Cosan announces up first plans outside Brazil

SAO PAULO, Sept 21 (Reuters) - Brazil's Cosan Ltd. (CZZ.N) said on Friday it will start taking its first international steps, with possible investments in ethanol plants in the Caribbean, Mexico or even in the United States in the coming years.

The recently-created holding of Brazil's top sugar and ethanol producer Cosan S.A. (CSAN3.SA), which held an initial public offering in August in New York, is seeking better access to the vast U.S. automobile market.

"It's impossible to be a global player in Brazil. You have to be present in the world's largest ethanol market, the United States," Cosan S.A.'s financial vice president, Paulo Diniz, said after a presentation to market analysts in Sao Paulo.

"There's no company which is really a global renewable energy player, and at present, Cosan's condition to move into this position is unique," he added.

The company is examining three alternatives.

The first would be to invest in an ethanol dehydration plant in the Caribbean, following in the steps of companies like Brazil's Crystalsev and U.S. giant Cargill.

Through the Caribbean Basin Initiative (CBI), the region is exempt of a 54 cent a gallon tariff on foreign ethanol imports into the U.S. market.

Companies regularly buy hydrate ethanol in Brazil and process it into anhydrous ethanol in countries like El Salvador and Jamaica and ship it to the United States tariff free.

The cost to dehydrate and reexport the product to the U.S. market is around 30 cent a gallon, Diniz said.

A distillery could also be built together with the dehydration plant using local cane and producing electric energy through the burning of the cane bagasse. The company already does this in Brazil and it could reduce local costs.

Another alternative would be to install a distillery in Mexico. Diniz said sugar and ethanol exports from Mexico would have free access to the U.S. market through NAFTA (North American Free Trade Agreement) from January 2008.

Cosan is also considering investments directly in the U.S. market. Diniz said this is a "favorable" moment to buy plants there, but U.S. subsidies to blenders, which are not transferred to local ethanol producers, and the eventual imbalance between corn and oil prices could be problems.

If Cosan decides to invest in the United States, it would be before cellulosic ethanol gets to a commercial scale.

ADM

Cosan's seemingly "unlimited" capital raising capacity opens the possibility for acquisitions of "big companies," Diniz said.

He said the company could raise in the coming years up to $15 billion through subsequent stock offerings.

"With our current structure we can even dream of big steps (large company acquisitions)," Diniz told reporters.

The company is also considering setting up a management team in the United States.

Diniz denied U.S. giant Archer Daniels Midland Co. (ADM) (ADM.N) had been in talks to buy Cosan. In June, ADM said was considering the purchase of the Brazilian company, in an interview to The Wall Street Journal.

ADM is currently a minority shareholder of Cosan S.A.

"Our relationship is fantastic... but its comments were unhelpful," Diniz said.

(Reporting by Inae Riveras)