segunda-feira, 25 de junho de 2007

Big players in the Brazilian ethanol industry

Today's leader in the Brazilian sugar cane industry is COSAN, a conglomerate lead by Rubens Ometto, and producing over 1 billion litres of ethanol per year.
That leadership may soon be challenged by Infinity Bio-energy, a company founded in March 2006 that targets no less than world leadership in ethanol distribution.
Lead by Sergio Thompson Flores, this company, with half a billion dollars in cash to buy sugar cane plants, has already bought 3 plants and announced construction of another 5. By early 2007, it had already invested $230 million purchasing Cridasa (in Espiritu Santo), Usinavi (Mato Grosso do Sul) and Alcana (Minas Gerais).
By the next harvest, it should be milling around 4 million tonnes of cane – but the objective is to mill 28 million tonnes by 2010.
Based on the current productivity – 85 litres per tonne - that should be enough to produces 2.3 billion litres of ethanol.
Infinity's investment comes from international investors, like Stark, Och Ziff Management and Merrill Lynch; and 74% of its capital (around $400 million) is floated on the London Stock Market. On top of that, it plans to get listed on the Brazilian stock market Bovespa in 2007.
It entered Brazil when it took integrated the U.S. 'Evergreen' fund which owned 100% of Alcana and 51% of Cridasa.
Its strategy is to produce in regions that do NOT have a tradition in sugar cane; and Infinity will focus on the south of Mato Grosso de Sul and the north of Espiritu Santo, near the borders with Minas Gerais and Bahia. Construction of 3 new plants is already announced for Mato Grosso do Sul, in the region of Navirai. The next two should be in Espiritu Santo, near Cridasa, and in the south of Bahia.
The logic is that in those areas, the company can lease land much cheaper than in Sao Paulo, where 60% of the sugar cane production is concentrated today.
Apart from sugar cane, the company is studying an investment in biodiesel; where it would concentrate on crops with high oil yield, like mamona and dende.
Within the industry, Infinity's plans are received with mixed feelings. Some hope it will bring extra dynamics and international exposure for the industry . Others fear that their lack of specific know-how may lead to mistakes (some whispering that the R$260 million paid for the Navirai plant are way to much) and hence, a loss of credibility of the Brazilian industry in international markets.

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