Bloomberg News

Logum Logistica Wins $924 Million Loan for Ethanol Pipeline

September 29, 2011

(Updates with comment from trader starting in third paragraph.)

Sept. 29 (Bloomberg) -- Logum Logistica SA, a joint venture backed by Petroleo Brasileiro SA, won a 1.7 billion real ($924 million) loan from development bank Banco Nacional de Desenvolvimento Economico e Social for a project to transport Brazilian ethanol by pipeline.

The bridge loan will cover a first phase of the project that includes three sections of pipeline in the states of Sao Paulo and Minas Gerais, Sao Paulo-based Logum Logistica said in a statement today.

Trucks currently move almost all Brazilian ethanol, transportation that costs an average of 8 centavos a liter, according to Joao Chierighini, logistics manager at Sao Paulo- based ethanol trader Bioagencia. Logum will be able to charge mills a significant fee to use the pipeline, which can reduce freight costs by as much as 30 percent, he said.

“The pipeline’s operators will achieve big margins,” he said. “You can only transport ethanol by road at the moment. There are few alternatives.”

The 1,330-kilometer (830-mile) ethanol pipeline would be able to transport 21 billion liters of ethanol a year from the country’s central-west region to consumption centers in the southeast, the company said.

Logum Logistica’s backers include state-controlled oil company Petrobras, construction company Odebrecht SA, and Raizen, Brazil’s biggest cane miller, according to the statement.

Brazil is the second-largest producer of ethanol, behind the U.S., according to the U.S. Energy Information Administration. Anhydrous ethanol, which is mixed with gasoline in Brazil, sells for about 1.38 reais a liter, according to information compiled by Bloomberg.

--Editors: Tina Davis, Steven Frank

To contact the reporter on this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editor responsible for this story: Francisco Marcelino at mdeoliveira@bloomberg.net


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