Tag Archives: ethanol

New investments signal turnaround in Brazil ethanol industry

Improved returns from sales at home and abroad are unleashing the first major flurry of investment in Brazil’s struggling ethanol industry in nearly a decade, with at least nine companies expanding or building new capacity.

Medium-sized private mill Rio Verde said it would double ethanol output over the next two years to capture resurgent biofuel demand.

Cargill and Odebrecht are the biggest of at least eight other companies investing in expansion in the past months, even as Latin America’s largest economy sinks deeper into its worst recession in over a decade.

The real’s collapse has improved Brazilian ethanol’s edge abroad, and recent increases in refinery-gate prices by state-run oil company Petrobras and taxes on gasoline have boosted domestic demand for the biofuel to record levels.

Once completed, Rio Verde’s expanded output will account for only a small portion of Brazil’s total capacity, but this and the other projects are the strongest sign yet that ethanol has turned a corner after government subsidies of gasoline prices could no longer be sustained. 

“The outlook for ethanol has brightened, even as the broader economy looks more difficult,” said Luis Galan, operations manager at the Rio Verde mill in Goias state.

Earlier this year, Rio Verde started commissioning its new ethanol unit, which will produce 180,000 liters (47,500 gallons) a day, in addition to its current 300,000 ltr/d output. Another 190,000 ltr/d will come in the second phase in 2016 or 2017.

The total 670,000 ltr/d comes to 0.5 percent of Brazil’s capacity of 115 million ltr/d.

To be sure, many of Brazil’s 360 mills are in no position to start building new plants as they struggle with stifling debt accumulated over the past decade. Many are still skeptical that the government has abandoned its practice of suppressing fuel prices to curb inflation, which helped drive nearly 80 mills out of business in the past several years.

But the government is quickly running out of ways to replace falling revenues in the deepening economic downturn. This makes additional tax increases on gasoline more likely, which would further strengthen ethanol’s advantage at the pump.

“The sector is finally turning around,” said Alexandre Figliolino, head of agribusiness at investment bank Itau BBA.

Petrobras to Pay R$ 2.2 billion to ANP – National Oil Agency

Petrobras (PBR) reported today, after the market close, that the Arbitration Court issued on July 2nd, an interim decision on the arbitration proposal by Petrobras regarding the resolution of ANP (National Agency of Petroleum, Natural Gas and Biofuels), which considers the concessions Baleia Anã, Baleia Azul, Baleia Franca, Cachalote, Caxaréu, Jubarte and Pirambu as a single field from the second quarter of 2014.

The interim decision determines that Petrobras starts to deposit quarterly, on behalf of ANP, the controversial “special participations”. Based on the current price of oil and the current production in the field, this amount will be approximately R$ 350 million per quarter. “Although the amount is pending confirmation by the parties, the value previously estimated by the ANP is R$ 2.2 billion”, Petrobras said, stressing that “it is a decision of preliminary nature, given that the arbitrage has not decided on the merits of the matter yet”.

More on Petrobras

Ethanol use in Brazil grows with new rules, says Louis Dreyfus unit

Ethanol producers in Brazil are feeling relief from improving demand, prices with tax incentives and an increase in the amount of fuel mixed with gasoline, according to a unit of Louis Dreyfus Commodities.

“I’m excited about the prospect of demand for ethanol this year,” said CEO Rui Chammas of Biosev in a telephone interview. “The market is reacting to the incentives.”

Sales of hydrated ethanol at gas stations in Brazil rose 32.6% in the first four months of the year, to 5.47 billion liters (1.44 billion gallons), while gasoline sales fell 3.7% after the government reintroduced a tax on fossil fuels that had been discontinued in 2012, showed regulator data.

Consumption has also increased due to a tax exemption in sales in the state of Minas Gerais, as well as the increase in the mandatory blending in the national gasoline, Chammas said. The Biosev is the largest producer of ethanol from Brazil after Raizen Energia.

Most of Brazil’s cars can be fueled with either gasoline or ethanol, and often consumers choose the most cost-effective fuel at the pump.

The country’s ethanol plants suffered from low demand in recent years, hurt by weak demand related to the measures by President Dilma Rousseff like price caps and tax breaks for gasoline in inflation control efforts. Only 36% of the country’s flex cars were fueled with ethanol last year, down from 82% in 2009, according to data from Datagro.

Since 2001, 49 producers were forced to close the doors and 67 others are under bankruptcy protection, according to a report from Unica.

Biosev’s harvest of sugarcane will probably grow in the 2015-2016 season, which began in April, with better weather after years of drought, Chammas said. The company expects to reach between 29 and 32 million tonnes this season, up from 28.3 million in the previous season.

Read More: Sugar and Ethanol Producer? Cosan is much more than that nowadays!

Sugar and Ethanol Producer? Cosan is much more than that nowadays!

Cosan’s most known business is indeed Ethanol and Sugar production. That’s how the company started and they are still the largest producer in Brazil and a major player worldwide. However, due to volatility in these commodities’ prices, Cosan’s management has been diversifying its activities in the last few years and now half of it’s EBITDA comes from other businesses.

Cosan today operates on production, transportation and distribution of renewable energy sources. They prospect land, grow and process sugarcane, distribute fuels, transport and sell sugar on the domestic and international markets and produce and sells lubrificants. It is the world’s first vertically integrated bioenergy company. The below image, shows the different parts of the company:

Cosan Group

 

In the fiscal year ending in March, 31st, 2013, the company reported only 20% of its EBITDA from Raízen Combustíveis, the traditional Sugar and Ethanol business. Revenue and EBITDA were distributed as follows:

Cosan Numbers 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Business above is composed of manufacturing and distribution activities for the Mobil and Comma brands, base oil distribution and the corporate structure of Cosan, except Raízen.

Exchange rate was around BRL 2 for US$ 1 at the end of FY2013.

Cosan Ltd.

The diversified and vertical business model adopted by Cosan provides a much more stable operating environment. Furthermore, Cosan operates with renewable energy and presentes several areas for growth in the next decade or two. Overall, the company deserves a 4-star EBI Rating.

ADR Ticker CZZ
Bovespa Ticker CSAN3, CZLT33
Investor Relations Website http://ri.cosan.com.br/Default.aspx?linguagem=en
Industry* Renewable Energy
EBI Rating 4-star