Another look at sugar power

Context

Brazil’s sugarcane industry has been directly involved in energy production since the country’s landmark ethanol programme was conceived in the mid-1970s to reduce the country’s dependence on expensive imported oil. However, it was only since Brazil’s energy blackout in 2001 that the sector has increasingly entered the electricity business as well, selling excess power generated in the industrial process to local distributors and other companies. Sugar and ethanol mills – which are traditionally self-sufficient in energy – co-generate electricity by burning the residual sugarcane biomass, or bagasse, after the cane juice has been extracted.

As Brazil faces the threat of another energy crisis due to delays in large hydroelectric and natural gas projects, sugarcane co-generation looks increasingly attractive to buyers and sellers alike as a still untapped area of enormous energy potential. With demand now starting to exceed supply, Brazil must add an annual installed potential capacity of 3,500-4,500 megawatts (MW) between now and 2012 – or enough to generate an additional average of 2,600MW per year – to supply the country’s projected growth in energy demand of 4.8 per cent annually, according to forecasts by the government-linked energy research agency EPE. Between 2012 and 2017 Brazil will need to accelerate its investments in installed capacity to 4,000-5,000MW per year in order to generate an annual average of 3,050MW.

While this projection assumes a healthy average annual GDP growth rate of 5 per cent over the next decade, the challenge is nevertheless clear. We have looked in depth into the country’s energy bottlenecks in previous reports, starting with Brazil’s heavy dependence on hydroelectricity and the lengthy delays that have ensued for new planned hydroelectric projects, the country’s natural gas dilemma, its nuclear and coal options, and its solar potential.

Compared to all of these options, however, sugarcane electricity has five crucial advantages:

1. Speedy implementation. One of the main advantages of sugarcane co-generation is the speed with which such projects can be implemented. Unlike hydroelectric plants, co-generation plants can obtain environmental licensing relatively quickly – generally six-nine months after the application is first submitted. The process of building and implementing co-generation projects currently takes around two years, less than the average three years needed to construct power plants that use other fuels and the five years required for a large hydroelectric plant. Moreover, the new mills currently being built generally have state-of-the-art co-generation equipment installed from the outset.

2. Ample energy. Sugarcane co-generation has enormous power generation potential. Local mills, with an installed potential capacity of roughly 5,300MW, currently generate only about 1,800MW of average surplus energy – or roughly 3 per cent of the country’s total electricity demand, according to estimates by the country’s leading sugarcane producers’ association, Unica. The energy sold to third parties has been even smaller. As of 2007, just 635MW of average electricity had been sold through various government initiatives and auctions.

Source: Cogen SP.

Nevertheless, if the mills in the four centre-south states of Sao Paulo, Minas Gerais, Goias and Mato Grosso do Sul alone were fitted with the proper equipment and transmission lines, the sector would have an installed potential generation capacity of 14,800MW: more than the world’s largest existing operational hydroelectric plant, Itaipu, with 14,000MW of installed capacity. The industry would then be able to supply an average 10,200MW to the national grid by 2015, or an estimated 15 per cent of Brazil’s projected energy needs, according to recent studies jointly conducted by the Energy Ministry and other regulatory agencies. To put this figure into perspective, Brazil’s long-awaited Santo Antonio and Jirau hydroelectric projects on the Rio Madeira will have an installed capacity of just 6,500MW, with the potential to supply an average 4,050MW annually into the national electricity grid.

3. Seasonality. Electricity is co-generated from Brazil’s main centre-south sugarcane belt in the drier months of April to November, the period in which the nation’s reservoirs generally fall to their lowest levels. The addition of sugarcane electricity can thus provide much-needed security to the national electricity grid. Every 1,000MW that can be injected into the country’s southeast grid is the equivalent of raising the water levels in the country’s reservoirs by 4 per cent, according to estimates by Unica. This is no small matter because the southeast region – home to both Sao Paulo and Rio de Janeiro states – alone accounted for over half the country’s energy demand in 2007, according to the EPE. As average water levels in the nation’s reservoirs fell to just 44 per cent by December 2007, the Lula administration avoided power rationing only by keeping the country’s expensive fossil fuel-fired thermoelectric plants activated between January and April this year at an additional cost of R$1 billion to the Brazilian taxpayer. As of early September the Brazilian real was trading at R$1.66 to the US dollar.

