Renewable Energy for a Better World
Ethanol | Sugar | Cogeneration
Bio-ethanol: a Green Solution for the Future
Oslo, November 4, 2008
1
Disclaimer
Forward Looking Statements
This presentation contains estimates and forward-looking statements regarding our strategy and
opportunities for future growth. Such information is mainly based on our current expectations and
estimates or projections of future events and trends, which affect or may affect our business and results
of operations. Although we believe that these estimates and forward-looking statements are based upon
reasonable assumptions, they are subject to several risks and uncertainties and are made in light of
information currently available to us. Our estimates and forward-looking statements may be influenced
by the following factors, among others: (1) general economic, political, demographic and business
conditions in Brazil and particularly in the geographic markets we serve; (2) inflation, depreciation and
devaluation of the real; (3) competitive developments in the ethanol and sugar industries; (4) our ability
to implement our capital expenditure plan, including our ability to arrange financing when required and
on reasonable terms; (5) our ability to compete and conduct our businesses in the future; (6) changes in
customer demand; (7) changes in our businesses; (8) government interventions resulting in changes in
the economy, taxes, rates or regulatory environment; and (9) other factors that may affect our financial
condition, liquidity and results of our operations.
The words “believe”, “may”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect” and similar
words are intended to identify estimates and forward-looking statements. Estimates and forward-looking
statements speak only as of the date they were made and we undertake no obligation to update or to
review any estimate and/or forward-looking statement because of new information, future events or
other factors. Estimates and forward-looking statements involve risks and uncertainties and are not
guarantees of future performance. Our future results may differ materially from those expressed in these
estimates and forward-looking statements. In light of the risks and uncertainties described above the
estimates and forward-looking statements discussed in this presentation might not occur and our future
results and our performance may differ materially from those expressed in these forward-looking
statements due to, inclusive, but not limited to the factors mentioned above. Because of these
uncertainties you should not make any investment decision based on these estimates and forwardlooking statements.
2
Agenda
1. Introduction to Management
2. Brazilian Ethanol & the World Market
3. Cosan’s Enhanced Business Model
4. Fighting the Myths
3
Introduction to Management
Paulo Diniz - CFO and Investor Relations Officer
Luiz Felipe Jansen - Investor Relations Manager
4
Agenda
1. Introduction to Management
2. Brazilian Ethanol & the World Market
3. Cosan’s Enhanced Business Model
4. Fighting the Myths
5
‘Sugarcane’
It is a great pleasure to introduce our friend …
• Sugarcane is the prime ethanol
feedstock in Brazil
• Semi-perennial plant: lasts for about 5
crops seasons … with high yields …
and has many benefits over traditional
row crops
• Needs less energy to plant and to
cultivate … root system reduces
erosion … effective carbon uptake …
relatively low defensive & fertilizer
requirements … many varieties
6
The sugarcane evolution
Past, Present & Future shall increasingly favor Cosan
1532
1990 2000
1970
2012
2015
2030
Sugarcane as food - Sugar
Predictable
growth
market
Sugarcane as alternative energy - Ethanol
Sugarcane in the Brazilian energy matrix – Co-generation
Sugarcane as global renewable energy - Ethanol
OPEC
KYOTO / SHORTAGE
Sugarcane as basic input for the Chemical Industry
Facts
Facts
• Proálcool Program
• Biomass in the energy auctions
• Continuous instability over oil exporting countries
• Brazilian E100 car
• Commercial stages of Flex-Fuel
cars in Brazil
• Environmental issues disseminated over several
countries
• Several countries ratifying the
Kyoto protocol
• Strict CO2 emission targets
• End of Proálcool
• Brazilian E25 car
• Environmental and energy laws
in the USA and Europe
• Corn ethanol production in the
USA
Source: Canavialis and the company
• Initial stages of the carbon
credits market
Market with
strong
growth
potential
Future
• Mature carbon credits market
• Corn ethanol economic viable as fuel
• Cellulose used as ethanol raw material
• New technologies for the biomass usage in the
chemical industry
7
-7-
The sugarcane evolution
Modification in the Biomass Processing …
Planted Area
ATR
TSR
Sugar
12.8 tones
12.1 tones
OR
1 hectare
Anhydrous Ethanol
7,018 liters
Tones in the field
110 tones
Tones at the Mill
Bagasse
Energy
85 tones
23.8 tones
22.1 MWh
Anhydrous Ethanol
7,018 liters
Energy
Cellulose + Hemice
Anhydrous Ethanol
7.7 tones
4,894 litros
Lignina
Energy
2.4 tones
5.2 MWh
Energy
Leaves
23.8 tones
Source: Canavialis
22.1 MWh
22.1 MWh
Cellulose + Hemice.
Anhydrous Ethanol
6.8 tones
4,292 liters
Lignina
Energy
1.9 tones
4.2 MWh
8
The sugarcane evolution
Increase on Ethanol Output …
Planted Area
TSR
Sugar
Açúcar
12.8 tones
12.1 tones
OR
1 hectare
Anhydrous
Álcool Anidro
Ethanol
7,018 liters
Tones in the field
200 tones
Tones at the Mill
Bagasse
155 tones
43 tones
Energy
22.1 MWh
Anhydrous Ethanol
22,818 liters (3.2x)
Energy
Cellulose + Hemice
Anhydrous Ethanol
14 tones
8,100 liters
Lignina
Energy
4.3 tones
Source: Canavialis
16.9 MWh (0.7x)
9.4 MWh
Leaves
Palha
Energy
43 tones
22.1 MWh
Cellulose + Hemice.
