Brazilian state development bank invests $85 million in Santelisa; second-largest ethanol producer plans six more facilities, IPO

In Brazil, the state development bank, BNDES, will pay $85 million for new shares issued by Santelisa Vale, the country’s second largest ethanol producer. Santelisa has planned an IPO and has announced an investment in six new sugar and ethanol plants, which will increase its processing capacity to 35 million tons of cane by 2012, up from 19 million today.

In Brazil, ethanol production increased 20 percent in 2007, according to figures released by the the Ministry of Agriculture, Livestock and Supply. Consumption increased, according to a Ministry official, because 90 percent of all new cars sold in Brazil are flex-fuel vehicles. The Ministry projects that 20 new ethanol plants will come online in 2008.

Santelisa Vale’s major comeptitior, Cosan, said that the company is seeking acquisitions to add to its portfolio of 17 ethanol plants, and included a focus on investment in the US. Company officials said that the company’s $1 billion IPO, completed last year, provided the necessary growth capital for the company, which derives 33 percent of its revenue from ethanol production.

Recently, Petrobras announced a slowdown in their expansion strategy as Japan struggles to expand ethanol demand. Earlier, the state oil company had announced plans to build 20 ethanol plants in Brazil in cooperation with Mitsui. Now, the company is going ahead with only three pilot projects until Japan’s market growth rate becomes more clear.

Petrobras and Cosan, have locked horns over a Petrobras plan to build a state-owned pipeline to transport ethanol. “If Petrobras has the logistics, it will have control of the sector and this we don’t want,” said Rubens Ometto Silveira Mello, Cosan’s controlling shareholder and chief executive officer, told Agencia Estado. The proposed ethanol pipeline will run from Goias state to Sao Paulo. The state pipeline will be financed by the Japan Bank of International Cooperation, and the Inter-American Development Bank. Petrobras’ has planned a second pipeline from Goias to Paranagua, a major commodities port.

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