LONDON Biofuels investor Clean Energy Brazil has sold its stake in a Brazilian sugar mill for much less than its initial investment after the plant's debt pile proved too much of a burden in a tough ethanol market.
Brazil is the world's largest producer and exporter of cane-based ethanol, used as a substitute for fossil fuels to power cars and fire boilers, but the credit crunch has forced several firms that took on debt for expansion to search for buyers or bankruptcy protection.
Sugar prices have also soared to a near 30 year high, increasing competition between the ethanol and sugar industries for sugarcane supplies in the country.
Usaciga, which was Clean Energy's first major investment, has debts of about $185 million and posted a net loss of some $50 million for the year to the end of April, the company said in a statement on Wednesday.
"Usaciga was unable to attract further equity investment due principally to the liquidity squeeze, and no viable solution was found to alleviate the debt burden of the business," Clean Energy said.
Clean Energy sold its 49 percent holding in the Usaciga sugar mill to Agrocana Participacoes Ltda, the owner of the other half of the business, for $8.7 million in cash.
This compares with Clean Energy's initial investment of some $130 million for the stake back in March 2007 and with a book value of $50 million given to Usaciga on Clean Energy's balance sheet as at Oct 31, 2008.
The AIM-listed company said it was now reviewing the value of its other investments and further writedowns may be needed.
Clean Energy said it planned to return the net sale proceeds to shareholders. As a result of its reduced investment activity, Clean Energy is cutting costs by reducing directors' fees by 30 percent.
Chief Executive Marcelo Junqueira is stepping down and will become a non-executive director, while Chief Financial Officer John Koutras will take over the running of the company.
Shares in Clean Energy, which floated at 100 pence per share in December 2006, last traded at 14.0 pence on Wednesday morning, up from Tuesday's close of 13.5 pence.
(Additional reporting by Sharon Lindores; editing by Karen Foster)