Anhydrous Ethanol
12.2 tones
7,700 liters
Lignina
Energy
3.4 tones
7.5 MWh
9
Expected Attractive Industry Dynamics
Positive trends in Ethanol, Sugar and Power industries shall benefit Cosan
Oil price volatility and
supply instability
Higher demand for
alternative cheaper fuels
Global
environmental
concerns
Pressure for use of
renewable and cleaner
burning fuels like ethanol
Migration to urban
areas and GDP per
capita increase
Increase sugar
consumption per
capita
Gradual Deregulation
in developed countries
Reduction of trade and
import restrictions
Consolidation
in Brazilian ethanol
and sugar industries
Increase scale and
lower production
costs
Ever growing demand
for energy
Bio mass generation
opportunities
Significant ethanol and
sugar export
opportunities
Potentially higher
international prices
Further strengthening of
Brazil’s competitive
position
Additional and stable
revenue stream from
cogeneration
10
- 10 -
Flex-fuel car: a remarkable success in Brazil
Over 85% of new cars sales are flex-fuel cars
Through a special electronic sensor, the on-board computer
recognizes the fuel type and mixture, and properly adjust the engine
combustion parameters, without any interference from the driver
•
•
•
•
Introduced in the Brazilian market on March 2003
Flex-fuel cars are designed to be fueled with gasoline, ethanol or any
combination of gasoline & ethanol (currently from E25 to E100)
Seven brands and 49 models … and growing
33,000 gas stations all over the country with at least one dedicated E100 pump
11
Ethanol is more than reality in Brazil
Mandatory blending and flex-fuel cars are boosting ethanol
(m3/year)
Large growth ahead supported by an enlarging fleet
35.000.000
Despite the recent
introduction, flex-fuel
vehicles already account
for more than 85% of new
car sales in Brazil …
30.000.000
25.000.000
20.000.000
15.000.000
… booming ethanol
volumes in the country!
10.000.000
5.000.000
0
08/09
09/10
100
10/11
11/12
90
80
70
60
50
40
30
20
10
Source: ANFAVEA
Gasoline
Ethanol
Flex
Diesel
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
0
1981
07/08
1980
06/07
1979
05/06
% total production
04/05
12
USA: largest ethanol market in the world
Further potential for growth & opportunities
New objectives for the U.S. Renewables
Pres. Bush (State of Union 2007):
• Until 2017: replace 20% of the gasoline =132
billion liters (AFS).
Energy Bill (June/2007):
• Until 2025: 136 billion liters of renewable fuels
13
USA: largest ethanol market in the world
Further potential for growth & opportunities
•
Restrictions to the corn production in U.S. should limit corn ethanol
production to 60 or 65 billion liters a year. Cellulosic ethanol should
generate another 15 to 20 billion liters, limited to the cellulose collect
costs in the north hemisphere (between US$ 20 and 60 / ton)
•
Therefore, until 2025, the gap between the 136 billion liters target and the
likely production of 85 billion liters should be imported … meaning
roughly 50 billion liters per year in 2025
•
Brazil would have, in this time horizon, conditions to prepare itself to
participate in this market
Renewable Fuels Demand following the RFS and the Energy Bill 2007
140
100
80
60
40
20
Renewable Fuel Standard
Energy Bill 2007
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
0
2006
bilion liters
120
14
USA: largest ethanol market in the world
Further potential for growth & opportunities
Potential Market in the USA
•
A likely scenario is the U.S. Government to protect local ethanol
producers, but considering the interests of ethanol importers, consumers
and sectors affected by high prices of soybeans and corn (consumers of
glucose and fructose, cattle, swine and poultry raisers). This scenario
should imply the creation of an ethanol import quota
•
Its reasonable to suppose that Brazil should have a big slice of this
quota, anything from 25% to 40%. In case of a 50 billion liters quota, the
Brazilian share should be of 12.5 or 20 billion liters
•
This quota should keep the current CBI regime (Caribbean Basin
Initiative) until the quota system is implemented. Assuming that the
current ‘zero import duty’ for CBI dehydrated ethanol imports continues
up to 2025, it would represent 9.5 billion liters of dehydrated ethanol (7%
x 136), produced out of 10 billion liters of hydrous ethanol
15
Europe: strong lobby limits market potential
Opportunities shall be directed to own production and imports from poor countries
Potential Market in Europe
• The more likely scenario is that Europe would supply its own needs
through local production and preferential tariff agreements with poor
countries in the world :
• “Everything But Arms” (EBA), allowing ethanol imports free of import
duty from several poor countries in the world (Brazil not included)
• “Sustainable Development & Governance” (SD&G), very similar to the
EBA agreement (Brazil not included)
• This means that Brazil would probably be able to export ethanol to
Europe only to supply a marginal demand not fulfilled by Europe’s excolonies from Africa and Central America. This marginal demand would
be limited from 3 to 4 billion liters
• Although environmental growing consciousness may push ethanol
consumption in some niche markets (for ex. Netherlands and
Scandinavian countries)
16
Asia and Other Countries not so close
Market potential still embryonic, but with some trade already in place
Potential Market in Asia and in Other Places
• Based on the Japanese fuel market of 60 billion liters a year, the
theoretical ethanol potential is over 3 billion liter a year of
consumption, therefore ongoing prospection continues towards
Japan.
