UPDATE: Brazil Petrobras, Sao Martinho Create Ethanol Joint Venture

21st Jun 2010 14:06

(Updates with announcement from Petrobras and additional details) By Jeff Fick Of DOW JONES NEWSWIRES RIO DE JANEIRO (Dow Jones)--Brazilian state-run oil company Petroleo Brasileiro SA (PBR, PETR4.BR), or Petrobras, will take a 49% stake in a new ethanol joint venture with closely held sugar producer Sao Martinho SA, Petrobras's second major move into the sector in 2010. Petrobras said that it will pay 420.8 million Brazilian reals ($239 million) for the stake in the joint venture company, which will be called Nova Fronteira Bioenergia S.A. Nova Fronteira will operate two mills in Goias state. The deal marks the third big play by an oil major in Brazil's fragmented--but rapidly consolidating--ethanol industry, with companies jockeying for a slice of the world's largest center for sugar cane ethanol production. Monday's deal follows Petrobras's move in May to take a 45.7% stake in sugar group Guarani for 1.6 billion Brazilian reals ($911 million). Guarani is Brazil's fourth-largest sugarcane miller. In February, Royal Dutch Shell (RDSA.LN) made the largest foreign investment ever in Brazil's ethanol industry in a $12 billion tie-up with Cosan Industria e Comercio SA (CSAN3.BR), the world's largest sugar and ethanol group. That followed BP PLC's (BP) 2008 purchase of a stake in Tropical Bioenergia SA. Nova Fronteira will include Sao Martinho's Usina Boa Vista S.A. ethanol mill and the SMBJ Agroindustrial S.A. greenfield project in Goias state. Usina Boa Vista currently crushes about 2.5 million metric tons of sugar cane annually, with plans to boost capacity to 7.0 million tons by the 2014-2015 harvest, Petrobras said. Petrobras and Sao Martinho will share control of the Nova Fronteira, with each company electing three members to the six-person board. -By Jeff Fick, Dow Jones Newswires; 55-21-2586-6085; [email protected] (END) Dow Jones Newswires June 21, 2010 09:06 ET (13:06 GMT)