MidnightCall Magazine
In this issue:
- Before the Last Flood — By Norbert Lieth
- Gaza Flotilla: Aggression or Self-Defense? — By Arno Froese
- Far East AsiaTrendsToday – Part III:Geo-prophecy or Geopolitics? — By Wilfred Hahn
News From Israel MagazineIn this issue:
- The Myth of the Al-Aqsa Mosque: Part 1 — By Herbert Novitsky
- ON THE HORIZON:
- Obama Honors Jewish Heritage Month
- Building an Electronic Human Brain
- ‘Iran Critics Must Get Rid of Nukes,’ Says Turkish PM
- Israel Joins Prestigious OECD Club
- Israel Accepted after Unanimous Vote
- Spy Satellite Successfully Launched
Shell Signs $12 Billion Ethanol Deal with Brazil
“It’s a vote of confidence from an oil major for the Brazilian ethanol industry,” said Jonathan Kingsman, managing director of the Lausanne-based Kingsman SA ethanol and sugar consultancy. “I expect more interest from the oil companies in Brazilian ethanol, both in production and distribution.”
The 50-50 joint venture, with almost 4,500 filling stations nationwide, will better position Cosan and Shell to compete with the two top players in the market, state oil giant Petrobras and Ipiranga, a unit of Brazil’s Grupo Ultra.
The deal calls for Cosan to transfer its sugar, ethanol, fuel distribution and energy generation units to the venture, with assets valued at $4.93 billion and debt of $2.52 billion.
Shell will contribute its retail fuel and aviation distribution business, valued at up to $3 billion, and inject $1.63 billion into the merged company in up to two years. In all, the value of the joint venture can reach $12 billion.
Cosan first branched out into the fuel distribution business in 2008 when it acquired U.S.-based Exxon Mobil Corp’s Esso chain of service stations for nearly $1 billion. Cosan also agreed in December to buy a local chain of filling stations called Petrosul for an undisclosed sum.
While the deal will not immediately add to Cosan’s existing cane crushing capacity of about 60 million tons a year, it will give it a deep-pocketed partner at a time when some of its smaller rivals are vulnerable to takeovers.
The companies hope to more than double ethanol output to up to 5 billion liters a year from about 2 billion now, Shell’s downstream director, Mark Williams, said in London, without giving a time frame. The increase would come from takeovers and organic growth, he added.
Oil companies and major global investors have been searching for partnerships in Brazil’s promising ethanol sector, which is largely dominated by family companies with complex ownership structures.
Shell has been looking for opportunities in Brazil’s ethanol industry for years. About 90 percent of all new cars in Brazil are flex-fuel, running on any mix of ethanol and gasoline, making the country a huge market for biofuels.
Other foreign companies have also been looking to Brazil. U.S. agribusiness giant Bunge Ltd. struck a deal in December to buy sugar and ethanol producer Moema for $452 million, while French commodities company Louis Dreyfus said in October it would take over the Santelisa Vale mill for an undisclosed sum.
For Cosan, the world’s largest sugar and ethanol producer, teaming up with Shell could give it access to a vast overseas distribution network and new technologies in ethanol production, an area where Shell has been investing. Shell’s network may help Cosan export more ethanol as output grows.
“We’ll have a partner with an absolutely huge international presence in fuels sales,” Cosen CFO Marcelo Martins said.
The so-called second-generation in ethanol production has yet to reach commercial scale, but some companies are betting on the use of cellulosic material such as bagasse or cane stalks and grasses to make biofuels, in part to move away from making fuel from foodstuffs.
-www.reuters.com
1 February 2010
This report shows the energy of globalization. According to Fortune magazine, Royal Dutch Shell, is the largest business in the world, with revenue close to half a trillion dollars annually. It stands to reason that smaller companies will have to merge in order to exist, or else become casualties of a hostile takeover. In any case, it becomes clearer everyday that globalism is the clear winner. While companies dealing with billions convey their intent to better this world, purify the climate, etc., the bottom line still is more money, more possessions, more power. But in the end, nothing will help, for the Bible says, “Go to now, ye rich men, weep and howl for your miseries that shall come upon you. Your riches are corrupted, and your garments are motheaten. Your gold and silver is cankered; and the rust of them shall be a witness against you, and shall eat your flesh as it were fire. Ye have heaped treasure together for the last days” (James 5:1-3).
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