• However, mixed signs appear to be driving Japan to adopted goals not
so aggressive, such as the substitution of MTBE for the EBTE in
volume of 7% to 20% of the gasoline. Therefore, the potential would be
only of 352 million liters of ethanol per year
• The largest potential market for Brazil in Asia is China, but the
quantification of this market is still very doubtful
• Other markets continue to appear on a random basis. Recently
Petrobrás closed export deals with Venezuela and Nigeria of 1.4 and
1.2 billion liters per year respectively.
17
Is there a world market for ethanol?
Yes, but adoption of ethanol is, before anything, a political decision!!!
Conclusion: Potential Market in 2025 for Brazilian Ethanol
Industrial ethanol (Japan + Korea): 1.35 billion liters
Venezuela + Nigeria: 2.0 billion de liters
UE-27: probable residual market of 3 or 4 billion liters
CBI: 136 billion liters demanded x 7% x 50% = 4.76 billion liters
U.S., incl. CBI: (136-85) x 30% = 15.3 billion liters
Other markets (including Japan for fuel): total of 2.85 billion liters
Total of
25 billion
liters
Potential Development for Brazilian Ethanol Exports (billion liters)
30,00
25,00
20,00
15,00
10,00
5,00
Cenário
Baixo
Worst Case
Cenário
Alto
Best Case
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
0,00
2011
•
•
•
•
•
•
18
Agenda
1. Introduction to Management
2. Brazilian Ethanol & the World Market
3. Cosan’s Enhanced Business Model
4. Fighting the Myths
19
Cosan: a quick introduction
A History of Growth and Innovation … with scale, know-how and efficiency
Crushing
Capacity
(MM Tons)
2012E
70,0
• Greenfield & Brownfield
Projects (+10MM tons)
• IPO ($400MM)
60,0
• Cogeneration (1GW)
2007
2005
• CZZ $1.2Bn NYSE IPO
60.0
• 10Y Bonds ($400MM)
• IFC loan
• Alliance with Kuok
Group
2008
• Vertical
integration
2006
50,0
• Perpetual
Bonds ($450MM)
45.0
• Ibovespa index
2004
2000
40,0
2002
• Cosan S.A. officially
established
1984-1994
Development of
VHP sugar
• Da Barra
acquisition
• Alliance with Tereos
and Sucden
30,0
Inaugural Bonds
($200MM)
38.8
40.0
40.0
31.5
30.3
1997-1999
• Partnership
with Tate &
Lyle
1936
20,0
• Santos port
concession
Foundation of
Costa Pinto
10,0
19.1
15.6
9.5
7.5
4.0
0,0
1936
1986
1988
2000
2001
2002
2004
2005
2006
2007
2008
2012E 20
Cosan: a quick introduction
Integrated platform provides flexibility … sugar, ethanol and electricity
Raw Sugar Production
and Refinery at Origin
Refinery at Destination
Export & Trading
Refined Sugar for the
Local Market
60%
Own
Sugarcane
Crushing &
Production
Cogeneration
40%
Growers
Sugarcane
Sale to the
Grid
Ethanol Sale in the
Local Market
Ethanol Production
Export Logistics
Distribution at
Destination
• Integrated platform represents an important competitive advantage for sugarcane crops vis-à-vis other feedstocks
– Reduces risk of margin compression
– Brings accurate information on crop development
– Allows direct investments in R&D on major cost components
– Enhances coordination between industry and agricultural department
21
- 21 -
Cosan: a quick introduction
Over 500.000 ha of land & crushing capacity of over 44 million tones of sugarcane
54M ha
Own Land
246M ha
Leased
Land
0.5MM
tones Local
300M ha
Land
Adm. by
Cosan
24MM ton
Own
Sugarcane
3.6 MM
tones of
TSR
3.2MM
tones
of Sugar
2.8 MM
tones of
TSR
1.6 Bi
liters of
ethanol
6.4MM
tones of
TSR
44MM ton
Total
Sugarcane
to
Crush
250M ha
Supplier’s Land
20MM ton
Third
Part.
Sugarcane
2.7MM
tones
Export
1.2 Bi
liters
Local
0.4 Bi
liters Export
11.4MM tones of
Bagasse
250 MW
1.3 GW
Future situation with investments in co-generation
Assumptions: installed capacity of 44 million tones of sugarcane; 80 tons of sugarcane per hectare; TSR (total sugar recoverable) of 145kg per ton of sugarcane; 140 kg
of sugar or 86 liters of ethanol per ton of sugarcane + 0.26 ton of bagasse per ton of sugarcane; 0.28 MWh per ton of bagasse
22
Cosan: leading global market position
Top Ethanol and Sugar Producers
The only Brazilian company within the largest players
The Second Largest Global Ethanol Player…
… and Second Largest Global Sugar Producer
Ethanol Production in 2007
Sugar Production – in 2007
Total of 13.1 Bn Gallon
1.200
Total of 159 MM Tons
6,0
1.017
5.2
1.000
5,0
4,6
830
Ethanol
2.0
4,0
800
600
540
Acq.