4. Competitive costs. The overall economic costs for sugarcane co-generation projects are increasingly competitive with other energy sources, as easily accessible hydroelectric projects close to the industrialised south and southeast regions have already been built. That said, the capital costs of installing co-generation equipment are not cheap for individual millers, averaging between R$2.5 million and R$3.5 million per MW installed, according to local companies.

However, once co-generation equipment (such as high-pressure boilers) is installed, sugar and ethanol mills can sell electricity for 20 per cent less than the same electricity generated from a hydroelectric plant, at an average of R$105/MW hour (MWh) with a 13 per cent annual return on investment, according to Rio de Janeiro-based consultancy PSR Inc. To put this in perspective, it costs three to five times more per MWh for Brazil to keep its fossil fuel-based thermoelectric plants active. In February this year the average price for running diesel-fired plants hit R$560/MWh while the equivalent cost for less expensive but more polluting plants using other fossil fuels was R$325/MWh.

5. Diversified producer base in the centre-south. Another big advantage for co-generation is the location of Brazil’s main sugarcane production in the country’s centre-south states. Brazil has roughly 210 existing and planned mill projects in the main centre-south states of Sao Paulo, Minas Gerais, Goias and Mato Grosso do Sul that can be connected to the national grid by 2015, alongside dozens of mills in other cane-producing states such as southern Parana state. Meanwhile, most of the country’s new hydroelectric capacity will be built in the Amazon basin, which will result in higher transmission costs for sending electricity to the country’s more industrialised south and southeast regions. In addition, the diversified producer base permits diversification of risk to an extent which is impossible with the country’s large planned hydroelectric projects.

Some drawbacks

However, co-generation has its drawbacks. For investors, one of the disadvantages is that plants cannot operate during the three-month hiatus in the cane harvest, which usually runs during the rainiest months of January, February and March. This often impedes the signing of contracts between sugarcane millers and companies that need a guaranteed year-round supply, such as construction materials companies that are heavily dependent for their electricity on natural gas supplies delivered from Bolivia. The fragmented nature of Brazil’s sugarcane sector, in which the majority of the country’s mills are still family run, has also led to lengthy, time-consuming negotiations that often fall apart at the last minute. Funds such as the ABN Amro-run InfraBrasil infrastructure fund – which has invested in sugarcane biomass co-generation projects – have in turn found it necessary to create new companies and contracts to isolate themselves from any potential liabilities arising from exposure to the mill’s principal business of producing and selling sugar and ethanol.

Brazil’s current electricity auction model continues to favour bids by thermoelectric plants that can be activated simply in emergencies, rather than those that must operate part of every year, since such plants do not have to factor in the cost of yearly feedstock as part of their operating costs. When and if the plants are activated in times of emergency, the feedstock costs are passed on to the Brazilian taxpayer. For more on the long-term problems provoked by this auction model, see the trusted judgements in our recent coal report. This, in turn, makes it hard for sugarcane producers to compete with plants run on petroleum derivatives as well as with hydroelectric plants, save on special government auctions set aside for alternative energy sources.

On the producer side, local millers for their part have long warned of three main obstacles that have prevented them from investing more heavily in co-generation. First, existing mills that retrofit their equipment to improve co-generation capabilities have had to reapply for an entirely new set of environmental licences even if nothing else was altered at the mill, adding to bureaucratic delays and delaying participation in government auctions. Second, mills have been responsible for installing their own transmission lines to the grid, a cost that many producers deemed prohibitive, considering the mill’s distance from existing transmission substations.

Third, financing the installation of more efficient boilers and other co-generation equipment is an expensive proposition, especially in a nation with some of the world’s highest real interest rates and at a time of low global sugar prices. The majority of existing mills – even in Brazil’s largest sugarcane state of Sao Paulo, which accounts for roughly 60 per cent of the country’s total sugar and ethanol output – continue to use very inefficient 21 bar steam boilers to burn the bagasse. This severely limits the potential of the sector unless more financing can be accessed and the government sets higher ceiling prices for biomass energy. Moreover, soaring steel and other input prices have led to an overall price rise for boilers and other equipment of about 24 per cent in the past 12 months, according to August 2008 estimates by Brazil’s leading sugarcane equipment manufacturer Dedini (which has a roughly 35 per cent market share of the co-generation market).

