SAO PAULO (Dow Jones)--A new Brazil-focused ethanol company - with backing from big-name U.S. investors such as Sun Microsystems Inc. (SUNW) founder Vinod Khosla, supermarket magnate Ron Burkle and the co-founder of AOL Steve Case - has raised $200 million in a private placement of its common shares this week, Ana Fernandes Kertesz, a vice president of Goldman Sachs (GS) in Brazil, said Wednesday.
Goldman Sachs is the sole exclusive placement agent for the new company, Brazilian Renewable Energy Company Ltd., or Brenco. "There was $200 million raised in this round," said Kertesz. "There will be additional equity raised in the future."
The new company, which will be headed by Philippe Reichstul, the ex-president of Brazil's state-owned oil company Petrobras SA (PBR), aims to become one of the largest ethanol producers in the world, said another investor in the company who didn't want his name disclosed.
Brenco's goal over the next 10 years is to reach an annual output of 1 billion gallons (3.8 billion liters), according to market sources.
By comparison, the country's largest miller to date, Cosan SA (CSAN3.BR), which accounts for under 10% of Brazil's total ethanol output, produced 1.27 billion liters in the 2006-07 season (May-April).
Brazil, the world's leading ethanol exporter, shipped out a record 3.4 billion liters of ethanol in 2006, or about a fifth of the country's total production of some 17 billion liters.
Global interest in Brazil's cheap cane-based ethanol has boomed in recent months due to high world oil prices and growing climate change concerns among other factors.
An influx of private equity money into the Brazilian sugarcane sector has followed, including U.S. investment company Kidd & Co., which helped finance young, bio-energy company Infinity Bio-Energy.
Infinity Bio-Energy, which listed on the London stock exchange's junior market, or AIM, last May, now owns four operational Brazilian sugarcane mills that are set to crush 5.5 million tons of cane in the 2007-08 season.
In addition, there is the Cayman Island-incorporated Bioenergy Development Fund, which has financing from France's third-largest bank, Societe Generale, but has yet to announce any acquisitions in the sector.
Another recently formed company, Clean Energy Brazil, which raised GBP100 million on AIM in December, is planning to invest in three mills in Parana in coming months. Local press reports had originally put Brenco's capital holdings as $2 billion.
"This $200 million that was raised is just an initial placement; $2 billion is the target," said a source, adding that the placement was very well received.
Other key investors in Brenco include ex-World Bank President James Wolfensohn, film producer Steven Bing, and local investors Tarpon All Equities LLC and Grupo Semco.
"We are obviously very bullish on biofuels and using sugarcane to make ethanol," said Samir Kaul, a general partner of Khosla Ventures, the venture fund founded by Vinod Khosla.
"It's a cheaper process, it's more favorable for the environment, and they have their costs well below a dollar a gallon in Brazil.
So it makes it much more competitive given that corn is high." U.S. ethanol is primarily made from corn, but corn prices have jumped in recent months due to increased U.S. ethanol production.
Brenco is incorporated in Bermuda, but has headquarters in Sao Paulo, according to sources. Brazil is the world's No. 1 sugar producer and exporter. It is also the world's No. 2 ethanol producer after the U.S. Together, Brazil and the U.S. jointly produce over 70% of the world's ethanol output.
-By Grace Fan, Dow Jones Newswires; 55-11-3145-1489; brazildowjones.com; and Antonio Regalado