503
3,0
(3)
2.5
3,2
400
2,1
1,7
2,0
1,6
1,3
226
1,1
164
200
327
1,0
1,0
133
0,8
102
50
0
ADM
VeraSun
Aventine
Abengoa
US
BioEnergy
Pacific
Ethanol (1)
Source: Regulatory Filings, Equity Research Reports and Cosan
Note:
(1)
Marketed volume = own production + acquired from third-party
(2)
Accounting for sugar under ethanol-equivalent basis. Cosan numbers are 2006/2007
(3)
Accounting for ethanol under sugar-equivalent basis
0,0
Sudzucker
Tereos
Illovo
(Germany)
(France)
(South
& Lyle
Africa) Nordzucker
(UK)
(Germany)
CSR
(Australia)
Tate
British
Sugar
Danisco
(Denmark)
(UK)
Bajaj
(India)
23
- 23 -
Cosan: leading Brazilian market position
Fragmented Industry in its early stage of Consolidation
The Brazilian sugar and ethanol market is very fragmented. Cosan,
the largest player, accounts for only 9.1% of the market …
Consolidation in related sectors in Brazil
Domestic Market Share
Market Share of Top 5 Companies
Sugarcane Crushed in 2006/2007
OilOil100.0%
100.0%
9.1%
Beer
Beer 97.0%
97.0%
Louis Dreyfus 2.5%
Soybean
Soybean 95.0%
95.0%
Carlos Lyra 2.3%
Steel
93.0%
Steel(2) 93.0%
Vale do Rosário 2.2%
(2) 91.5%
Orange
OrangeJuice
Juice 91.5%
São Martinho 2.2%
Tércio Wanderley 2.1%
Cement
Cement 80.0%
80.0%
Guarani 2.0%
Zillo 2.0%
Others 71.1%
Dairy 77.4%
Dairy 77.4%
Oscar Figueiredo 1.9%
Santa Terezinha 1.9%
Pulp 72.6%
Pulp 72.6%
Santa Elisa 1.8%
Paper 48.7%
Ethanol & Sugar 17.8%
0%
20%
40%
60%
80%
100%
Source: Unica and company reports
24
Major Changes demand major actions
The Sugarcane Sector faced major disruptions
Major Changes & Opportunities
Depressed Short-Term Outlook
• WTO highest court ruled against European
subsidized sugar exports (gap of 4-to-5 million
tons in the free market)
• Countries, producers and newcomers rushed to
“The El Dorado” through a messy production
expansion and new projects
• Remarkable success of flex-fuel cars in Brazil
(over 85% of new cars are flex-fuel after only
two years since launch)
• Global sugar production surplus, levered by
subsidies & import restrictions, generated heavy
inventories
• United States build the largest ethanol market in
the world in merely two years … with further
potential based on government targets
• Excess supply compressed sugar prices in the
free market (2/3 are protected markets)
• In Feb’08, fuel ethanol sold surpassed the
amount of gasoline sold in Brazil
• Potential energy shortages in Brazil in the near
future invited bio-mass into the energy matrix
• Ethanol production growing faster than new
markets opening
• Ongoing ethanol import barriers by developed
countries
• Misperception between “food & fuel” dilemma
A Changing Environment
implies New Changes
for the Companies!
25
Innovation to Face a Changing Environment
Selective actions shall imply in a broader Business Model
COMMERCIALIZATION
(Retail – da BARRA sugar)
SUGAR & ETHANOL
PRODUCTION
Cosan S.A.
Plantation
1. LAND DEVELOPMENT
(Project Radar)
Crushing
2. POWER
CO-GENERATION
(Ongoing Project)
Production
3. BROWNFIELD
(Gasa)
4. GREENFIELD
(Jataí Module)
5. EPCM
ENGINEERING
(Promon)
6. DEHYDRATION
PLANT
(Caribbean)
7. ETHANOL
TRADING
(Vertical)
8. SUGAR LOGISTICS
(Rumo)
9. ETHANOL PIPELINE
(Uniduto)
10. FUEL DISTRIBUTION
(Esso)
26
1. Radar - Land Development Project
Levering Land Expertise to keep Value Creation Inside Cosan
The Best Tool for Land Procurement
• Cosan manages 600.000 ha (largest BR agric. producer)
Profiting from Land Appreciation in the Future
Potential Areas for Future Growth
• Leading edge in Geo processing Technology (GIS)
Agricultural
Potential maps
Slope maps
Rainfall maps
A10
A08
A11
A01
A09
A03
Land Appreciation in Goiás Greenfields Area
36.8%(2)
38.1%(2)
5,800
5,200
4,200
3,800
Montevidiu
A02
A01: MT
A02: MT
A03: MT
A04: GO(S)
A05: MS(S)
A06: MS(C)
A07: MG
A08: CE; PB; RN
A09: BA; PI; MG
A10: TO; MA
A11: TO; GO
A12: GO(C)
A04
A06
A12
A07
A05
Jataí
April-07
July-07
Source: FNP
(1) Greenfield projects announced in Apr-07 by Cosan
(2) In nominal R$
27
2. Co-generation of Energy
Brazil has a superior environment-friendly Energy Matrix
Evolution of Energy Offer in Brazil
Sugarcane as the 2nd Energy Source
OTHER
RENEWABLE
100%
TYPE OF ENERGY
SUGARCANE & RELATED
90%
80%
VEGETAL COAL & WOOD
70%
HYDRO & ELECTRICITY
60%
NUCLEAR
50%
MINERAL COAL
NATURAL GAS
40%
30%
20%
OIL & RELATED
NON-RENEWABLE ENERGY
