The Board of Directors of the Inter-American Development Bank today approved its first private sector financing for a bioenergy project in Brazil for a total of US$120 million to Usina Moema Acúcar e Alcohol Ltda., a major sugar, ethanol and bio-energy producer based in the State of São Paulo, that is operating in one of the fastest growing industries in Brazil and worldwide.
This operation is part of IDB’s initiative to promote the structuring of senior debt financing for five Brazilian ethanol production projects that will have a total cost of US$997 million. These investments will contribute to Brazil’s goal of tripling annual ethanol production by 2020.
The IDB also supports the Brazilian government’s goal of becoming a global center of excellence for research and development in biofuels. The Bank is holding discussions with senior Brazilian officials with a view to facilitating technology transfer and technical assistance, so that other countries in the region can benefit from Brazilian know-how.
“In past years, Moema’s brisk growth was financed primarily by short- and medium-term debt,” said IDB team leader Leandro Alves. “Moema is now in the process of refinancing up to US$120 million of such debt through a financing package put together by the IDB.”
The package comprises an IDB loan of up to US$40 million from the Bank’s ordinary capital and $80 million of co-financing from commercial banks.
“The transaction will help Moema increase the average life of the debt being refinanced from approximately 10 months to 6.6 years,” explained the other IDB team leader, Sylvia Larrea. “It will therefore improve the company’s debt profile towards one more consistent with the long-term nature of its assets, enhancing the sustainability of the company,” added Larrea.
The operation will allow Moema to redirect funds currently used to service short-term debt to fund its capital investment plan, including projects to boost Moema’s production of sugar, ethanol and energy co-generation from biomass (bagasse).
IDB’s private sector window serves as a catalyst, not only enabling financing in the long tenors required by the company, but also mobilizing private funds in the form of co-financings. Required implementation of IDB’s Environmental and Social Management System ensures a good management of potential environmental, social, health, safety, and labor impacts.