Brazilian producers do not yet take advantage of all the potential biomass available to them: they currently use just two-thirds of the sugarcane plant (sugar and bagasse), while leaving the remaining one-third, which is composed of leaves and stalks, to nature. If the sector began co-generating electricity via the additional biomass, returns from co-generation could theoretically be doubled. On the other hand, there are additional costs of gathering the remaining biomass and researchers also warn that some of this matter should be left in the fields to fertilise and protect the soils from degradation.

Government softens stance as energy crisis hits

The government paid little heed to the complaints of local producers until the disappointing results of its much touted June 2007 alternative energy auction, for which the Lula administration had had high hopes. While 42 sugarcane mills registered for the auction with a total of 1,504 MW installed capacity of electricity generation to sell, just a third of that was bought at an average price of R$135.85/MWh. The results were widely seen as an embarrassment for an administration that rose to power partly by lambasting the previous government’s handling of the 2001 energy blackout, especially as water levels in the country’s reservoirs began falling throughout the last quarter of 2007.

Months of arduous negotiations between government officials and the sugarcane sector ensued, as the government sought to coax more millers to sell energy at future auctions and also announced plans for the country’s first ever biomass auction, without giving in to all the cane sector’s demands. Rains returned to Brazil in the first quarter of this year, however, making the threat of short-term energy rationing increasingly remote. In turn, this steadily eroded the bargaining power of the producers despite strong economic growth of 5.8 per cent in the first quarter of the year.

In August 2007 the Lula administration – in tandem with the Sao Paulo state government – finally settled on the following initiatives to sweeten the pot for local millers:

1. Regulation: environmental permitting and transmission tariffs. The Sao Paulo government reduced the time for granting environmental licensing of mills that were retrofitting co-generation equipment to an average 30-day wait, rather than the former 180-210 day wait, according to Cogen SP. The cost of obtaining environmental licences was also trimmed by at least 50 per cent, in addition to existing tax breaks. Since 2003, for example, the Sao Paulo government has offered partial exemption from the inter-state circulation tax (ICMS) of 18 per cent for the acquisition of capital goods, with boilers, turbines and other pieces of equipment being taxed 12 per cent, 8.8 per cent and 5.6 per cent respectively. In addition, in 2004, Brazil’s electric energy regulatory agency Aneel passed a resolution granting a discount of up to 50 per cent in distribution and transmission costs for renewable energy sources, including sugarcane-based co-generation. This resolution resulted in an average 15 per cent discount in the final price for buyers.

2. Better financing conditions. Brazil’s state-owned development bank BNDES has now agreed to finance new, more efficient co-generation equipment – notably 90 bar steam boilers which cost around R$50 million apiece for a 3 million tonnes/year sugarcane mill – at low interest rates of 100 basis points (bps) over Brazil’s basic long-term interest rate (TJLP). Less efficient equipment such as 70 bar boilers will be financed at slightly higher interest rates of 150 bps points over the TJLP. In addition, 100 per cent of this equipment could be financed for up to 14 years. Financing for transmission line installations has been granted similar terms, with interest rates that are 130 bps above the TJLP and loan terms of up to roughly 14 years. However, only 75 per cent of the cost of these investments in grid connectivity can be financed, according to Cogen SP.

3. Transmission auction for mills. The government also agreed to hold a transmission auction – originally scheduled for July 2008 but now postponed until October – for contractors to build and operate transmission lines across the longer distances and more rugged terrain of the states of Mato Grosso do Sul and Goias. Mills in these states are expected to have a potential 2,900MW of installed capacity to inject into the national grid by 2013. The proposed substation and transmission lines are currently forecast to come online in July 2010. Even if the operation of the grid is delayed by unforeseen circumstances, mills that sell energy at the government auction have been assured that they will be fully compensated for the value of their contracts.

4. Higher auction price and guaranteed sales. After months of back-and-forth negotiations, the government set the final ceiling price for its first biomass auction at R$157/MWh, lower than many producers had hoped but higher than the minimum R$150/MWh currently needed for new, large-scale sugarcane mills to make a profit, according to calculations by local producers. That price was also higher than recent prices at other government auctions, as illustrated by the chart below.

