Petrobras, through its Petrobras Biocombustível subsidiary, has formed a strategic partnership with Grupo São Martinho S.A., one of the largest sugar and energy groups in Brazil, to increase ethanol production in Midwestern Brazil, in the State of Goiás. The partners will form a new joint venture company—Nova Fronteira Bioenergia S.A.—which will control the Boa Vista Mill, currently in operation, and the greenfield project SMBJ Agroindustrial S.A., both in Goiás.
With a R$420.8 million (US$238 million) investment, Petrobras Biocombustível will hold a 49% equity stake in the new company. The funds will be used to increase the new company’s production, especially that of the Boa Vista Mill. With current and planned investments, the plant will have its milling capacity expanded from the current 2.5 million tons of sugarcane to 7 million tons in the 2014/15 season.
The disbursement will take place in two stages: the first, for R$257.6 million, after the completion of the due diligence, which is scheduled to occur within 90 days, and the remaining portion up to 12 months later.
According to the CEO of Petrobras Biocombustível, Miguel Rossetto, this partnership represents a strategic alliance aimed to consolidate the company as an important producer of ethanol.
Through Petrobras Biocombustível, Petrobras holds stakes in companies operating out of the sugar and energy industry with a current crushing capacity above 20 million tons of sugarcane per year. Petrobras foresees investments in the order of $2.4 billion in the 2009-2013 period to expand ethanol and biodiesel production, particularly in Brazil, in order to respond to the growth in the domestic and global demand for biofuels.
Grupo São Martinho has crushing capacity for 14 million tons of sugarcane. It has three plants in operation: São Martinho, in Pradópolis (in the region of Ribeirão Preto, state of São Paulo); Iracema, in Iracemápolis (in the region of Limeira, also in the state of São Paulo), in addition to in Boa Vista (Quirinópolis, 300 km away from Goiânia, state of Goiás), and a ribonucleic acid production unit, called Omtek, also in Iracemápolis. The average harvest mechanization rate is 82%, and 100% at the Boa Vista Mill.