# Caderno de Idéias. CI0607 August, 2006 OPTION OF SWITCHING AN INVESTMENT PROJECT INTO AN AGRIBUSINESS PROJECT

Save this PDF as:

Size: px
Start display at page:

## Transcription

1

2 Caderno de Idéias CI0607 August, 2006 OPTION OF SWITCHING AN INVESTMENT PROJECT INTO AN AGRIBUSINESS PROJECT Danilo Sampaio Gonçalves Visiting Professor at FEAD and Fundação Pedro Leopoldo Haroldo Guimarães Brasil Professor at Fundação Pedro Leopoldo and Visiting Professor FDC José Antônio de Sousa Neto Project Manager and Visiting Professor FDC Professor Master in Economics FEAD/Minas Centro Alfa Campus Aloysio Faria Av. Princesa Diana, 760 Alphaville Lagoa dos Ingleses Nova Lima, MG Brasil Tel.: Fax:

4 SUMMARY Abstract... 5 Introduction... 5 Panorama of the sugar-alcohol sector... 6 Real options... 8 The quadrinomial model... 9 The process for manufacture of sugar and alcohol Data input parameters Investment on plantations Industrial investments for production of alcohol Switch option to sugar production Operational costs Useful life of project The prices of sugar and of alcohol Calculation of annual volatility Risk-free rate Probabilities of the quadrinomial model The Project s Cashflow Calculation of option value Final considerations References Published titles... I

9 THE QUADRINOMIAL MODEL Real options are usually classified in four large groups: the option of postponing, forsaking, expanding, and canceling. Additionally, the options of downsizing, temporary shutdown and switching. The switch may involve raw materials or products. Switching products is different from the expanding option, as it does not involve increasing production capacity. The project being evaluated has the ability of producing both alcohol and sugar. Thus, its analysis may be classified as an evaluation of a switch option. For learning purposes, it was decided to name it switch option. Both the price of alcohol and sugar have their own volatility, which provides a full range of combination of values between the two. COPELAND e ANTIKAROV (2001, p ) present a quadrinomial approach with a binary tree, with two sources of uncertainty. As shown in Figure 1, this tree has four branching on each node, and is expanded until reaching 120 possibilities on he tenth year of the analysis. For this tree to be calculated, one has to find the volatilities of each source of uncertainty (p) between the sources of uncertainty. t0 t1 t2 Al Ac Alu 2 Acu 2 Alu Alu 2 Acu Acud Alu 2 Acd 2 Alu Alud Acd Acu 2 Alud Acud Ald Alud Acu Acd 2 Ald 2 Acu 2 Ald Ald 2 Acd Acud Ald 2 Acd 2 Figure 1 Prices of alcohol and sugar in a multi-step quadrinomial tree Source: COPELAND; ANTIKAROV, 2001 (Adapted). The correlation shows how is the behavior of variations occurring at the same time with the prices of sugar and of alcohol. Zero correlation indicates that the prices oscillate independently one from the other. Positive correlation shows that the prices oscillate in a similar manner. In this situation, rises in the prices of alcohol are normally accompanied by rises of the prices of sugar. Drops in the prices of a product normally occur simultaneously with reductions on the other product. Positive correlation increases the general volatility of the project, due to the greater probability of occurrence of extreme values of the two prices at the same price. At the negative correlation, a price rise in one of the products (alcohol or sugar) is normally accompanied by a reduction of the price of the other product. Thus, a change in price tends to be neutralized by a change in the price of the other product, reducing the general volatility of the project. Caderno de Idéias August,