OIL & RELATED
NATURAL GAS
MINERAL COAL
NUCLEAR
RENEWABLE ENERGY
HYDRO & ELETRICITY
VEGETAL COAL & WOOD
SUGARCANE & RELATED
OTHER RENEWABLE
TOTAL ENERGY
2006 - %
54.9
37.7
9.6
6.0
1.6
45.1
14.8
12.7
14.6
3.0
100.0
2007 - %
54.2
37.4
9.3
6.1
1.4
45.8
14.9
12.0
15.7
3.2
100.0
30.9
BioMass
10%
ENERGY MATRIX
BIOMASS
HYDRO & ELETRICITY
URANIUM
MINERAL COAL
NATURAL GAS
OIL & RELATED
TOTAL ENERGY
BRAZIL'07
OCDE'05
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
0%
WORLD'05
30.9
14.9
1.4
6.1
9.3
37.4
4.2
2.0
11.0
20.4
21.8
40.6
10.5
2.2
6.3
25.3
20.7
35.0
100.0
100.0
100.0
With an energy consumption in 2007
3
of 238,328 x 10 equivalent tons of oil,
Brazil has built an environment friendly
energy matrix, where sugarcane has
become the 2nd energy source for the
country (ethanol & cogeneration)
28
2. Co-generation of Energy
Adding a stable Cash Flow stream of over R$560M/yr to Cosan
Energy Co-generation: Cosan’s Potential vs. Ongoing Commitments
At 60MM tons crushing capacity, potential of 1.3 GW, with an incremental EBITDA of R$ 600MM
60MM tons
4.1 GWh
R$ 3.5 bi
35.8MM tons
1.3 GW
2.4 GWh
R$ 1.7 bi
740 MW
0.5 GWh
(spot market)
1.9 GWh
R$ 560 MM
R$ 350 MM
(already sold)
CRUSHING
CAPACITY
COGEN
CAPEX
INSTALLED
POWER
CAPACITY
SALEABLE
ENERGY
EBITDA
Notes:
- Estimates subject to changes
- 1 MWh = 0.184 tons of CO2. Total of 754 tons of CO2/yr included in the EBITDA
- Average days of 189 days per crop, with 83% of crushing time
- Assumed bagasse and 50% of leaves, generating for 189 days (although additional bagasse/leaves could imply in 10 months of cogeneration)
29
3. Brownfield Expansions
Over 10.0MM tons of Crushing Capacity at Attractive Multiples
•
•
•
Cosan has the capability to expand its crushing power by 10.6 million tons of cane (approximately 920 million liters of
ethanol or 1.48 million tons of sugar).
Such expansion would imply in an estimated Capex of R$1.1 billion, or an interesting multiple of R$105/ton of crushing
capacity.
Seeing independently, such Brownfield would be one of the top producers in Brazil.
2.8
0.3
Crushing starts
this crop ’08/’09
0.5
2.0
1.9
0.5
50.6
1.0
1.6
40.0
Current
Capacity
Gasa
* Estimates; subject to changes
Bonfim
Univalem Destivale
Mundial
Junqueira
Ipaussu
Gasa II
Future
Capacity
30
4. Greenfield Project
Currency appreciation mitigated by higher Crushing Output
Project Profile
•
Integrated greenfield project, fully dedicated to ethanol
•
State-of-the-art technology, with efficient industrial
facilities and lower production costs
•
Located in the State of Goiás, compound by 3 modules
•
Initial 10.0MM tons of crushing capacity enhanced to
12.0MM
•
Total estimated capex of R$ 1.4 billion (R$470 mm/
industrial module)
•
Jataí module coming on stream in 2009
Ethanol Output Timeframe
(MM Liters)
370
1.100
370
370
311
200
50
FY 10
FY 11
FY 12
Jataí Mill
FY 13
Paraúna Montividíu Total
Mill
Mill
Project
Output
31
5. EPCM Greenfield - PROMON
Juice
JUICE
TREATMENT
99,9%
99,7%
99,4%
MUD
FILTRATION
LOSSES
EFFICIENCY
LOSSES
98,5%
99,5%
100,0%
1,4%
1,8%
2,5%
EXTRACTION
PREPARATION
EFFICIENCY
RECEPTION/
CLEANING
0,3%
1,0%
2,0%
DECANT
HEATING
95,2%
96,5%
97,5%
100 %
Clear
Juice
9%
12%
15%
FERMENTATION
85,0%
88,0%
91,0%
DESTILATION
Vignasse
EFFICIENCY
CONCENTRATION
LOSSES
Total Efficiency
LOSSES
EFFICIENCY
Sugar
cane
0,0%
0,5%
1,5%
EFFICIENCY
LOSSES
Losses & Efficiencies Flows Revisited in a State of the Art Plant
0,3%
0,5%
1,0%
Ethanol
78,4% - Existing Mills
83,4% - New Mills
88,4% - State-of-the-Art Mills
Hydrous
Ethanol
99,0%
99,5%
99,7%
32
6. Dehydration Plant
Small base to penetrate the U.S. Market – CBI or Mexico
Exports to the US – Direct
• Anhydrous FOB Santos: U$2.09/gal
• Sea Freight: U$0.2
• VAT (2.5%):U$0.05
• Tariff: U$0.54/gal
• Final Price in the US: U$2.88/gal
Exports to the US – through CBI
• Hydrous FOB Santos: U$1.83/gal
• Sea Freight (Brazil/CBI): U$0.15
• Dehydration Costs:U$0.30
• Sea Freight (CBI/USA): U$0.15
• VAT (2.5%):U$0.05
• Final Price in the US: U$2.48/gal
In 2007, the Caribbean countries exported 0.3 billion gallons to the USA,
i.e. 70% of their quota. Considering the USA renewable fuel standards,
by 2022 the exporting potential from the CBI can reach 2.5 billion gallons
Note: Ethanol price at NY harbour as of October 14th: U$1.90/gallon
33
7. Ethanol Trading: Vertical UK LLP
