References

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Petrobas invested into sugar and ethanol, hot investment sectors in Brazil

The Brazilian sugar and ethanol sectors are pushing forward with major consolidation investments, with a new JV between Petrobas, the Brazilian state run oil giant, and Sao Martinho SA, a sugar producer for the production of ethanol. The Brazilian state run company announced Monday that it part with $239 million for the 49% stake in the JV named Nova Fronteira Bioenrgia S.A that is slated to run two mills in the Goias state.

The new ethanol JV is yet again the third biggest investment by an oil giant in the country’s fragmented, but quickly consolidating ethanol sector in which companies are fighting for a portion of the world’s biggest scale sugar based ethanol production hub.  

JOB Economia President, a firm with expertise in sugar and ethanol based in Sao Paolo state, said this new JV investment in ethanol production is an indication of the country’s sugar and ethanol sector’s fastly consolidating and there is abundant space for other similar deals, Julio Borges said. According to Borges, global giants such as Petrobas, BP PLC and Cosan Industria e Comercio SA, the global ethanol and sugar giant, and Archer Daniels Midland are all willing to make additional major investments in Brazil’s ethanol industry, with the market getting an increased controlled by large, well capitalized companies with such investments as a start.

Borges termed the Petrobas investment in the JV as the beginning of similar investments to follow in the sugar and ethanol industry in the country. The JV deal comes in the wake of Petrobas push for a 45.7% stake in Guarani group, a sugar group in the country and the fourth largest, for $911 million last month.

Back in March, Dutch Company, Royal Dutch Shell PLC undertook so far the biggest ever foreign investment deal in Brazil’s ethanol industry with a $12 billion tie up with Cosan, coming in the wake of a previous purchase BP had made in 2008 for a stake in Tropical Bioenergia SA.

Additionally, other similar investments in the sector included the American based Bunge Ltd’s investment in the purchase of Usina Moema Participacoes SA and France’s Louis Dreyfus Commodities buying of Santelisa Vale, a giant sugar and ethanol group in the country, while Cosan invested in local Brazilian milling group NovAmerica.

Monday’s investment is expected to benefit both Petrobas and Sao Martinho, with Petrobas getting the know-how and expertise of a major sugarcane miller, while Sao Martinho benefits from the financial support of Petrobas.

 

22 June 2010.