Latest Brazilian ethanol fund launched

Brazilian private equity firm DGF is the latest to start raising a fund to invest in Brazil’s booming ethanol industry.

Sao Paulo-based DGF has garnered 38%, or $75m (€48m), of its $200m Terra Viva Equity Fund, and expects to have $100m by July a company insider told Private Equity News. The source added DGF could launch a similar-size fund next year “if things go well”.

DGF is majority owned by Sydney Schameh, the vice president of Brazilian private equity association ABVCAP. Schameh expects buy-out funds to pour $4bn to $5bn into Brazil’s biofuels industry in the medium term.

With vast sugar cane fields, Brazil has become the world’s largest exporter of sugar-made ethanol which is used to make bioethanol, the main biofuel alongside biodiesel. Made from plants and waste, biofuels are gaining traction amid soaring oil prices.

DGF is primarly targeting Brazilian investors for the Terra Viva fund which will invest in the entire ethanol chain including raw material producers, manufacturers and transport/logistic operators during its 10-year life cycle. Local pension fund SUNCEF, Banco do Brasil pension fund and state technology-development fund Finepi have injected $42m, $21m and $12m respectively. Spain’s Banco Santander is also expected to invest an undisclosed sum.

Meanwhile, Meanwhile, Brazilian Development Bank BNDES is “actively” seeking investors to back its $150m-$250m Fundo Brasil Sustentabilidade fund which will specialise in the country’s renewable-power sector with a heavy focus on ethanol and bioenergy, according to a company spokesman.

BNDES has committed 40% of the FBS fund. The spokesman said several local institutional investors have expressed interest in financing the rest of the fund, which will launch by year end and be managed by Brazilian investment firm Latour Capital do Brasil.

FBS will back mostly ethanol enterprises because “ethanol is Brazil’s fastest-growing industry,” he added.

The fund will also bankroll biodiesel, biomass and second-generation biofuel producers as well as renewable generation projects such as wind and solar power. It will focus on companies that have the potential to generate Certified Emission Reductions, more commonly known as carbon credits, where there’s a huge international trading market.

FBS will have an eight eight-year life cycle and BNDES hopes to commit it in the first four years.

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