Commercial Platform to boost International Sales of Ethanol
Acquisition of Vertical (50% stake) to
enhance Cosan’s commercial area
- 53 people
(Brazil, USA, London & Geneva)
- 123,540 m3 storage capacity
(Santos, Rotterdam, Antwerp & Texas City)
- 981,043 m3 of ethanol sold in 2007
(97.3 Africa; 170.4 Americas; 603.2 Europe;
106.1 Far East; 1.5 Middle East & 2.5 Oceania)
HIGHLIGHTS (US$ mm):
2007FY
Volume (m3) 1.0
Sales
637
Gross Margin 13
2008FCST
1.5
1,200
45
34
8. Sugar Logistics – Rumo Logística
The largest Sugar Port in the world is born … and will grow further
Teaçú Port Terminal (Nova América)
COSAN Portuária
• Loading Capacity of 40,000
metric ton per day
• Largest sugar throughput
port terminal in Brazil: 3.5M
ton (23% of Brazilian
exports) in 06/07
• Static capacity 200K ton
• Static capacity of 170K tons
• Annual shipment capacity of
4 million tons of grains
+
• Highly automated operating
processes (from the moment
the truck leaves the mill until
it reaches the port)
- Current loading capacity of 8.0M tons, and static capacity of 435K tons
- R$119M investment made by Cosan to have 71.2% stake (28.8% Nova América)
FURTHER GROWTH
With a R$30MM
investment postintegration, the port
terminal will have 3
wharves and 5 ship loaders
being the largest bulk
terminal for agricultural
products in the world, with
total annual loading
capacity of 17M tons
35
9. Ethanol Pipeline – Uniduto
CCC Consortium assures ethanol volume to the pipeline
Ribeirão Preto (road-rail)
155.000 m 3
Storage Base (location, type & capacity)
Distribution base
Pipes (length & diameter )
235 km
Ø = 20”
Monobóia (exports “off-shore”)
Output:11 bi liters
114 km
Ø = 24”
Paulínia (road-rail)
100.000 m 3
127 km
Ø = 30”
Output:16 bi liters
Conchas (river-rail)
-rail)
3
155.000 m
36 km Ø = 16”
Juquiratiba (rail)
20.000 m 3
Output:24.7 bi liters
Campinas
São Paulo
106 km
Ø = 24”
Output:14.2 bi liters
Santos -CING (road)
220.000 m 3
Taboão da Serra (road)
170.000 m 3
Serra
do Mar
- Creation of Uniduto Logística S.A., a JV among Cosan, Copersucar and Crystalsev
- Uniduto to develop, construct and operate an ethanol pipeline network linking the port terminal on the
coast of Santos, SP, and the city of Paulínia, with arms to the cities of Conchas & Ribeirão Preto
- The ethanol pipeline shall reduce logistics costs by 35% to 40% (from R$95/m3 to R$57/m3, RP region)
36
10. Esso – Fuel Distribution
Acquisition brings unique base on Fuel Marketing, Lubes and Distribution
Fuels Marketing
Retail
Lubes & Specialties
Industrial & Wholesale

 Over
Over 1,500
1,500 retail
retail
service
service stations
stations

 Focused
Focused on
on high
high
grade
grade customers
customers
(scale
(scale and
and volume)
volume)
Aviation

 77 Key
Key airports
airports with
with
significant
significant market
market
share
share

 Mobil
Mobil 11 brand
brand and
and
formulation
formulation

 11 Lubes
Lubes Oil
Oil Blending
Blending
Plant
in
RJ
Plant in RJ
Supply & Distribution




44 owned
owned terminals
terminals
17
JV
terminals
17 JV terminals

 21
21 throughput
throughput locations
locations
Gasoline Market Share
Ethanol Market Share
Aviation Market Share
Lubes Mkt Share
S&D Volume Breakdown
2007 Sindicom
2007 Sindicom
2007 Sindicom
2007 Sindicom
2006
BR
34,0%
BR
32,3%
BR
Ipir. CBPI
16,8%
Shell
Ipir. CBPI
13,8%
Texaco
Shell
11,9%
Texaco
AleSat
Shell
12,3%
7,5%
AleSat
1,4%
Repsol
1,4%
Repsol
0,8%
Sabbá
1,3%
Sabbá
0,3%
3rd Party Terminals
24%
Texaco
18,9%
12,2%
3,8%
Ipir. DPPI
%
32%
Ipir. CBPI
AirBP
100% Owned
Terminals
32,0%
9,0%
3,6%
25,2
BR
19,1%
9,7%
Ipir. DPPI
55,4%
21,1%
14,7%
Esso Vol. @ 3rd
Party Terminals
18%
26%
Esso Vol. @ JV
Terminals
0,3%
Shell
11,6%
11,0%
Diesel Market Share
LPG Market Share
Esso Market Share by Airport
2007 Sindicom
2007 Sindicom
2007 Est.
BR
40,0%
Ipir. CBPI
23,1%
Shell
11,6%
Texaco
10,3%
BR
46,3%
Ipir. CBPI
22,8%
Texaco
10,2%
25,0%
Recif e
20,0%
Campinas
20,0%
10,2%
Galeão (RJ)
5,6%
Shell
AleSat
Ipir. DPPI
2,8%
Repsol
4,9%
Cast rol
4,4%
15,0%
4,4%
4,0%
Brasilia
Repsol
7,1%
FL Brasil
Guarulhos
10,0%
Ipir. DPPI
1,8%
2,8%
Sabbá
1,6%
Ipir. DPPI
1,8%
Repsol
0,9%
AleSat
1,5%
Pampulha
L&S
6,0%
Sabbá
Curit iba
Aviation
0,3%
S&D
0,5%
States with Retail Operations
37
Cosan valuation thru CSAN3/CZZ share price
A fraction of Replacement Cost – a unique opportunity!