In another concession to the sugarcane sector, the Brazilian government, via the Chamber of Electrical Energy Sales (CCEE), agreed to assume the cost of buying all energy sold at the country’s first biomass auction. In the recent Jirau hydroelectric auction, by contrast, the winning companies had to assume the risk of selling any excess energy they generated (over the amount the regulated market would pay for) on the free market.

Mixed results for Brazil’s first biomass auction

With many producers uninspired by the ceiling price, sales at Brazil’s first biomass auction, officially called the Reserve Energy Auction, on 14 August, were lower than expected. Less than a third of the 96 mills that were authorised to sell at the auction actually took part, selling an average 23MW in generation for 2009 (from an installed capacity of 229.5MW) and 548MW by 2010 (from an installed capacity of 2,149.9MW), or just 26 per cent of the total on offer. According to independent energy analyst Instituto Acende Brasil, the country still faces a projected “structural energy deficit” of 977MW for 2009 after the results of this auction if GDP continues to grow by around 5 per cent per year.

Nevertheless, some progress was achieved. In a notable first, one of the country’s largest sugarcane groups Acucar Guarani (a subsidiary of French sugar giant Tereos) formed a partnership with power company Tractebel (a subsidiary of Belgian-based energy group Suez Energy)[ to sell an average of 20MW for the average price of R$158.11/MWh across a 15-year period, after earmarking nearly R$120 million to invest in new co-generation capabilities.

Other winners included Brazil’s largest sugar and ethanol group Cosan, which agreed to a R$1.5 billion deal to sell energy for R$156.05/MWh over the same period, but from only three out of its 18 Sao Paulo-based mills. However, the largest volume sold came from ethanol startup Brenco (backed by US venture capitalists Vinod Khosla and Ron Burkle), which closed a R$2 billion deal to sell an average of 108MW from 2010 on. The firm was aided in part by lower co-generation costs for its four new large-scale 3 million tonne/harvest sugarcane mills that will begin coming online in 2009 and 2010, as well as by the government’s offer to hold a transmission auction for Goias-based mills.

The producers that declined to sell in the end have warned that the ceiling price needed to be 20 per cent higher, or around R$180/MWh, to make auction sales viable for them. Lingering uncertainties regarding the regulatory issues surrounding transmission lines, another upcoming auction now scheduled for September (to sell energy to be delivered from 2011), the prospect of growing private sector sales and finally the penalty of heavy fines imposed on sellers who failed to deliver the energy on time also played a part in the lower-than-expected sales volume.

Low risk of energy rationing

With an economic slowdown already starting to affect the economy as interest rates rise (a subject we have discussed in depth in a recent report, the risk of energy rationing in Brazil is looking increasingly remote. Further helping the energy outlook, the Lula administration in late June announced new regulations that mandate higher requirements for water levels in reservoirs during November and March, as well as the immediate activation of thermoelectric plants if water levels fall too low.

While this is likely to keep Brazil’s lights on and factories humming, the current government policy comes at the expense of a more dedicated sugarcane policy that would help more traditional mills sell their energy to third parties, especially at a time of tightened credit lines and low global sugar prices. Despite the current regulatory environment, we believe that future biomass auctions will see higher prices, as electricity prices rise on tighter generation capacity over the next five years. Unfortunately, the Lula administration may well not hold another biomass auction in the next 12-18 months, unless forced to reconsider by greater-than-anticipated delays in natural gas and hydroelectricity projects or the vagaries of rainfall across Brazil in this timeframe.

Private sector market heats up

The regulated market – which accounts for about 73 per cent of the national energy market – is not the only place where local producers can sell their electricity. In the past year the unregulated or free market has become another area of increased opportunity for co-generation sales. About 30 sugarcane groups have begun to sell energy to individual companies and distributors since last year, with more looking to take a share of this potentially lucrative segment. Brazilian utilities are also starting to evince growing enthusiasm for biomass electricity. Among the most recent deals announced:

• In July 2008 the Sao Paulo-based Equipav milling group (currently the largest generator of bioelectricity in Brazil) closed a R$250 million deal with pulp and paper producer International Paper to deliver an average 24MW per year for the next 12 years.

• In addition to its partnership with Acucar Guarani, power firm Tractebel in June 2007 invested R$160 million to build a Sao Paulo-based sugarcane mill in partnership with Dedini Agro. This mill is expected to generate 70MW of energy from 2010 on. The company has announced that it expects to add more biomass investments to its portfolio in the near term.

