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Paulo Adalberto Zanetti

President of Vale do Ivaí (Shree Renuka Sugars Group)


Strategy, in practice

Shree Renuka Sugars owns a transnational corporation with activities in the bioenergy agribusiness, has a strong presence in India and now also here in Brazil. The company is considered the world’s fifth largest sugar producer and operates one of the biggest refineries worldwide. It is a leading sugar producer in India and has the largest sugar market in the world.

It operates seven sugar mills, with a total capacity to process 35,000 tons of sugarcane/day and two refineries installed in ports, which have a capacity of 1.7 million tons of sugar per year. The company is currently starting operations in Brazil, with a major presence in Center-South Brazil, due to the acquisitions of the Vale do Ivaí and Equipav companies, which have a processing capacity of 14 million tons of sugarcane/year.

Shree Renuka Sugars has activities throughout the entire sugarcane production chain. The company has sizable installations comprising not only the sugarcane processing and the production of sugar and ethanol, but also the cogeneration of energy. Its activities are an interface between the world and the sugar market of India.

In the 2007-2008 harvest, it exported 885,000 tons of sugar from India, whereas in the 2008-2009 harvest it imported 781,000 tons of sugar, and currently, in the most recent harvest, it imported more than one million tons of sugar from Brazil. In July 2010, the company had a capital of about US$ 913 million, quite close to US$ 1 billion.

Among its controlling owners are the founding partners, represented by the family of businessman Narendra Murkumbi, which owns 38% of the Group’s shares. International institutional investors own 22%, financial institutions, banks and investment funds represent 13%, the public in general 23%, and the company’s employees or employee foundations own 4%.

Renuka Sugars’ assets in India represent a total daily crushing capacity of 35,000 tons of sugarcane and a production of 930,000 liters/day of ethanol, 6,000 tons of refined sugar and the cogeneration of 203 megawatts of power, of which 111 are surplus available for sale. In 2011, the crushing capacity will remain at the current level of 7.1 million tons of sugarcane/year.

With the inauguration of yet another refinery, with the capacity of 9,000 tons of sugar/day, Renuka Sugars will increase its daily ethanol production to 1.2 million liters, its refined sugar production to 9,000 tons, and the generation of energy to 233 MW, with a surplus of 135 MW. As related to exports of the refineries installed in India, the region of Kandla’s production is destined to the Middle East, the region of Haldia refines the sugar for the markets of Southeast Asia and the West Coast of India processes the sugar destined to countries of East Africa.

As related to the policy of India for ethanol as fuel, the current mixture with gasoline is set at 5%, however, since the supply still does not reach this volume, this figure still is not met. There is already a technically based authorization to mix up to 10% for all existing vehicles. The volume of ethanol needed for a 5% mixture is approximately 850 million liters per year.

Renuka is now engaged in changing the law to 10%, thereby considerably increasing the size of the market. The long-term policy involves negotiating a mixture in the magnitude of 20% of ethanol in 2017, with the government of India. As a reference, the price of ethanol must be set by the government at about 27 rupees per liter, which amounts to approximately R$ 1.00.

The policy of India for sugar has two clear objectives. First, to warrant a reasonable price for sugar consumers. Second, to protect the high sugarcane price, since most farmers are small producers. To have an idea of the social significance of this decision, the crushing of 7.1 million tons of sugarcane involves 60,000 suppliers, and it is even prohibited that the mills themselves produce sugarcane.

The scenario and outlook of the market for ethanol in India is as follows: In the 2009/10 harvest, the so-called drinkable alcohol, used to make beverages, totaled 1.1 billion liters. For the 2010/11 harvest, estimates run at 1.2 billion liters. For use in the chemical industry, one estimates maintaining the same consumption level as in 2009/10, i.e., 400 million liters.

For ethanol as fuel, one estimates an increase from 300 million to 1.04 billion liters. Shree Renuka is the world’s second largest buyer of unrefined sugar. Since 2009, it has bought all the sugar it needs here in our country. In Brazil, Renuka acquired the controlling interest in the company Vale do Ivaí, in the State of Paraná (PR), and 50.4% of the shares of the Equipav-Biopav Group, amounting to a total investment of R$ 600 million when taking into consideration the mills and the sugarcane plantations.

The joint crushing capacity of these units is 13.6 million tons of cane, and is projected to reach 15.5 million tons in the next harvest. We are currently producing 1.062 million m3 of ethanol and in the next harvest we plan on producing 1.382 million m3. As for sugar, in this harvest season we produced 863,000 tons and aim at 1.150 million tons in the next.

As related to cogeneration, in the current harvest season we generated 221 MW, with a surplus of 139 MW, and for the next this figure stands at 313 MW, of which 215 MW will be surplus for sale. As related to synergy between investments made in Brazil and Asia, we should point out that India, Southern Asia and the Middle East stand out as the largest import markets for sugar in the world, facing increasing challenges in terms of availability of land and water.

The efficient technology developed, the operational costs, the large production scale and the edaphoclimatic conditions were the factors that made Renuka invest in Brazil. As a reference, the company Vale do Ivaí is located in the town of São Pedro do Ivaí-PR, and comprises two mills that are 57km apart one from the other. Currently, these units have a capacity to process 3.1 million tons of sugarcane; the average distance between the mills and the plantations is 17km; they are located close to warehouses of the company CPA Trading and the port of Paranaguá.

Vale do Ivaí participates in four logistics companies, engaged in developing transportation through pipelines that interconnect the city of Maringá and the port of Paranaguá, and in the storage and shipping of bulk and liquid cargoes in self-owned port terminals. As related to Equipav-Biopav, the proximity of the two mills results in a strong cluster covering a range of 75km, which leads to a very high utilization rate of agricultural and industrial machinery and the reduction of logistics costs.

Sugarcane is supplied from plantations covering about 115,000 hectares of land, of which 85,000 hectares are company-run plantations, with a high rate of planting and harvesting mechanization. Let me emphasize this: an 82% mechanization in harvesting and 86% in planting. There is much flexibility in selecting the means to transport the produced sugar and ethanol, either through the ports of Santos or Paranaguá, and strong synergy of the logistics companies and the State of Paraná.