10 The calculation of the neutral risk probability of the quadrinomial tree may be obtained with the following equations 1 : Pu al u aç = ( u al u aç + u aç g al t + u al g aç t + ρ alaç u al u aç t ) / 4 u al u aç Pu al d aç = ( u al u aç + u aç g al t + d al g aç t - ρ alaç u al u aç t ) / 4 u al u aç Pd al u aç = ( u al u aç + d aç g al t + u al g aç t - ρ alaç u al u aç t ) / 4 u al u aç Where: Pd al d aç = ( u al u aç + d aç g al t + d al g aç t + ρ alaç u al u aç t ) / 4 u al u aç u al and u aç d al and d aç g al and g aç = ascending movements of alcohol and sugar = descending movements of alcohol and sugar = expected growth rate of the prices of alcohol and of sugar ρ alaç = correlation between variations of the prices of alcohol and sugar The switch option exists when the asset accepts several inputs or can produce various products, at a switching cost that is not prohibitive. The classical example of the switch option is the operation of an electrical thermal plant, which is capable to burn gas, oil or coal. According to CUTHBERTSON and NITZSCHE (2001, p.535), the payoff of this option is: Payoff = Max [ S 1 S 2 CS, 0] where: S 1 = NPV of the current operation mode 1 S 2 = NPV of operation mode 2 CS = Cost of switching from operation mode 1 to mode 2 In the project being reviewed, the cost of switching involves the construction of a plant that would be capable of producing either alcohol or sugar. Once the investment is made, the switch of the product being manufactured does not incur conversion costs. The production of texts on real options has attained large dissemination in the academic medium, with diversified production of texts concentrated on the analysis of projects for exploration of natural resources. The specific treatment of the switch option began with KULATILAKA and TRIGEORGIS (1994). Ever since, this option has been used by various authors 2. 1 The mathematical development of the quadrinomial model may be verified in COPELAND and ANTIKAROV (2001, p ); CLEWLOW and STRICKLAND (1998, p ). 2 Among others, the emphasis may be placed on works by CHIN-TSAI and CHENG-RU (2004) who evaluate the option of switching between local and international production in an exporter company; MADLENARA, KUMBAROGLU, and EDIGET (2005) established the irreversibility of the switch option in electrical investments; PENNINGS and SLEUWAEGEN (2004) reviewed the switching between exports, creation of a local subsidiary, forming of joint venture and licensing of production; RESE and ROEMER (2004) covered the changing of the commercial partner as a switch option. 10 August, 2006 Caderno de Idéias

13 Industrial investments for production of alcohol Industrial investments are preceded by various bureaucratic stages, which begin with the incorporation of a new business, run through the securing of various administrative and environmental licenses, and arrive at the financial structuring of the Project. The investments for construction of the industrial facility, including the milling, boiler and distillery processes of the Project, are estimated to amount to 53 million reais. This amount includes the pre-operation investments for developing the sugar-cane plantations. Switch option to sugar production In order to exercise the switch option, the Project needs to accomplish the complementary investments required for production of sugar; namely, the erection of the plant. The additional investments are estimated at 87.6 million reais. In modeling this option, the erection of the Plant must necessarily be preceded by the erection of the distillery. Operational costs Operational costs involve the following stages: growing and maintaining sugar-cane plantations, cutting and hauling the sugar cane, milling and production of alcohol and vary, in accordance with the volume produced as shown in CHART2. The modification of the Project for production of sugar implies in changes only in the industrial costs, as described in CHART 3. CHART 2 Operational costs of alcohol project reais Harvest Agricultural Industrial Total Source: GONÇALVES, CHART 3 Operational costs of sugar project reais Harvest Agricultural Industrial Total Source: GONÇALVES, Caderno de Idéias August,

