Sugar & Ethanol
A sustainable company
By 2015, ETH Bioenergy aims to become one of the biggest players in its industry by investing in high technology, grooming people and implementing environmental protection Project
written by: Sérgio Bourroul
photos by: Guilherme Afonso
An Odebrecht Group subsidiary, the company is 33% owned by the Sojitz Corporation, a Japanese multinational trading company that deals in commodities. Created in mid-2007, ETH will integrate its operations in the areas of production logistics, and sales of sugar, ethanol and bioenergy. It will invest over BRL 5 billion to set up three production hubs located in the Brazilian states of São Paulo, Goiás and Mato Grosso do Sul, where approximately 600,000 hectares will be planted with sugar cane. The venture will also create about 20,000 work opportunities.
According to Production Director Ailton Reis, “The innovations involved in the ETH venture start with its business model, which is based on the creation of hubs that will generate synergy among their factories, reducing production costs and optimizing the plants’ installed capacity and consequently making the company more competitive.” Today, it has two plants that produce sugar, ethanol and electricity for their own consumption At least 10 will be onstream by 2012, with a total annual processing capacity of 46 million tonnes of sugar cane. That will guarantee an output of 3.1 billion liters of ethanol, 2.3 million tonnes of sugar and installed power co-generating capacity (using sugar cane bagasse) of 1,300 MW per year.
In less than a year of operations, the company has already set down roots in all three states. In March, it acquired the Eldorado Factory, located in the municipality of Rio Brilhante, Mato Grosso do Sul, 150 km from the city of Campo Grande. The plant was inaugurated in June 2006, and the company plans to invest in the expansion of its current production capacity, which will go from 2.2 million to 5 million tonnes of sugar cane processed per harvest, making it possible to produce 150,000 tonnes of sugar, 360 million liters of ethanol and boost current energy co-generation from 12 MW to a whopping 130 MW. Adding these figures to those of the other two plants under construction in two Nova Alvorada do Sul municipalities (Santa Luiza I and Santa Luiza II), the company will plant 200,000 ha in Mato Grosso do Sul, processing up to 15 million tonnes of sugar cane per harvest.
In September 2007, ETH acquired the Alcídia Distillery in Teodoro Sampaio, São Paulo. The company’s São Paulo State hub is located in the Pontal do Paranapanema area, where three more plants will be built, and another 220,000 ha will be planted to grow 16 million tonnes of sugar cane per harvest. The installation of the second plant, Conquista do Pontal, in the municipality of Mirante do Paranapanema, is now underway, and two more units are planned for the municipalities of Presidente Epitácio and Euclides da Cunha.
Motorgraders, tractors and other pieces of heavy equipment have already arrived in the municipality of Caçu, Goiás, to do the earthmoving work, not to mention specific equipment that will be used to plant sugar cane during the initial stage in order to etablish ETH’s first plant in that state. Two more units will also be built there, one in the same municipality, and another in Itarumã. All told, the Goiás hub will grow sugar cane on 200,000 hectares of land, producing up to 15 million tonnes per harvest.
The massive size of this project is directly proportional to Brazil’s productive potential for growing and processing sugar cane. According to Ailton Reis, the Center-South of Brazil produces up to 85 tonnes of sugar cane per hectare. “We produce the most sugar in the world, at the lowest cost. Compared to other major producers, our production costs are nearly half those of India, two and a half times lower than the United States and China, and over three times lower than Europe,” Ailton explains.
By 2015, sugar cane milling in Brazil is expected to grow by about 7% per year, whereas the international demand for ethanol should triple during the same period of time. In the past two years alone, sales of flex-fuel vehicles (FFVs) in Brazil grew by 83%. “We are getting ready to supply this promising market, while betting on excellent business opportunities in the United States, the European Union, China and Japan,” says Clayton Miranda. “Our business plan will benefit the entire bioenergy supply chain with investments in different logistical modalities in Brazil and other countries, such as building cargo terminals and setting up sales outlets to meet the demand efficiently,” he adds. Clayton underscores that ETH is making a special effort to provide working conditions and implement environmental management procedures that will bolster international approval of ETH’s products. “We are eliminating burning as a way of clearing land, and harvests will be mechanized,” he says. “That way, we will reduce carbon emissions, protect wildlife and, above all, the soil, while maintaining productivity in the next few years.”
