Almost two years after its formation; Raizen, the joint
venture between Brazil's sugar and ethanol manufacturer,
) and Royal Dutch Shell plc, received unconditional approval from
the country's antitrust regulatory body, the Brazilian Economic
Defense Administrative Board (CADE).
Raizen, a combination of Portugese words for root and energy, was
formed on August 25, 2010 through a binding agreement between
Cosan and Shell. The primary focus of the combined entity was the
production of ethanol, sugar and power along with the supply,
distribution and retail of transportation fuels.
The joint venture, considered to be one of the largest ethanol
producers in the world, is anticipated to have 2.2 billion litres
of annual production capacity and 23 ethanol plants with annual
sugarcane crushing capacity of 62 million tons.
Within the joint venture, Cosan's total contribution in the form
of sugar and ethanol assets, cogeneration plants (7 existing, 2
under construction, 6 yet to be built in 3-4 years), downstream
assets, and stake in Uniduto was roughly US$4,925.0 million. The
company also assumed net debt of approximately US$2,524.0 million
related to assets and in addition, $500 million of additional
debt from BNDES.
Shell's total contribution of US$4,925.0 million included
$1,625.0 million of cash contribution, downstream assets and
aviation fuel businesses in Brazil, interest in logen Energy and
Codexis. These 2G technology assets and earn-out mechanism could
result in a future cash contribution, estimated to be US$300.0
million by Cosan.
In our opinion, the Cosan-Shell joint venture has enabled better
access to ethanol consumer market and resulted in increased
competition in biofuels and fuel distribution businesses.
Cosan currently has a Zacks #2 Rank, translating into a
short-term (1-3 months) Buy rating while its nearest competitor
Archer Daniels Midland Company
) bears a Zacks #3 Rank, indicating a Hold rating.
ARCHER DANIELS (ADM): Free Stock Analysis
COSAN LTD-A (CZZ): Free Stock Analysis Report
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