14 Useful life of project The Project, as well as the other industrial projects of the sugar-alcohol sector, does not have a predefined service life, and an analytical approach should be employed for its analysis. The sector s technology is assumed to be mature and, provided that proper preventive maintenance is performed, the equipment should have indefinite durability. However, the project evaluation horizon was defined as being of 10 years, with the last year being assumed as a perpetuity. For this purpose, it was assumed that the annual investments required for maintaining productive capacity are of an amount corresponding to annual depreciation. The prices of sugar and of alcohol Alcohol and sugar are agricultural-industrial commodities, whose prices are influenced by supply and demand, both of the domestic and of the foreign markets. In order to perform the evaluation of the project, the initial values of R\$ for one cubic meter of anhydrous alcohol and R\$ for one metric ton of sugar were used. The price of hydrated alcohol was estimated as being 93% of the price of anhydrous alcohol; namely, R\$ per cubic meter. Calculation of annual volatility The volatility of the price of anhydrous alcohol was calculated using the monthly average of the prices of the first maturity date of futures contracts traded at the BM&F. The ethanol market was under strong control of the government until The trading in the future market of anhydrous alcohol began in May 2000, which is the starting point of the historical series of the calculation. The prices were collected until the end of An annual volatility of 10.98% was found as the series was updated. The futures contracts for sugar started to be traded at the BM&F in January The month average prices of the first maturity date of crystal sugar contracts were collected up to December Calculations performed on the series of sugar prices determined an annual volatility of 15.93%. The recommendation by HULL (1999, p.25) of having a historical series of prices of the same magnitude as the projection horizon had to be waived in view of the lack of input data. Risk-free rate The risk-free rate to be used should be the real one; namely, the rate obtained after removing the expected inflation for the period. This is required in order to remove the effects of inflation from the interest rate, because the project was also being evaluated without assuming it. The rate must also be assumed post taxes, in accordance with the current literature. The risk-free rate selected for this Project was 6%. Several works produced in Brazil assume this rate to be consistent with the panorama of high interest rates in force in the country. DIAS (1996), MARRECO (2001) and BRASIL (2002) have adopted this rate. Probabilities of the quadrinomial model While reviewing the series of prices for alcohol and sugar, we found the value of in the calculation of correlation between the variations of prices of the variables. Such value is commensurate with the relationship between the two commodities that, in spite of having distinct uses, share the same sources of uncertainty, especially regarding the availability of the raw material, sugar cane. The values determined for probability of increases in the price of alcohol, combined with increases in the price of sugar Pu al u aç probability of increase in the price of alcohol combined with a drop in the price of sugar Pu al d aç probability of drop in the price of alcohol combined with a rise in the price of sugar Pd al u aç probability of drop in the price of alcohol combined with a drop in the price of sugar Pd al d aç are shown in TABLE August, 2006 Caderno de Idéias

15 TABLE 1 Neutral probabilities of the quadrinomial model Parameter Probability Pu al u aç Pu al d aç Pd al U aç Pd al d aç Source: GONÇALVES, The Project s s Cashflow The information obtained enable the establishment of the FCDE Available Cash flow of the Project. The basic FCDE manufacturing of alcohol alone is shown in TABLE 2. Deductions on the sales add up to 16.25% of the price of sugar and 3.65% of the price of alcohol. The rates for Income Tax and Social Contribution over Profit add up to 35%, and are levied cumulatively on the Gross Operating Profits. Base don the Project s basic FCDE, one can put together the project s FCDE for manufacturing of sugar. Although it is named as Sugar Project, the FCDE assumes the optimal operation of the Plant, which would designate 63% of the sugar cane for production of sugar and use the remainder of this input material for production of alcohol, adding to the process the residual molasses generated in the production of sugar. The production of sugar entails change of the initial investment, revenues, deductions on sales, costs, taxes and depreciation. Refer to TABLE 3 for the Sugar Project FCDE. One may calculate the Net Present Value NPV of the projects using the data obtained in the FCDE s. In order to produce this calculation, a discount rate of 6% a year was used. Thus were calculated the NPV of the Alcohol Project (54.5 million reais) and of the Sugar Project (less 50.5 million reais). Based on this initial calculation, only the erection of the distiller would be feasible and the Sugar Project would be shelved. Caderno de Idéias August,

16 TABLE 2 FCDE for the Alcohol Project thousands of R\$ DISCRIMINATION Sugar Production (tons) Anhydrous Alcohol Produc. (m 3 ) Hydrated Alcohol Production (m 3 ) Price of Sigar (R\$/ton) Price Anhydrous Alcohol (R\$/m 3 ) Price Hydrated Alcohol (R\$/m 3 ) Sugar Revenues (R\$) Anhydrous Alcohol Revenues (R\$) Hydrated Alcohol Revenues (R\$) Gross Operating Revenues Deductions on Sales (1.617) (2.112) (2.607) (3.048) (3.433) (3.819) (3.862) (4.772) (5.276) (5.779) Net Operating Revenues Total Costs (40.350) (53.001) (67.803) (72.277) (75.656) (82.000) (82.375) (94.237) ( ) ( ) Gross Operating Profit Provision I. Tax & Social Contrib. (453) (534) (206) (1.565) (2.857) (3.586) (3.730) (6.043) (7.460) (7.675) Net Profit (+) Depreciation/Amortization (-) Investments (51.451) (1.500) (3.718) (3.393) (6.787) (6.787) (7.407) (9.049) (9.049) (4.525) (6.787) Net Availability (51.451) Accumulated Availability (51.451) (48.043) (43.827) (41.259) (34.770) (21.537) (4.872) Source: GONÇALVES, August, 2006 Caderno de Idéias

