. via linkage to CPI] 17

Profit forecast and projections

Exchange rate exposure

Profit projections are based 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 Bedford to be reasonable. These assumptions are nevertheless subject to uncertainties and contingencies Kenya has its own national currency (Shillings), however U.S. dollars are still predominantly used in Kenyan business dealings and are widely accepted

Below expected revenue projections

Currency exchange exposure

Political Risk Risk category Changes in law/policy

Description Changes in law/policy which could not be anticipated

Foreign direct investment

Biofuel support

Kenya government has various incentives to attract foreign investments, changes to these incentives could be detrimental Change in ownership or control of the company could result in weakening its financial standing or support by previous advocators

Consequence Requirement of the company to fund and carry out capital works or meet a marked increase in operating costs to comply with the change Additional startup costs/taxes Losing support from government and locals of Kenya to advance Biofuels in Kenya

Mitigation

18

Lobby groups

Corruption

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 protect wildlife and maintain biodiversity. There has been calls for legislation over the Tana Delta Kenya, being one of the poorest countries in the world is exposed to corruption regularly

Successful legislation over the Tana Delta would hamper projects progression

Financial or product loss

Asset ownership risk Risk category Technical obsolescence Default and termination

Description The risk that design life of the plantation proves to be shorter than anticipated accelerating refurbishment expense 'Loss' of the property or other assets upon the premature termination of lease or other project contracts upon breaches by the company On settlement or earlier the asset do not have the value originally estimated by the company

Consequence Additional cost of upgrade Loss of investment

Mitigation [The company may have recourse with designer, builder or insurers]

Residual value on transfer to the company

Key personnel

Capital costs incurred to upgrade the asset to the agreed value and useful life or asset demolished or removed The competition for skilled technicians, Loss of key management professionals, workers may pose a officers and/or technical challenge for the business to attract and personnel and the retain them as the industry matures shortage of headcount resources are potential risks the business expansion

19