• On 13 August Parana’s state-run power firm Copel announced plans to invest R$260 million to generate 120MW through sugarcane co-generation. The firm is looking to take a 51-60 per cent stake in any partnership with local millers.

• On 21 August Cosan announced that it had signed a R$500 million, 15-year deal with one of Brazil’s largest private energy firms, CPFL, to deliver 2.9 million to 3.6 million MWh. The deal is expected to require investments of roughly R$190 million.

• CPFL has also created a subsidiary, CPFL Bioenergia, that is evaluating more than 500MW in sugarcane co-generation projects. The firm told shareholders in a recent conference call that it believes Brazil’s sugarcane sector has the potential to account for 15 per cent of the country’s energy mix between 2015 and 2020, up from just 3 per cent today.

• Energias do Brasil (EDB), a subsidiary of Portuguese power firm Energias do Portugal (EDP), is reported to be evaluating minority stakes in sugarcane co-generation projects in Mato Grosso do Sul state that could produce up to a combined 320-400MW with estimated investments of R$1 billion by 2012. In the first quarter of this year EDP created a renewable energy subsidiary, Enernova, which will invest in biomass, wind and small hydro projects not just in Brazil but across all of South America.

• Local sugarcane entrepreneur Maurilio Biagi Jr, who sold one of his mills to Cargill in 2007, announced plans in August to invest US$250 million in co-generation equipment in order to quadruple the current 50MW output of his mills to 200MW. These plans assume that the private sector will purchase bioelectricity for higher prices than those of government auctions.

In addition to the private market, sugarcane mills can sell carbon credits to international markets, another potentially attractive revenue stream. Of the 112 Brazilian electric sector groups selling carbon credits on the international market as of mid-2007, 50 were sugarcane bagasse co-generation plants.

Trusted Judgement

Brazil’s first biomass auction in August 2008 was a big step forward

Adriano Pires, Director, Brazilian Centre of Infrastructure (CBIE)

The biomass auction was an important step forward for Brazil since the prices offered to the final consumer were reasonable, and the country needs to diversify its energy sources. For the next five years, until the large planned hydroelectric projects come online, Brazil will not be able to increase its energy supply substantially. This is likely to push the country’s electricity prices higher during this time. Equally important, power generation companies such as Tractebel entered the auction in partnership with sugarcane mills. This is an interesting model and should also help turn sugarcane energy into a viable power source, since sugarcane producers generally concentrate on producing sugar and ethanol, but power companies focus on electricity as their core business.

Antonio Carlos Fraga Machado, President, Brazil’s Chamber for Electrical Energy Sales (CCEE)

Brazil’s biomass auction was quite important because it helped guarantee the country’s energy security, using an energy that is clean, renewable and alternative. The auction rules were also quite well structured. The government wanted to offer total security to a sugarcane mill for its energy sales by setting a high ceiling price for generators at R$157/MWh but a low final consumer ceiling price of R$61/MWh [or roughly 15 per cent less than the R$71/MWh sold on the Jirau hydroelectric auction]. This was an interesting model and it is the first time an auction was structured this way. The CCEE has agreed to sell all the excess energy that is not bought by the consumer on the spot market. The auctions should in future help offer guarantees to investors that will allow them to invest in sugarcane co-generation.

But higher prices are needed to entice more producer participation

Luiz Felipe Jansen Mello, Investor Relations Manager, Cosan

The results of the biomass auction were a bit disappointing for the government, which had been hoping for a higher participation rate. But the fact that interest in the auction was quite sparse may prove beneficial by encouraging the government to offer higher prices in the future. At the beginning of the year, the government was talking about offering a price of R$180/MWh, since the level of water in the reservoirs was so low. But then the rains came, and so the government’s position kept getting stronger as the months passed. If the government does not offer attractive prices in the future, however, then mills will continue as they have in the past. That is bad for us, and bad for the country.

We are now trying to obtain financing from the BNDES for more co-generation investments, and we have sold energy at the government auction as well as via bilateral contracts. But the point is that we have to amortize all these investments. Cosan has a total of 1.3 gigawatts that can be sold, which will total some R$3.5 billion in investment. We estimate that we need investments of R$2.5 million per MW. We have three mills that will begin delivering energy by 2009 and another three that will start delivery in 2010. The revenue from co-generation is very stable and will give stability to our cashflow, something that we are looking for.

