Highlights
SÃO MARTINHO ANNOUNCES R$ 1 BILLION FINANCING DEAL FOR GREEN PROJECTS
São Paulo, July 1, 2021 — São Martinho, one of Brazil’s largest sugar and energy groups, announces that it successfully carried out a R$ 1 billion funding operation whose proceeds will be used in green projects currently planned by the company. Part of the amount, US$ 100 million, was raised through the International Finance Corporation (IFC) and Rabobank. The remaining R$ 500 million was raised via an infrastructure bond issue managed by Banco Itaú.
The credit facility led by IFC and Rabobank will be used to finance part of the project for the new thermoelectric generation unit at the São Martinho Plant, which will expand the company’s generation of clean, renewable energy by around 20%, as well as its investments in renewing sugarcane fields using innovative new farming practices. The credit facility comprises US$ 55 million in funds from the IFC, with a term of 12 years, and US$ 45 million from Rabobank.
Part of the funding operation brings an innovative development in Brazilian agribusiness: green credit based on Green Loan Principles (GLP), making this the first green loan in Brazil’s sugar and ethanol industry. The goal of these principles is to create green credit structures that adopt high social and environmental standards and guidelines, incorporate solid methodologies and foster relations marked by ethical conduct. This portion of the facility will be used to conclude São Martinho’s cogeneration expansion project, which involves replacing boilers and generators with lower-capacity, higher-efficiency equipment. This includes the use of regenerative cycle technology which, combined with the adoption of fluidized bed boilers, increases the amount of surplus power offered for sale to third parties by approximately 210 GWh each crop year, avoiding GHG emissions of 85,000 tons annually compared to the use of natural gas for power generation.
The project to expand clean and renewable energy generation not only will improve Brazil’s energy profile, but also produce enough electricity to power 46,000 homes using the same amount of bagasse currently consumed, while improving operational safety by automating processes and reducing annual emissions of particulates by around 300 tons and of nitrogen oxides (NOx) by 4 tons The investments in renewing São Martinho’s sugarcane fields will draw on smart farming technologies, which including maximizing the use of organic fertilizers, adopting localized soil preparation techniques (reducing by fivefold GHG emissions compared to conventional techniques), recycling nutrients and using real-time imaging to accompany plant development.
These initiatives reinforce São Martinho’s commitment as a leader in sustainability and ESG practices, while helping to develop and diversify Brazil’s energy profile, in line with the commitments undertook by the country in the Paris Climate Accord to reduce its GHG emissions by 43% between 2005 and 2030.
“These investments will expand São Martinho’s power generation by around 20% and improve the country’s energy profile, especially during the period of the crop year coinciding with the dry season in the country’s Center-South production region. We also are planning acquisitions of equipment from regional companies that will create some 400 new jobs directly and indirectly, while supporting local economic development,” said São Martinho CFO Felipe Vicchiato.
The nonconvertible infrastructure bonds were placed with a term of 10 years and amortizations in the 6th, 7th, 8th, 9th and 10th years. The proceeds will be used to finance part of the corn ethanol plant attached to the Boa Vista Plant and for maintaining, adapting and modernizing the plant’s operations involving sugarcane planting, intercrop maintenance, crop treatments, equipment and replacement parts, as well as investments in operational safety at industrial units.
The bond issue was subjected to a Second Party Opinion (SPO) by Sitawi, which attested to its compliance with the Green Bond Principles (GBP)1, the Climate Bonds Standards2 and other internationally recognized sustainability standards. According to the opinion, the investment will contribute to the Sustainable Development Goals (SDG 7) and to Brazil’s targets under the Paris Accord.
Other ESG highlights of the corn ethanol project include:
- creating around 1,400 direct and indirect jobs;
- using cane bagasse as an energy source, making plants less dependent on the use of other fuels;
- introducing innovative industrial technologies that consequently cause positive impacts on the development of the industry and of local communities;
- reducing by 90%¹ the GHG emissions generated by the production of ethanol compared to gasoline. The expansion in biofuel volume will avoid around 360,000 tons of CO2 emissions annually.
- advancing the substitution of soymeal by Distiller’s Dried Grains with Solubles (DDGS), which are more nutritional and digestible and in turn leverage livestock production and reduce dependence on pastureland during dry periods.
“These funding operations demonstrate to the market our financial solidity and put us in a strong position for accessing credit, like companies in other industries, such as pulp and paper, while expanding our exposure among different investor profiles,” said the CFO.
¹Estimate from the Sugarcane Industry Association (UNICA)
