Sempra Commodities signs marketing agreement with Etanalc S.A. for Brazilian ethanol
Sempra Commodities, the commodity-marketing unit of Sempra Energy (NYSE: SRE), today announced it has executed a 20-year agreement with Etanalc S.A. to market the ethanol production from three new ethanol distilleries being developed by Etanalc.
Etanalc expects each ethanol plant will be supported by 30,000 hectares of land and 3 million tons of sugar-cane production, as well as co-generation of electrical energy, using the sugar-cane residue. The first three distilleries will be located in Pedro Afonso, Colinas and Guarai in the state of Tocantins, Brazil, with ethanol production estimated to begin in 2010.
Under this agreement, Etanalc will provide Sempra Commodities with approximately 190 million gallons (4.5 million barrels equivalent) of ethanol per year, after the aforementioned three plants have been operating for three years.
Sempra Commodities retains the right to purchase any ethanol produced above anticipated production. Sempra Commodities also expects to be a shareholder in the project.
“As the United States and other countries embrace the development of all forms of renewable energy, we expect the ethanol market to grow rapidly and be a meaningful component of the global energy mix over the next decade,” said Bryan Keogh, vice president and treasurer of Sempra Commodities. “This represents a growth opportunity Sempra Commodities can actively pursue as part of the joint-venture the company is forming with the Royal Bank of Scotland Group.“
The joint venture, RBS-Sempra Commodities LLP, which was announced in July 2007 and is slated to be completed in the fourth quarter 2007, is expected to significantly expand Sempra Commodities’ market opportunities with new commodity lines and a broader geographic reach.
Ethanol is a non-toxic, water-soluble and quickly biodegradable fuel that, when blended into gasoline, is effective in reducing motor-vehicle emissions. Ethanol comprises about 3.5 percent of the total annual U.S. gasoline consumption of 140 billion gallons. Approximately 46 percent of all U.S. gasoline contains some ethanol content, according to industry sources. Headquartered in Rio de Janeiro, Etanalc S.A. was formed by Aureo Luiz de Castro for the purpose of developing this project. Brazil is the world’s largest exporter of ethanol. Based in Stamford, Conn., Sempra Commodities (comprised of Sempra Energy Trading LLC and its managed companies) is a leading participant in marketing and trading physical and financial commodity products, including natural gas, power, coal, oil, oil-related products and base metals.
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