While the risk of energy rationing is low, costs are rising and a potential shortfall still exists

Claudio Sales, President, Instituto Acende Brasil

The risk of energy rationing for 2009 is now very low, since the government will initiate plans to activate its thermoelectric plants and prevent this from happening. However, the cost of running these plants is exorbitant, and is then passed on to the Brazilian consumer. For example, diesel prices are R$600/MWh compared to the average R$155/MWh sold in the biomass auction for sugarcane co-generation. Moreover, energy costs are also rising on the unregulated market, a trend that will continue due to the rising prices of petroleum derivatives and increased hydroelectric plant construction costs.

The results of the biomass auction were a promising step, but also partially frustrating because a structural energy shortage of over 900MW still exists for 2009. Another biomass auction would help the scenario, but the government has to do other things as well. For example, the next big hydroelectric plant scheduled to come online, Estreito, [on the border of Maranhao and Tocantins states] with a capacity of 1,087MW is supposed to enter operation by the end of 2010, but there have been lots of interruptions and judicial actions to stop construction due to environmental issues. The government must deal with this, as well as the potential for disruptions of natural gas deliveries among other issues. I am also concerned about Paraguay’s attempt to make Brazil renegotiate the sales of energy from the [joint Brazil-Paraguay] Itaipu hydroelectric plant, though I believe Brazil should stand firm and make it clear that the rates should not be changed.

Wrap

Sugarcane co-generation is one of Brazil’s best and cheapest bets for diversifying its energy mix in the short to medium term, offering the country a respite from expensive imported diesel, coal and natural gas products as well as a way to sidestep lengthy delays in large hydroelectric projects. Moreover, as the sugarcane sector continues to expand on investor bets that ethanol will become a world commodity in a time of triple-digit petroleum prices, co-generation is a natural byproduct that will come into its own by 2010.

In the short term, however, the Lula administration has not yet committed to a rational and comprehensive policy of fully backing sugarcane co-generation by offering the majority of local producers a price that is compatible with their financing and profitability needs, especially now that the tighter credit environment has pushed up the cost of capital. This is likely to leave much of the investment up to private sector players in the next one to two years, which will be potentially lucrative for individual companies, but will not help the sector grow to its full potential. Nevertheless, overall nvestment in sugarcane co-generation will add stability and depth to the revenue streams of ethanol producers and utilities alike on a three- to seven-year view.

Longer-term outlook

In the long term, complications may arise for the sector as new technologies come onstream. If and when second-generation ethanol takes off, for example, sugarcane biomass will face increasing competition that will drive up the cost of the raw material and therefore prices for this energy. Local sugarcane groups including Cosan and Infinity Bio-Energy have also started to explore the biomass pellet market as an intriguing added-value export for the EU market. If it takes off, this could boost sugarcane millers’ revenues, but also potentially push up prices for bagasse and increase costs for energy generation. If and when wind and solar power generation become cost competitive, they could also partially supplant sugarcane co-generation as a large-scale energy source.