17 TABLE 3 FCDE of Sugar Project thousands of R\$ DISCRIMINATION Sugar Production (tons) Anhydrous Alcohol Produc. (m 3 ) Hydrated Alcohol Production (m 3 ) Price of Sigar (R\$/ton) Price Anhydrous Alcohol (R\$/m 3 ) Price Hydrated Alcohol (R\$/m 3 ) Sugar Revenues (R\$) Anhydrous Alcohol Revenues (R\$) Hydrated Alcohol Revenues (R\$) Gross Operating Revenues Deductions on Sales (4.501) (5.880) (7.259) (9.910) (11.192) (12.027) (12.494) (15.488) (17.227) (18.831) Net Operating Revenues Total Costs (49.136) (58.119) (72.627) (77.057) (80.223) (86.207) (86.470) (98.399) ( ) ( ) Gross Operating Profit (5.533) (1.156) (2.304) Provision I. Tax & Social Contrib (1.077) (2.465) (3.290) (3.481) (5.910) (7.410) (7.700) Net Profit (5.533) (1.156) (2.304) (+) Depreciation/Amortization (-) Investments ( ) (1.500) (3.718) (3.393) (6.787) (6.787) (7.407) (9.049) (9.049) (4.525) (6.787) Net Availability ( ) (3.994) 848 (549) Accumulated Availability ( ) ( ) ( ) ( ) ( ) ( ) ( ) (96.121) (69.693) (31.905) Source: GONÇALVES, Caderno de Idéias August,

18 CALCULATION OF OPTION VALUE The calculation of the option value is made in several stages. Based on the binomial analysis, two quadrinomial trees were assembled with the possible prices of the alcohol and sugar. The joining of these trees covers all possibilities of combination between the prices for alcohol and for sugar, partially presented in TABLE 4. TABLE 4 Combinations of price of alcohol and sugar In reais per cubic meter and per ton t0 t1 t2 t Source: Produced by the author. 18 August, 2006 Caderno de Idéias

19 Using the two binomial trees, on each node, the free cash flow of the project FCDE is calculated for the alcohol project and for the sugar project. The result obtained is partially presented in TABLE 5. TABLE 5 Combinations of FCDE of alcohol and sugar In thousands of reais t0 t1 t2 t (136) (51.451) (3.738) (6.982) ( ) (187) 848 (3.229) (3.480) (187) (5.655) (3.229) (9.317) (4.686) (3.229) (4.686) (9.135) (5.683) (3.229) (4.686) (15.981) (12.186) (13.077) (13.077) (6.946) (13.077) (16.360) (13.077) (23.206) Source: Produced by the author. Caderno de Idéias August,

20 In the following phase, the quadrinomial tree is assembled with the switch options for each pair of prices for alcohol and for sugar. This tree was obtained with the calculation of the maximum (FCDE al, FCDE aç ) on each node and is partially shown in TABLE 6. TABLE 6 Maximum FCDE for alcohol and sugar In thousands of reais t0 t1 t2 t (51.451) (187) (187) (5.655) (3.229) (3.229) (5.683) (12.186) (6.946) (13.077) (13.077) Source: Produced by the author Note: The combinations in boldface are the situations where it is preferred to produce sugar. To complement the calculations of the quadrinomial model, base don the neutral probabilities presented in TABLE 1 and in the table of maximum FCDE between the projects, the quadrinomial tree of the flexible project was assembled and is partially shown in TABLE 7. In the analysis of the quadrinomial tree for the flexible project, it is seen that the flexible project s value with annual volatility of 10.98% for alcohol and 15.43% for sugar; correlation between the variations of the prices of 54.32% and risk-free interest rate of 6% per year is of million reais. If we assume that the net present value of the non-flexible sugar project is less R\$50.5 million, one concludes that the value of the flexibility option of this project is million reais, as demonstrated in TABLE August, 2006 Caderno de Idéias

### October 16, 2014. UNICA s Comments on Brazilian Sugarcane Ethanol Availability for the LCFS.

October 16, 2014 VIA ELECTRONIC MAIL Mike Waug Branch Chief, Alternative Fuels Section California Air Resources Board 1001 I Street Sacramento, CA 95814 RE: UNICA s Comments on Brazilian Sugarcane Ethanol

