Petrobras to Take 45.7% Stake in 4th Largest Sugarcane Processor in Brazil for Biofuels and Bioenergy
Petrobras and Tereos Participações Ltda. (Tereos International) have formed a strategic partnership to invest in Açúcar Guarani S.A. (Guarani), a Tereos group subsidiary, aiming to accelerate its growth in the Brazilian ethanol, sugar and bioenergy industry. Additionally, investments will be increased in technology and in research and development programs for new generations of biofuels.
Petrobras, by means of its Petrobras Biocombustível subsidiary, will acquire stakes in Guarani’s capital stock, and invest, in stages, R$1.6 billion (US$921 million) in it, assuming a price per share of R$5.83. At the end of the investments, it will hold 45.7% equity interest in Guarani, the fourth largest sugarcane processor in Brazil.
Petrobras Biocombustível will bring the group’s expertise in distribution, in manufacturing operations, in logistics, in ethanol and energy marketing, and in research and development to Guarani. Tereos Internacional will contribute to the society via their experience in agribusiness, in sugarcane processing, and in ethanol and sugar marketing. The partnership meets the common goals the partners have to invest in growing their participation in the sugar and energy sector.
The investments will focus on developing a new generation of biofuels and energy cogeneration (the simultaneous generation of electricity and thermal energy from a single source).
The choice to make a relevant investment in Guarani took into account the company’s operating and management quality, as it is a traditional player in the industry and has practices that are compatible with those required by Petrobras; the fact it is located in the State of São Paulo, the biggest ethanol consumer and producer market in Brazil, a fact that will facilitate logistics and synergy with the Petrobras System; the opportunity to participate jointly in the strategic decisions; and the company’s growth project, investing in ethanol production.
Petrobras Biocombustível will become a shareholder in Guarani in three stages:
Initial investment in the amount of R$682 million (US$393 million), through a capital increase in Cruz Alta Participações S.A. (Cruz Alta), a company controlled by Guarani;
Tereos Group has decided to contribute its Indian Ocean sugarcane assets and its European starch assets, as well as Guarani, to Tereos Internacional. After the merger of shares of Guarani into Tereos Internacional, Guarani will become privately held. Subsequently, Petrobras Biocombustível´s holding in Cruz Alta will be converted into a stake of 26.3% in Guarani;
Within a period of up to 5 years, Petrobras Biocombustível has the option to invest an additional R$929 million, through a capital increase, in order to attain a stake in Guarani of 45.7%. Additionally, Tereos Internacional will have the option to invest up to R$ 600 million in Guarani through a capital increase, within 12 months after Petrobras Biocombustível´s investment in Guarani. Petrobras Biocombustível, in turn, also has the right of carrying out further investments to reach a stake of up to 49% in Guarani.
In the bio-fuels area, Petrobras plans to invest US$2.8 billion over the 2009-2013 period to expand production in ethanol and biodiesel mainly in Brazil, in order to meet the increasing domestic and global demand for bio-fuels.