Relevant Companies

Brazilian Biofuels Companies

Name	Description
Areva Koblitz	Brazilian biomass and small hydro equipment manufacturer controlled by French nuclear power firm Areva, with projected revenues of R$250 million for 2008. Areva took a 70 per cent controlling stake in Sao Paulo-based Koblitz in January 2008.
Dedini S/A Industrias de Base	Brazil's leading sugarcane equipment maker. Has 35 per cent of the country's sugarcane cogeneration equipment market with an estimated R$800 million in revenues from this segment in 2008, up 25 per cent from the preceding year.
Petrobras (PETR4:BZ)	Brazil's state-run oil firm - which plans to export a target 4.75 billion litres of ethanol by 2012 - inaugurated a new biofuel unit in mid-2008 to oversee alternative energy investments. In May 2008, Petrobras took its first 10 per cent minority stake in an ethanol distillery in Goias state, alongside Japanese trading partner Mitsui which took another 10 per cent stake. By year-end 2008, the oil firm should also have 3 operational biodiesel plants yielding a combined 170 million litres per year. Petrobras' plans for 2 ethanol-dedicated pipelines have been perennially delayed, with the timeline for the first pipeline now pushed to 2009.
Brasil Ecodiesel (ECOD3:BZ)	Brazil's largest biodiesel maker with six operational plants that can produce roughly 640 million litres of biodiesel per year. The firm has experienced difficulties in delivering biodiesel as feedstock costs, notably soyoil, soared in 2007/08. After persistent market rumors last year that Petrobras was interested in acquiring Brasil Ecodiesel, the troubled firm underwent financial restructuring starting in August 2008 and in Q3/09 reported a net profit of R$5.25 million.
Adecoagro	Argentine agribusiness firm backed by George Soros with investments in sugarcane, coffee, cotton and soy among other sectors. In June 2007, the firm announced plans to invest an additional $900 million in at least three more Brazilian sugarcane mills located in Mato Grosso do Sul state. Adecoagro purchased its first Brazilian ethanol and sugar mill located in Minas Gerais state in 2005.
Brazilian Renewable Energy Co. (Brenco)	Ethanol company backed by venture capitalists Vinod Khosla, Stephen Case, supermarket magnate Ron Burkle and Brazilian asset manager Tarpon Investments among others. The firm has plans to invest R$5.5 billion by 2015 in 10 ethanol-only distilleries with the capacity of producing 1 billion gallons (3.8 billion litres) of ethanol. Currently, the firm has 5 mill sites being implemented in Goias, Mato Grosso do Sul and Mato Grosso, with plans to begin operations at its first four mills in the upcoming 2010-11 season. In October 2009, Brenco - which was hit hard by the global financial crisis and is currently undergoing financial restructuring - signed a memo of understanding with Odebrecht's ETH Bioenergia to consider a merger.
Alcotra do Brasil	One of Brazil's largest ethanol trading companies, with roughly 800 million litres exported in 2007. A subsidiary of Belgium based ethanol company Alcogroup. The company bought its first sugarcane mill - with a cane crush of roughly 2 million tonnes of cane - in Minas Gerais in March 2008.
Bunge (BG:US)	The US-based oilseeds processor and trading firm in September 2007 acquired its first Brazilian sugarcane mill, Santa Juliana, in the key centre-south cane state of Minas Gerais, with the capacity of crushing 1.6 million tonnes of cane. Bunge - which has significant investments in US corn ethanol - has plans to expand Santa Juliana mill's cane crush to 4 million tonnes. The firm has also announced plans to build three new sugarcane mills in centre-north Tocantins state. Bunge's Brazilian subsidiary was hit hard by lower fertilizer prices in 2009, but as of October, was in talks to potentially acquire key Sao Paulo milling group Moema.
Cargill	The US multinational trader (and Brazil's largest sugar exporter) in June 2006 took a 63 per cent controlling stake in its first ethanol mill, Cevasa, in Sao Paulo. The firm - which has also taken a 43.75 per cent minority stake in a Minas Gerais mill, Itapagipe - also owns an ethanol dehydration plant in El Salvador in partnership with major Brazilian sugarcane trading and logistics company Crystalsev (controlled by Santelisa Vale)
LDC Sev	A subsidiary of French multinational commodities trader Louis Dreyfus, with plans for an IPO on the Bovespa in three to five years' time. In October 2009, the company completed its acquisition of a roughly 60 per cent controlling stake in Brazil's second-largest and financially-troubled sugarcane producer Santelisa Vale. The merged company now has 13 operational mills across Brazil with a crush capacity of 40 million tonnes of sugarcane, second only to industry leader Cosan, with a capacity of producing 2.7 million tonnes of sugar and 1.5 billion litres of ethanol. In addition, LDC Sev has a controlling stake in trading company Crystalsev.
ETH Bioenergia	A subsidiary of Latin America's largest construction company Odebrecht, the company was formed in July 2007 with a promised R$5 billion in capital to grow into one of Brazil's largest ethanol and sugar firms over the next decade. The firm has four operational mills in the 2009-10 season in Sao Paulo, Goias and Mato Grosso do Sul, with plans to launch a fifth mill in Sao Paulo in November. Japanese trading firm Sojitz in October 2007 purchased a 33.3 per cent stake in ETH for 9.2 billion yen (US$80 million). ETH is now in talks to potentially acquire troubled ethanol firm Brenco to create the world's largest ethanol producer. ETH currently has plans for an IPO on the Bovespa in 2012.
Noble Group	Asia's largest commodities trader in 2007 entered Brazil's sugarcane sector with its acquisition of a Sao Paulo mill, followed by investments of roughly US$300 million in the construction of a second Sao Paulo mill. Noble also has investments in sugar logistics at Santos Port and is reportedly in talks to acquire more Brazilian cane mills such as one being sold by Infinity Bio-Energy.
Clean Energy Brazil (CEB) (CEB:LN)	Clean Energy Brazil (CEB) - an innovative firm that aims to take minority stakes in Brazilian sugarcane firms to help them grow - raised £100 million in December 2006 in an initial share offering on the London AIM and has since taken minority shares in key Parana milling group Usaciga and Sao Paulo milling group Unialco. CEB is a partnership formed in part by London-based sugar brokerage Czarnikow and London-based investment bank Numis.
Infinity Bio-Energy (IBI.LN)	Filed for bankruptcy protection in May 2009. Raised US$516 million on the London AIM in May 2006. The firm currently has a cane-crushing capacity of 9.5 million metric tonnes per harvest, and has inked agreements to build plants in Panama and the Dominican Republic. The Bermuda-incorporated firm in late June also agreed to inject roughly US$200 million into five bankrupt state-owned sugar mills in Jamaica.Has an estimated R$1 billion in debts.
Sao Martinho (SMTO3:BZ)	Sao Martinho, one of Brazil's most efficient sugarcane groups, was the country's second ethanol and sugar group to list on the Bovespa, raising R$423 million in its IPO on February 2007. The company in mid-2008 announced plans to triple sugarcane production by 2020 to 30 million metric tonnes of cane. The firm sold a 10 per cent stake in its Boa Vista mill to Mitsubishi to help secure a 30-year supply industrial ethanol supply contract with the Japanese firm in March 2007.
Cosan (CSAN3:BZ, CZZ.N)	Brazil's largest ethanol and sugar producer - with roughly 8 per cent of the sector's output - was also the country's first ethanol firm to list on the Bovespa on November 2005. After Cosan incorporated a Bermuda-based holding company to give special voting power to its principal shareholder, the firm in September 2007 also debuted on the NYSE, raising US$1.2 billion. Due in part to minority shareholder worries over corporate transparency, the company's Brazil stock was the Bovespa's worst-performing stock in 2007.
Acucar Guarani (ACGU:BZ)	A subsidiary of French sugar giant Tereos and one of Brazil's largest sugar and ethanol companies, with a cane crush of 12.7 million metric tonnes of cane in the 2007-08 harvest. The company is strong on the Brazilian retail sugar market, and also owns a 75 per cent controlling stake in Mozambique sugar company Companhia de Sena. Partnership with power firm Tractebel Energia led to sales of an average 20MW in generation over a 15-year period on Brazil's first biomass auction.