Cosan Replacement Cost Calculation
(Without Esso) – Fx Rate:US$2.0
Unitary Cost
Cosan Size
(45 million tons)
R$/ton
US$/ton
R$ million
US$ million
Sugar Cane Reception and Processing
19
9
833
416
Ethanol Distillery Plant
10
5
453
226
Ethanol Dehydration Plant
5
2
203
101
Sugar Cristalization and Refinery
15
8
675
338
Steam and Energy Production
16
8
716
358
Civil Construction, Infrastructure and Engineering
51
26
2.303
1.152
Sub-total (Industry)
115
58
5.182
2.591
Machinery, tractors and other vehicles
30
15
1.341
670
Survival Irrigation and Fertilizing Systems
9
4
397
199
Buildings, Workers Facilities and Other
6
3
259
129
Sugarcane Plantation Cost (avg. 85 tons/ha;R$4,000/ha - 60% own cane)
34
17
1.525
762
Sub-Total (Agriculture)
78
39
3.522
1.761
Administrative Buildings
1
1
56
28
Base Replacement Cost
195
97
8.760
4.380
Advances to suppliers (avg. 85 tons/ha;R$4,000/ha - 40% own sugarcane)
23
11
1.016
508
"Hiden" Base Replacement Cost
23
11
1.016
508
Sub-Total Production Replacement Cost
217
109
9.777
4.888
="Cosan Mills (assumes 45MM tons @ replacement cost of R$217/ton)
217,3
108,6
9.777
4.888
Port Facilities (based on transaction with Nova America)
7,7
3,8
346
173
Sugar warehouses (1,1 million tons @ ~R$100/ton)
2,4
1,2
110
55
Ethanol tanks (1,1 billion liters @ ~R$225/m³)
5,5
2,8
248
124
Owned Land (~55 thousand ha @ ~R$20 thousand/ha)
24,4
12,2
1.100
550
Sunk investments in Greenfields (as reported)
3,6
1,8
162
81
Tax benefit NPV (Goiás Greenfield)
3,3
1,7
150
75
Co-gen (R$2,500MW - 75MW+50MW+78MW)
11,3
5,6
508
254
Cosan Total (R$MM)
275,5
137,8
12.400
6.200
(-) Net Debt (Cosan S.A.) (as of 1Q09)
(904)
(452)
(=) Replacement Cost Cosan (R$MM)
11.496
5.748
Number of Shares
272,5
272,5
Total Replacement Cost per Share
42,2
21,1
Share Price
CSAN3 @ Bovespa
R$ 10.55
CZZ @ NYSE
US$ 2.68
A Bargain !!!
38
Agenda
1. Introduction to Management
2. Brazilian Ethanol & the World Market
3. Cosan’s Enhanced Business Model
4. Fighting the Myths
39
Myths vs. Facts
Get the Facts Right and Forget the Myths
Given the ongoing debate on ethanol benefits, it is important to
distinguish false myths from real facts
1.
Ethanol is leading to a general deforesting in the world
2.
Ethanol Use Cause More Damage to the Environment than Fossil Fuels
3.
Ethanol Production Consumes More Energy Than it Generates
4.
Brazil is being overrun by sugarcane in detriment of food production
5.
If Biofuels are viable, they are only in certain niches (such as Brazil)
40
Myth #1
Brazilian Sugarcane Ethanol leads to the Amazon Rainforest deforesting
•
In terms of general deforesting, let’s concentrate on
the Amazon Rainforest because there are no forests
in the USA to be destroyed.
•
The vast majority of the Brazilian sugarcane
(approximately 90%) is harvested in the CenterSouth region, which is located over 2,500 km from
the Amazon. That is roughly the distance between
NY City and Dallas, or between Paris and Moscow.
Where is the Sugarcane?
2,000 Km
Myth vs. Fact
Amazon Rainforest
MT
•
The remaining 10% is grown in the North-East region
of Brazil, about the same distance from the
Amazon’s eastern border.
2,500 Km
GO
MG
MS
Sugarcane
PR
•
RN
PB
PE
AL
SE
SP
In addition, the Amazon region does not offer
favorable conditions for sugarcane production and
for this reason, future expansion is anticipated to
continue in the Center-South region of Brazil.
Source: NIPE – Unicamp, IBGE and CTC
•
At the main sugarcane cluster in the world, i.e. São
Paulo state, the sugarcane increase is occurring
over the cattle land. Cattle land in São Paulo had an
average of 1.2 heads/hectare (in Brazil, the average
is even lower). Now this ratio has increased to 1.4
heads/hectare. Some environmentalists argue that
the cattle are being pushed towards the forest. No, in
reality the cattle density is being increased!
Hectares
Brazil ……………………………
Potential arable land ………….
Potential land for agriculture …
Cultivated land ………………...
- Out of which Sugarcane ….
850.0
320.0
90.0
60.4
7.9
Acres
2,100
790
222
149
19
41
Myth #2
Ethanol use cause more damage to the Environment than fossil fuels
Myth vs. Fact
•
•
Ethanol can be produced from a wide variety of
feedstock, with different environmental impacts
depending on how they are processed.
Emissions Avoided with Ethanol Replacing Gasoline
Ethanol from grains
(US / EU)
Ethanol from sugar
beet (EU)
Ethanol from sugar
cane (Brazil)
0%
-20%
Brazilian ethanol produced from sugarcane reduces
greenhouse gas emissions by up to 90% compared
to gasoline, a reduction unmatched by any other
biofuel produced with existing technology.
