Cosan: ethanol and electricity in Brazil
“Is sugar cane like strawberries?” I asked Vanessa Heitmann, an engineer for COSAN Corporation, as she tried to explain why they got so much more sugar in June than they did in April. It’s not just the quantity of sugar cane, but the quality, the amount of juice that you can get out of one stalk of sugar cane after it has baked in the sun. If you take a bite of a strawberry picked from a field in July, your taste buds will be awakened, and your hand will instantly go to your mouth as you bend over so as not to stain your white blouse.
This is the same for the sugar cane and the folks at the Costa Pinto plant in Rafard City, Piracicaba County, Sao Paulo State, Brazil understands this. The Costa Pinto factory, COSAN group headquarters, is the largest of seventeen plants that Cosan Corporation owns. Cosan is one of the world’s major producers, growers, and processors of sugar cane. Sugar cane is the raw material used to produce sugar, alcohol, ethanol, and electricity.
According to the company website, Cosan crushed 26.6 million tons of sugarcane during the fiscal year 2005. In the fiscal year 2005, total net sales were R$1,900.4 million (U.S.$750.8 million) and gross profit was R$561.8 million (U.S.$222.0 million). COSAN says they believe they are the largest sugar producer in Brazil and among the three biggest sugar producers in the world, having sold 2.3 million tons of sugar during the fiscal year 2005. The company says they are the second-largest seller of refined sugar in the Brazilian retail market through the Company’s “Da Barra” brand, holding an approximate 13% market share as of April 30, 2005.
According to Cosan, they are the second-largest exporter in the world, having exported approximately 2.0 million tons during the fiscal year 2005, representing roughly 4% of total worldwide sugar exports. Cosans sugar exports are principally handled by the Company’s subsidiary Cosan Operadora PortuÃ¡ria S.A., or Cosan PortuÃ¡ria, which operates port and warehouse facilities at the Port of Santos in the State of SÃ£o Paulo.
Sugar is not what Cosan has gained its worldwide fame for, nor the main reason it was able to raise $400 million in it’s first offering on the Bovespa stock exchange. Sugar is not the reason Moodys gives Cosan a rating of Ba2 and the S&P gives Cosan a BB rating, nor why it has $450 million in perpetual bonds. Cosan is creating multiple revenue streams through sugar cane, including sugar, alcohol, ethanol, and electricity. The entire Cosan corporation seems committed to the continuous sustainability and renewability of every piece of the sugar cane process and the utilization of all technology that can help in that process.
As we drive from Indaiatuba to the Costa Pinto plant in Rafard, Sao Paulo I am struck by the seas of green sugar canes. Piracicaba is the most traditional sugarcane region of the state of SÃ£o Paulo. It reminds me of driving the backroads of Iowa and seeing row after row of cornfields. We drive by trucks that warn us of their more than 30 meters in length, with sugar cane spilling over the uncovered tops of the twelve-foot bins that are going to the same destination as we are headed.
Vanessa gave us an overview of what we will see as we go through all 31 processes they use to squeeze, pummel, filter and manipulate every last little ounce of worldly wisdom out of the sugar cane. Satoro, another engineer, starts us off at the same truck we had passed earlier. Sugar cane is cut seven months out of the year, beginning in April. A mechanical claw pulls the sugar cane out of the bins and onto a conveyer belt.
They use over seventy different types of sugar cane, depending on the soil and the time of year. There are 400 to 600 trucks a day, 24 hours a day, coming into the plants during the seven months. The grinding begins; Cosan grinds, on average, 24,000 tons of sugar cane a day. Through a series of crushing, separating fibers, scratching and pressing the juice is released and sent to the distilleries to make sugar.
The residue used to be thrown away and in the United States, where we use corn to make ethanol, it still is thrown away. But Cosan has an old fashioned name for a new product; bagasse. Bagasse, the residue from sugar cane, is sent to boilers where it is heated to steam. The steam creates electrical energy. Currently, Costa Pinto produces 9.2 megawatts of power.
In two years Cosan will change the boilers to achieve higher efficiency of about 60 megawatts of power. They estimate they will need 15 megawatts of power, so by 2009, they expect to sell 45 megawatts. According to the Deputy Secretary for the Environment of SÃ£o Paulo State, Suani Teixeira Coelho, there is a twenty-year contract by the State that guarantees the purchase of electricity, up to 3,000 megawatts, to the business that is upgrading to sell electricity to the grid.
But we are only into our first twenty processes at the Costa Pinto plant. The juice is still steaming and separating into molasses and sugar. As sugar comes spewing out another conveyer belt, it is bagged in bags stamped, Da Barra S.A., the largest producer of sugar and the second largest exporter of sugar. Locally, they are the largest producer of sugar. But they don t let that molasses go to waste either. The sweet smell of molasses picks up as I turn the corner. Another whiff gives me the other smell; yeast. A plop of brownish-white foam hit’s my head, and I realize I am standing under the largest mug of beer in the world. A giddiness explodes as the group realizes we could just stand there and get drunk. In Brazil, they have a saying, drink the best, burn the rest. We are watching alcohol being made, and we are about to see the product we have anxiously awaited ethanol.
Cosan says they are the largest ethanol producer in Brazil and the second-largest in the world, having sold 824.7 million liters during the fiscal year 2005. They also claim to be the largest exporter of ethanol in the world, having exported 298.3 million liters during the fiscal year 2005. On our way from Indaiatuba, we saw Alcool (ethanol) being sold for R$1.39 (Reals) and was told that it was somewhere around 60 cents a liter. If those 825 million liters that Cosan sold were at 60 cents a liter that is $USD49.5 million that Brazil did not spend on foreign imported oil. And that is from just one ethanol producing group, and it doesn’t include what Cosan sold overseas. Cosan says they are the second-largest producer of ethanol, globally and second-largest retailer of ethanol locally.
In a white paper entitled, “Bioethanol, The Way Forward” by Oswaldo Lucon, Olimpio de Melo Alvares Jr. and Suani Teixeira Coelho, “oil import savings amounted to US$52.1 billion (January 2003 US$) from 1975 to 2002 (Goldenberg et al., 2003).
There are plenty of reasons to be interested in using cellulosic ethanol as a source of energy for motor transportation. According to Marilyn Radler, Senior Editor, Oil & Gas Journal, the United States uses 498,000 barrels of imported motor gasoline a day. According to Governor Blogavich s office, that translates to $800,000,000 a day we are spending for imported gas.
According to Elizabeth Lowery, General Motors, Vice President Environment, and Energy, “The Cosan refinery maximizes each step of the process to ensure sustainability to the production of ethanol. We can all learn from the process as we evolve from corn-based ethanol to cellulosic ethanol. And the success of ethanol as we are producing this as fuel on a global basis will depend on the economics and efficiencies. The best practices need to be shared on a global basis and Cosan is willing to share this information.”