### Positioning Brazil for biofuels success

Positioning Brazil for biofuels success Positioning Brazil for biofuels success The country now produces ethanol more cheaply than anywhere else on Earth, but that may not be true for long. Vicente Assis,

### Quel avenir pour le modèle brésilien en matière de biocarburants?

Groupe d Economie Mondiale (GEM) Sciences Po Quel avenir pour le modèle brésilien en matière de biocarburants? Marcos S. Jank President, Brazilian Institute for International Trade Negotiations Professor

### Sugar & Bioenergy Overview

Sugar & Bioenergy Overview BEN PEARCY, MANAGING DIRECTOR, SUGAR & BIOENERGY 1 2012 BUNGE INVESTOR DAY Forward-Looking Statements Today s presentation includes forward-looking statements that reflect Bunge

### BRAZIL: ENERGY & FOOD THE SUGAR CANE CASE. Fernando Moreira Ribeiro, Secretary General UNICA - Sugar Cane Industry Union, Brazil

BRAZIL: ENERGY & FOOD THE SUGAR CANE CASE Fernando Moreira Ribeiro, Secretary General UNICA - Sugar Cane Industry Union, Brazil September 2007 BRAZILIAN FUEL ETHANOL HISTORY 1925 First tests using ethanol

### CONFERENCE CALL PRESENTATION. November, 13th

CONFERENCE CALL PRESENTATION November, 13th 1 BrasilAgro Overview Start-up company created by an experienced team to take advantage of opportunities in the Brazilian agricultural market Revenue stream

### ETHANOL PRODUCTION FROM US SUGAR: A BAD IDEA ON ECONOMIC AND PRACTICAL GROUNDS

Strategic Marketing & Business Consulting February 2007 ETHANOL PRODUCTION FROM US SUGAR: A BAD IDEA ON ECONOMIC AND PRACTICAL GROUNDS Faced with the prospect of opening the US market to more imported

### BIODIESEL THE NEW FUEL FROM BRAZIL NATIONAL BIODIESEL PRODUCTION & USE PROGRAM

BIODIESEL THE NEW FUEL FROM BRAZIL NATIONAL BIODIESEL PRODUCTION & USE PROGRAM BIODIESEL: THE NEW FUEL FROM BRAZIL The Brazilian Government has just authorized the commercial use of a new fuel. Brazil

### Callus formation on sugarcane leaf roles under sterile tissue culture conditions representing the first step of genetic modification of sugarcane.

Callus formation on sugarcane leaf roles under sterile tissue culture conditions representing the first step of genetic modification of sugarcane. 68 Bayer research 25 Sugarcane Agriculture Biotechnology

### Simulation and Evaluation of Autonomous and Annexed Sugarcane Distilleries

Simulation and Evaluation of Autonomous and Annexed Sugarcane Distilleries Tassia L. Junqueira a,b*, Marina O. S. Dias a,b, Charles D. F. Jesus a, Paulo E. Mantelatto a, Marcelo P. Cunha a, Otávio Cavalett

### FORECASTING MODEL FOR THE PRODUCTION AND CONSUMPTION OF COTTON FIBER VERSUS POLYESTER

1 FORECASTING MODEL FOR THE PRODUCTION AND CONSUMPTION OF COTTON FIBER VERSUS POLYESTER Elisa Mauro Gomes Otávio Lemos de Melo Celidonio Daniel Latorraca Ferreira Leandro Gustavo Alves Johnnattann Pimenta

### Outlook for Sugarcane Biofuels Building on Brazil s s Experience with ethanol

BRAZILIAN SUGARCANE INDUSTRY ASSOCIATION UNIÃO DA INDÚSTRIA DE CANA-DE-AÇÚCAR Outlook for Sugarcane Biofuels Building on Brazil s s Experience with ethanol Joel Velasco Chief Representative North America

### Third Quarter 2015 Earnings Conference Call. 21 August 2015

Third Quarter 2015 Earnings Conference Call 21 August 2015 Safe Harbor Statement & Disclosures The earnings call and accompanying material include forward-looking comments and information concerning the

### The Journal of Science Policy & Governance

The Journal of Science Policy & Governance POLICY MEMO: INCREASING SUSTAINABLE BIOMASS THROUGH PRODUCTION TAX CREDITS BY Ashley Paulsworth ashley0paulsworth@gmail.com Executive Summary As various tax credits