Mechanized harvesting will also ensure better working conditions. “Our rural workers are already learning the skills they will need to operate modern farm equipment, which will improve their professional standing and make their work routine less tiring,” Ailton concludes.
ETH products
Bioenergy plays an important role in the diversification of Brazil’s energy matrix. In addition to driving economic and social development, it can also cut down on greenhouse gas emissions. By burning the bagasse produced when milling sugar cane, ETH will produce 1,300 MW/year of energy, using 52% for co-generation to run its 10 factories. The remainder will be sold on the free and regulated energy markets as of 2010, for the National Interconnected System. ETH has registered to bid in the first biomass electricity auction organized by the National Electric Energy Agency (Aneel), which is scheduled to be held by the end of June 2008. A total of 118 factories have registered for the auction, which will initially supply nearly 8,000 MW of thermoelectric power.
ETH will produce two types of fuel ethanol: anhydrous and hydrated grade. The difference between them is simply their water content. While anhydrous grade ethanol (used as a gasoline additive and in the chemical industry) contains about 0.5% water, hydrated ethanol, which is sold at gas stations, contains about 5% water. In the industrial production process, hydrated ethanol is produced directly by distillation columns and used in ethanol and flex-fuel vehicles. An additional process is required to produce anhydrous ethanol, removing most of its water content.
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ETH also produces VHP (very high polarization) sugar for export. This is raw, low-moisture sugar that is used as a feedstock by mills that produce refined sugar for the food industry and direct consumption.
Ethanol pipeline
With a view to optimizing shipments of the nation’s growing ethanol production to market from central Brazil, Petrobras in 2007 announced plans to build two ethanol pipelines: one between Senador Canedo, Goías, and São Sebastião, São Paulo, and another connecting Campo Grande and Paranaguá, Pará. Brazilian President Luiz Inácio Lula da Silva has approved the Goiás-São Paulo pipeline as part of the federal Growth Acceleration Program (PAC). The 1,150-km system will begin in Senador Canedo and run southwards through the state of Minas Gerais in the direction of São Paulo, passing through the cities of Ribeirão Preto and Paulínia until it reaches the Port of São Sebastião.
In March 2008, the State of Mato Grosso do Sul signed a protocol of intent with the Federal Government and the State of Paraná to carry out feasibility studies for the installation of a 920-km pipeline that will run through the state and transport ethanol to the Port of Paranaguá.
Mato Grosso do Sul is working at a rapid pace to expand its ethanol production to 2.5 million cubic meters by 2009. There are already 12 factories operating in that state, 19 in the process of obtaining environmental permits, and another 40 being negotiated. The State Department of Farm Development, Production and Industry, Commerce and Tourism (Seprotur) provides incentives through its Sugar/Ethanol Industry Development Program to boost production of sugar cane byproducts by expanding the planted area and seeking to provide more competitive conditions for production and income creation.
The program’s aims include helping expand productive units already operating in the state, carrying out agro-ecological zoning for sugar cane farming, constructing new port terminals and developing ways of harnessing the surplus energy that the plants will generate. It also includes investments in the maintenance and expansion of roads and railways and the creation of port infrastructure to ship production to market. To meet the demand of these factories, 1.5 million hectares will be planted with sugar cane in Mato Grosso do Sul by 2010. “This government program coincides with ETH’s priorities. We have been welcomed with open arms in Mato Grosso do Sul,” says Ailton Reis.
People make the difference
When it acquired the Alcídia and Eldorado factories, ETH took on sugar plantations, industrial plants, equipment and different business cultures. “Our biggest differentiator will be people, and we are already working on selecting and training, while investing in excellent working conditions,” says Luciano Guidolin, the ETH officer Responsible for Finance and People.
Due to the verticalization of the process of producing sugar and ethanol, the company’s teams include a wide range of professionals from many different backgrounds. The teams working in the Production area are basically assigned to processing and farming. The arrival of farm equipment at the established hubs has meant that mechanization is gradually being incorporated into that activity. “Because farming will be mechanized, we have devoted considerable effort to planning the training our farm machine operators receive, so they know how to operate and maintain the equipment,” says Patrícia Maia, who is Responsible for People and Organization at ETH. “This requires careful hiring procedures, because the basic job requirements are a high-school diploma and a driver’s license. Prior experience is also an advantage,” she adds.
