SAO PAULO Jan 16 French commodities company
Louis Dreyfus may sell the biomass energy plants of its
Brazilian subsidiary Biosev, which has struggled to
turn a profit in the local sugar and ethanol industry, a
newspaper said on Thursday.
Biosev said in a statement "it is not conducting any
negotiations to sell its cogeneration assets," which the Valor
Economico newspaper said were valued at 1 billion reais ($421.92
million). But the company did not deny the possibility that it
might consider the sale of existing plants or of future projects
at mills not currently generating electricity.
The newspaper reported that Biosev has contacted local and
international energy companies that may be interested in buying
its cogeneration plants, as it tries to generate capital after
failing to raise 500 million reais in a bond offer in the last
quarter of 2013.
Valor Economico did not name its sources.
Biosev, Brazil's second biggest sugar and ethanol producer
after Cosan, currently sells 1,000 megawatts/hour of
energy in long-term contracts at a price of 140 reais per
megawatt/hour at its thermoelectric plants that produce
electricity from burning bagasse, or sugar cane leftovers.
Biosev has undergone a managerial change recently, replacing
Chief Executive Christophe Akli with Rui Chammas, the former
head of Braskem, Latin America's largest
petrochemicals company. The company's chief financial officer is
also stepping down later this year.
The changes in management come on the heels of several
quarters of poor results from Biosev. The company posted a loss
of 245 million reais in its second quarter that ended in
September after bad weather dented the company's sugar cane
Talk of Biosev's potential sale of its energy assets comes
ahead of the July expiration of put options Louis Dreyfus linked
to the 2013 initial public offering of its Brazilian sugar and
Holders of the options, which give them the right to sell
Biosev shares at the initial price of the IPO, are deep in the
money and they are expected to exercise the puts. The strike
price is 16.57 reais and the shares are trading at 10.16 reais.
Sources told Valor that Biosev has not been generating the
necessary cash flow "to stand on its own legs" without the help
of Louis Dreyfus, which has injected 1.2 billion reais in its
subsidiary in just the past year.
The potential sale of the company's biomass energy assets
would come at an opportune moment. The Brazilian government is
struggling to drum up new generation capacity for distributors,
which need to cover a supply and demand gap for electricity
expected in the coming few years.