-40%
-60%
-80%
•
In fact, when compared to crops such as corn or
soybeans, sugarcane captures more carbon
because it is a unique semi-perennial crop only
replanted every six years.
-100%
Source: IEA – International Energy Agency (May, 2004), based on a review of recent articles.
Future Improvements
% Mechanization
Avoided emissions
80%
280
70%
255
60%
230
50%
205
40%
180
30%
155
20%
130
10%
105
0%
MM ton CO2
The use of degraded pastures – the expansion area
of choice for sugarcane in Brazil – actually generates
a carbon credit, as sugarcane captures significantly
larger amounts of carbon than the quantities
originally stocked in this type of land.
% Mecanization
•
80
2007/2008
2011/2012
42
Myth #3
Ethanol Production consumes more Energy than it generates
Myth vs. Fact
•
Energy Efficiency of Selected Feedstocks
When the entire process is considered, from the
planting of sugarcane to the use of ethanol as a
motor vehicle fuel, sugarcane ethanol produces
9.3 units of clean, renewable fuel for every unit
of fossil energy utilized. Ethanol produced from
other feedstock's such as sugar beet, cereals
and grains (corn, wheat, barley etc), manages a
2-to-1 ratio today.
12
10
Sugarcane is
5x to 6x
more efficient than
other feedstocks
•
In addition, the by-products of sugarcane ethanol
production (bagasse and in the future leaves)
are used to produce clean, renewable electricity.
Energy Output/Input (Ratio)
8
6
4
2
0
Sugarcane Sugar Beet
Source:
Wheat
Straw
Inter-American Development Bank
Corn
Wood
43
Myth #4
Brazil is being overrun by Sugarcane in detriment of Food Production
Myth vs. Fact
•
Sugarcane for ethanol production in Brazil occupies
4.7 million hectares, or roughly 1.5% of the
country’s 320 million hectares of arable farmland.
The cultivated area is 1/2 of that dedicated to corn,
1/4 of the area planted with soybeans and 1/60 of
the land used for cattle farming.
Agricultural Land used in Brazil
14%
4%
13%
6%
5%
Sugarcane
Beans
Corn
Soybeans
•
•
•
With roughly 1.5% of its arable land dedicated to
sugarcane for ethanol production, Brazil has been
able to replace half of its gasoline needs with
sugarcane ethanol. While cane production has
increased steadily in recent years, food production
in Brazil has grown dramatically without any
material price increases.
The 2007 grain and oilseed harvest set a record at
142 million metric tons, a doubling of production in
the last ten years. Brazil is widely recognized for its
diversified and highly efficient agricultural sector – it
is the world’s leading exporter of beef, coffee,
orange juice, poultry, soybeans and sugar.
A variance of this myth is the one that correlates the
biofuel production to the hunger in the world. In fact,
the poor people are having a bit better conditions to
eat a little. Besides that, the area dedicated to
biofuel production in the world is 10 million ha, while
the area used for agricultural purposes in the world
is 1.2 billion ha. Critics lost completely their sense
of proportion. They are thinking that the sugarcane
plantation in Brazil and the corn in the USA, which
is growing, are disturbing the whole system. Simply,
this is not possible.
Rice
24%
Coffee
Others
34%
Hectares
Soybeans ……………………..……
Corn …………………………………
Sugarcane ………………………….
- being 60% to Ethanol ……..….
Beans ……………….......................
Rice………………………………….
Coffee……………………………….
Others …………………………...….
Total…………………………………
21.3
14.4
7.9
4.8
3.8
2.8
2.2
8.4
60.8
%
34.9%
23.7%
13.0%
7.8%
6.3%
4.7%
3.7%
13.7%
100%
44
Myth #5
If Biofuels are viable, they are only in certain niches, such as Brazil
Myth vs. Fact
•
In this last myth, finally the critics acknowledge that
sugarcane ethanol produces a cleaner fuel and blá,
blá, blá … then they say “well, this is only in Brazil
which is just a niche, and is has 10 times less cars
than in the USA. Therefore, even if you guys solve
the problem there, you will not solve the problem in
the world!”.
•
Well, Brazil produces only part of the world’s
sugarcane. There is sugarcane all over Central
America, in India, Thailand, South Africa, Australia,
etc. Other areas in the world could be explored,
including the African continent, in order to improve
life conditions to people in those locations (PovertyEnvironment-Renewable Energy). But then, these
same critics continue to say “ah, this is interesting.
But when you produce ethanol in Brazil, you have
slave work and you burn sugarcane fields to cut
them”.
•
In summary, what we need is some
effort from people with minimum
knowledge and common sense, in
order to clarify these myths …
therefore, may I invite you, in this
room, to do so in the future.
Thank you!
Well, during the harvest period Cosan has more
than 40,000 employees, all of them with signed ID
from the Labor & Work Minister, according to the
local labor law. Moreover, São Paulo state is
responsible for 2/3 of the Brazilian sugarcane
production, and has nowadays almost 50% of the
sugarcane harvest done by mechanical harvesters.
According to the state law, by 2014 all the manual
cut, which requires the burning of the sugarcane
fields, will be extinguished in the state. And usually
the other states in Brazil tend to follow the
leadership of São Paulo state
45
Renewable Energy for a Better World
Ethanol | Sugar | Cogeneration
Which ethanol producer/renewable
energy player should you bet?
Thank you !
46