Tereos International is to expand the operations of its sugar and ethanol subsidiary in Brazil, Guarani. Tereos announced plans to invest 767 million reais ($476 million) to expand sugarcane crushing capacity and energy cogeneration of the subsidiary over the next 4 years.
This investment plan will benefit from a long-term 764 million reais financing agreement secured with the Brazilian Development Bank (BNDES) and from the successful completion of Guarani's US$560 million refinancing.
In line with the agreement signed between Tereos Internacional and Petrobras Biocombustível on April 30, 2010 regarding investments in Guarani, Petrobras Biocombustível participated in the financing of these investments by a capital injection of 195.4 million reais on March 31, 2011, increasing its current stake in Guarani from 26.5% to 31.4%. Tereos Internacional will hold the remaining 68.6% of Guarani.
The investment plan contemplates a 3.5 million tons increase in Guarani's sugarcane crushing capacity, from 21 million tons to 24.5 million tons, with an increase in production of approximately 170 thousand tons of sugar and 195 thousand cubic meters of ethanol. It also contemplates a significant 913 GWh expansion in energy cogeneration sales, from 259 GWh to 1,172 GWh per year.
The plan includes investments in Guarani's industrial plants Cruz Alta, Tanabi, São José, and Mandu and Usina Vertente S.A. Approximately half of the total amount to be invested will be directed to increase operational capacity, and the other half to increase energy cogeneration.
Tereos Internacional and Guarani's boards have approved the first phase of the investment plan, amounting to an initial investment of 465 million reais. The initial investments will consist in expanding the sugarcane crushing capacity at São José and Mandu by 1.2 million tons while increasing the cogeneration production of the São José, Mandu, Cruz Alta and Tanabi mills by a total of 651 GWh.
To secure long term funding for its investment plan, the Brazilian Development Bank (BNDES) approved a 764 million reais financial package for Guarani. BNDES funding will not only support the aforementioned expansion investment plan but will also secure additional funding for investments necessary to upgrade Guarani's existing operations.
Together with the above initiatives, Guarani has also concluded a refinancing process by agreeing to a US$560 million syndicated loan. The banking syndicate was coordinated by Rabobank, which was also acting as the Agent Bank, and also includes BNP Paribas, Bradesco, Crédit Agricole, Itaú BBA and Natixis as bookrunners and mandated arrangers. Rothschild acted as a financial advisor, said the Tereos announcement.
