Deals

Summit Agriculture raises $115m for Brazilian corn ethanol project

The project, partly financed through the group's own Summit Brazil Renewables Fund I, will gain cost advantages from its location in the country’s interior.

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Unloading a bumper crop of corn after harvest

Summit Agricultural Group (SAG) is constructing a $115 million corn ethanol production facility in the Brazilian state of Mato Grosso, with private investment firms Laverack Capital Partners and Tiger Infrastructure Partners helping to finance the project.

SAG also financed the facility with its single vehicle, Summit Brazil Renewables Fund I, which was launched in 2014 and is expected to reach a final close at the end of this month. The majority of its investors in the fund are high net worth individuals, with additional funding from family offices. The fund held a second close in October last year on $10.3 million, and is targeting up to $150 million, according to official documents.

SAG executives told Agri Investor this is the first large-scale corn ethanol production facility in Brazil amid the country’s growing ethanol consumption. The group’s president Eric Peterson said the firm has hopes to capitalise on a multibillion-gallon shortfall, citing a Bank of America projection that sales will rise from 8.1 billion gallons a year to 13.5 billion between 2016 and 2022.

The 60 million gallon a year plant will enjoy significant geographic advantages on both ends of the value chain and outcompete rival fuel sources, said SAG chief financial officer Justin Kirchoff. The plant is in the western state of Mato Grosso and will focus on its interior market. Geography and limited transportation infrastructure make bringing in offshore petroleum or sugarcane costly, while those challenges inflate the price of corn produced in Mato Grosso by the time it reaches major cities or export markets.

SAG also holds 11,000 acres of soybean- and corn-producing land, but Peterson said that SAG has no plans to vertically integrate its ethanol project with its soybean and corn one.

“We lease that property to a tenant and it’s up to them who they sell to,” said Kirchoff. “We’ll be buying corn from a lot of producers.”

The plant will produce high protein and fibre livestock feed as an additional revenue stream, according to Kirchoff.

Brazil produces 25 percent of the world’s ethanol. Private equity interest in ethanol projects has been tepid since the end of 2010, when the sector saw significant losses due to overbuilt capacity, rising food and falling oil prices.