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Shell and Cosan JV on sugarcane ethanol

Shell and Cosan have signed a US$12 billion joint venture (JV) agreement to produce and commercialise ethanol and power from sugarcane.

The sugarcane ethanol will be distributed through a combined distribution and retail network in Brazil, and the JV will explore opportunities to take production and sales global.

The sugarcane ethanol JV will have an annual production capacity of over 2bn litres. It will also generate electricity from sugarcane bagasse in co-generation plants at all the sites.

“The proposed joint venture is set to pool our complementary businesses, enhance our growth prospects in ethanol production globally and support our growth platform for our retail and commercial fuels businesses in Brazil,” says Mark Williams, Shell Downstream Director.

“Over the next 20 years, sustainable biofuels are one of the most realistic commercial solutions to reduce CO2 emissions from transport.”

Rubens Ometto Silveira Mello, Cosan’s Chairman of the Board and Non-Executive Chairman-Elect of the proposed JV, adds: “While there is still plenty of integration planning to do before we launch the proposed joint venture, this is an important milestone in our effort to create one of the world’s most competitive sustainable biofuels companies.”

Cosan and Shell are bringing the following assets into the JV:

Cosan
Shell
  • Sugarcane crushing capacity – ~60 million tonnes per year from 23 mills;
  • Ethanol production capacity – >20bn litres per year;
  • All co-generation plants;
  • Brazilian downstream assets, including ~1730 retail sites, and supply and distribution assets; and
  • Ethanol logistics assets.
  • US$1.275bn in cash paid over two years – equivalent to US$1.625m net of payments to be made to Shell and its affiliates related to the brand licensing and other ancillary agreements for a period of 10 years;
  • Brazilian downstream assets, including ~2740 branded retail sites, supply and distribution assets, and the aviation fuel business;
  • Its share interest in cellulosic ethanol technology developer Iogen Energy; and
  • Its 14.7% share interest in biocatalyst provider Codexis.

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