Power companies - with sugarcane cogeneration projects

Name	Description
Tractebel Energia (TBLE3:BZ)	Subsidiary of Belgium-based energy multinational Suez Energy. Part of a consortium (including construction giant Camargo Correa and state-run power companies Eletrosul and Chesf) that won a concession in May 2008 to build the 3,300MW Jirau hydroelectric project on the Madeira river in the Amazon. Bioelectricity investments include a partnership with Acucar Guarani, as well as a joint-venture sugarcane mill that should generate 70MW from 2010 onward.
Energias do Brasil (ENBR3:BZ)	Subsidiary of Portuguese power firm Energias do Portugal. Generates, distributes and sells energy in the states of Sao Paulo, Espirito Santo, Mato Grosso do Sul, Tocantins and Ceara. Evaluating a potential 400MW in sugarcane cogeneration projects by 2012 in Mato Grosso do Sul state via recently-created renewable energy subsidiary Enernova.
CPFL Energia (CPFE3:BZ)	One of Brazil’s largest private power companies, with operations in Sao Paulo, Rio Grande do Sul, Parana and Minas Geraias. Has a 14 per cent national market share in distribution and 23 per cent market share in sales. Evaluating more than 500MW in potential sugarcane cogeneration projects, via recently-created subsidiary CPFL Bioenergia.
Copel (CPLE6:BZ)	State-run Parana power company, formally known as Cia. Paranaense de Energia. In August 2008, the firm announced plans to invest R$260 million to generate 120MW through sugarcane cogeneration.