Backed by the US firm’s $70m Brazil Renewables Fund, the $115m project is the first of ‘multiple plants’ it intends to build within the next two years.
Earlier this month, Iowa’s Summit Agricultural Group and Brazilian agribusiness Fiagril inaugurated Brazil’s first large-scale ethanol plant that uses corn as its feedstock.
The two companies jointly undertook construction of the FS Bioenergia plant at the beginning of last year. Located in the city of Lucas do Rio Verde, the project cost $115 million. It will process 22 million bushels of corn and produce 60 million gallons of ethanol annually during its initial phase.
In addition to ethanol, FS Bioenergia will produce 60,000 MW of electricity and the 170,000 tons of livestock feed components derived from dried distillers’ grains, a byproduct of ethanol production. FS Bioenergia will market the feed components under three distinct brands, with varying proportions of fiber and protein suited to feeding cattle, chicken and pigs.
The project is partly funded by Summit’s $70 million Brazil Renewables I fund, launched in 2013. SEC filings respectively dated June 2014 and August 2015 suggest the vehicle’s original $38 million target was subsequently raised to $150 million.
The firm manages two other vehicles focused on the country: the $30 million Summit Brazil fund, which provides exposure to Mato Grosso farmland, and the $9.1 million Summit Sao Manoel, which invests in similar assets based in the state of Amapá.
While Brazil has produced ethanol from sugarcane since the 1970s and is currently responsible for about a quarter of global production, Summit founder and chief executive Bruce Rastetter told Agri Investor that the FS Bioenergia project grew out of the government’s recognition that domestic ethanol demand cannot be met with sugarcane alone going forward.
Rastetter said that in sourcing its feedstock from within the state of Mato Grosso, FS Bioenergia will benefit from recent improvements in agricultural input quality and corn yields in the region that will support a rapid expansion of ethanol production.
“Our goal would be to take this plant and, long-term, double the plant and then continue to build a platform out, rather than just a single plant. You will see us build additional sites in Mato Grosso to continue to grow in that state with multiple plants,” Rastetter said, detailing plans to have 250 million gallons of corn ethanol production capacity in the state within two years.
Rastetter noted that, despite ongoing concerns regarding corruption in Brazil, Summit has found the environment in Mato Grosso and the country overall to be very business-friendly for agriculture. He said local officials offered clear guidance on issues including environmental regulations and permits and were very accommodating of plans to add value within the country to commodities that are often exported raw.
At the national level, Rastetter highlighted moves to introduce overtime pay and the government’s recent announcement that it will use the army to complete a repaving of the BR-163 highway that will improve logistics in northern Brazil as evidence of an improving business environment.
“It’s been refreshing to us to see people embrace and support a new industry that is going to be a significant player in Brazil and very good for investors in the long term,” he said.
Summit Ag is currently raising its third US-focused farmland fund with a target of $60 million, according to a July SEC filing. The first two vehicles of the series were respectively closed on $32.8 million and $41.35 million.