The ETH project will work with a large fleet of equipment, including 213 farm tractors, 180 harvesters, 138 bulldozers, excavators and motorgraders, and 360 trucks of its own. “This is costly and sophisticated equipment that will be used to its maximum capacity. Because of that, we need well-trained, responsible operators,” explains Luciano Guidolin.
Another challenge in the farming department is planting. Rain or shine, sugar cane must be planted by May to ensure a successful harvest. In areas with a long tradition of growing sugar cane, hiring is not a problem. However, in Caçu, where soya farming predominates, ETH is bringing in people from other parts of the country to finish planting 20,000 hectares. “We are in a remote area surrounded by small towns of 5,000 to 7,000 people, so we need to bring in workers from other parts of the state and even northern Brazil,” explains Patrícia Maia. Accommodations for 1,200 people have been built to house these new members, as well as a cafeteria, a soccer pitch, a multipurpose playing court, a fully equipped medical center, a socializing area, and all the infrastructure facilities provided at Odebrecht’s construction jobsites. “We are setting new standards for working conditions for farm workers,” underscores Patrícia.
The job requirements for the industrial area include a technical certificate in chemistry, mechanics, electrical engineering or sugar & ethanol. ETH offers training programs to provide specialized skills required by the sugar/ethanol industry, covering all phases of production, from raw materials, milling, handling sugar juice, manufacturing sugar and ethanol, generating and distributing steam and energy, and storing and transporting these products. Basic subjects such as math, physics and applied chemistry, computer skills, safety and personal hygiene are also included. Broader topics related to the business itself are also covered, such as sales and distribution, market intelligence and logistics, as well as behavioral aspects, such as teamwork, communication and leadership skills. The Goiás and Mato Grosso do Sul SENAI and the Paula Souza Foundation in São Paulo – traditional professional education institutions – are helping ETH’s local People teams train the newly hired company members.
Considering the difficulties involved in traveling long distances due to the remote locations where its units are found, the company is assessing the possibility of offering e-learning programs to its members active in the administrative area. ETH currently has 19 young partners, and has carried out three training programs to introduce its members to the Odebrecht Entrepreneurial Technology (TEO) – two at the Alcídia Factory and one at the Caçu construction site.
Creating new jobs – it will have over 8,400 members by 2010 – and providing benefits will not be the company’s only social contributions. “Our operations must bring development and improve the socioeconomic conditions of the areas where we are present,” observes Clayton Miranda.
In the social and environmental arena, several studies are being carried out – both corporate and local. ETH has already made education, health and the environment its top priorities. The company has made contact with municipal governments and local organizations to assess their needs, and continued with projects begun by the previous owners of the Alcídia and Eldorado factories.
The Vó Nina State School has been established in the sugar cane plantation area of the Alcídia Factory. There are 350 local pupils studying there, including the children of farmers from the rural community in the vicinity of the distillery. In the town of Teodoro Sampaio, the company has helped improve the conditions for building and operating a municipal emergency room by donating medical supplies and equipment.
The factory’s plant nursery houses more than just varieties of sugar cane. It has also set aside a large area for growing native plants that are used to reforest the area on a permanent basis. Furthermore, ETH is lending a hand to programs aimed at establishing a green corridor connecting the Morro do Diabo forest preserve with Três Morrinhos to protect black lion tamarin monkeys, which are endemic to the Atlantic Forest in rural São Paulo State and now on the verge of extinction.
The Eldorado Factory nursery is working along the same lines. It has donated over 120,000 seedlings of native plant species to reconstitute riparian forests in the area, in partnership with Floresce Brasil Mudas, a reforestation firm associated with the NGO SOS Mata Atlântica. The unit is also a signatory of the Corporate Conduct Commitment to Eradicate Child Labor, together with the Abrinq Foundation for Children’s Rights, the Mato Grosso do Sul Federation of Industries, the Ethos Institute, Força Sindical, the Central Labor Union (CUT), the International Labor Organization (ILO) and UNICEF.
The Guardian Angel project, introduced in the municipalities of Nova Andradina and Deodápolis, provides social services to 200 low-income children and adolescents from Mato Grosso do Sul and the children of members working at the factory by encouraging them to stay in school and study. At a facility maintained by ETH, these students take booster lessons based on their school curriculum, and engage in sports and artistic activities. In order to qualify, students must be enrolled in and attending local schools. “We have big ideas and dreams for the social area. We want to be a major social agent and improve the quality of life of people who might become ETH members one day. The Odebrecht Foundation is our inspiration,” underscores Clayton Miranda.