### Biofuels: how much, how fast and how difficult. Prof. José Goldemberg University of São Paulo São Paulo, Brazil

Biofuels: how much, how fast and how difficult. Prof. José Goldemberg University of São Paulo São Paulo, Brazil Land Use for Ethanol (2006) BRAZIL Ethanol production from sugarcane Agricultural area (million

### First Quarter 2015 Earnings Conference Call. 20 February 2015

First Quarter 2015 Earnings Conference Call 20 February 2015 Safe Harbor Statement & Disclosures The earnings call and accompanying material include forward-looking comments and information concerning

### Labor market indicators of the Sugar Cane-AgroSystem in Brazil

Labor market indicators of the Sugar Cane-AgroSystem in Brazil Ethanol Summit Sao Paulo Jun 2007 Márcia Azanha Ferraz Dias de Moraes ESALQ/University of São Paulo The competitiviness of the Brazilian sugar

### SUGARCANE POTENTIAL Food & Energy. 30 October 2013

SUGARCANE POTENTIAL Food & Energy 30 October 2013 SA Sugar Industry economic contribution SA sugarcane industry is Diverse agriculture, sugars (raw, refined, specialised), syrups and range of by-products

### Flex Fuel Vehicles in Brazil

Flex Fuel Vehicles in Brazil Henry Joseph Jr. ANFAVEA Energy & Environment Affairs Commission Brasília, March 22 th, 2013. The Brazilian Automobile Industry Local Manufacturers (2012) - 26 companies Net

### How to reposition the energy sector s role in economic development, through innovation policies

1st Policy dialogue on energy efficiency in Latin America and the Caribbean: towards sustainable institutionalities How to reposition the energy sector s role in economic development, through innovation

### GET THE FACTS RIGHT AND KILL THE MYTHS

GET THE S RIGHT AND KILL THE MYTHS Given the ongoing debate on ethanol benefits, it is important to distinguish fallacious myths from honest facts MYTH #1 Brazilian sugarcane ethanol leads to the deforestation

### IEA Bioenergy Workshop & Business Forum on Sustainable Biomass Production for the World Market BRAZILIAN SUGARCANE ETHANOL: LESSONS LEARNED

IEA Bioenergy Workshop & Business Forum on Sustainable Biomass Production for the World Market BRAZILIAN SUGARCANE ETHANOL: LESSONS LEARNED Prof. Suani Coelho CENBIO The Brazilian Reference Center on Biomass

### Wolfgang Fechter

Renewable Energy Electricity from Sugar Cane Fibre in South Africa and Region NERSA Consultation Paper Cogeneration Regulatory Rules and COFIT Public Hearing Pretoria 3 May 2011 Wolfgang Fechter 032 4394304

### Fertilizer is a world market commodity, which means that supply

Supply & demand, Energy Drive Global fertilizer prices The Fertilizer Institute Nourish, Replenish, Grow Fertilizer is a world market commodity necessary for the production of food, feed, fuel fiber. &

### FEDERAL RESERVE BULLETIN

FEDERAL RESERVE BULLETIN VOLUME 38 May 1952 NUMBER 5 Business expenditures for new plant and equipment and for inventory reached a new record level in 1951 together, they exceeded the previous year's total

### Sugarcane Agroecological Zoning. To expand production, preserve life, and ensure a future.

Sugarcane Agroecological Zoning To expand production, preserve life, and ensure a future. Sugarcane Agroecological Zoning. To expand production, preserve life, and ensure a future. A new time has come

### Getting the Facts Right on U.S. Sugar Lobby s Erroneous Claims About Brazilian Sugarcane Industry

Getting the Facts Right on U.S. Sugar Lobby s Erroneous Claims About Brazilian Sugarcane Industry May 15, 2013 The Brazilian sugarcane industry is one of the best, most efficient and competitive examples

### Rail Brazil Tech Business Summit Location: Expo Center Norte November 5-7 2013 São Paulo

Rail Brazil Tech Business Summit Location: Expo Center Norte November 5-7 2013 São Paulo Building a New Platform for Brazilian Rail Sector: Political Strategies, Technologies and Cost Reduction Solutions

### Outlook for Sugarcane Ethanol

BRAZILIAN SUGARCANE INDUSTRY ASSOCIATION UNIÃO DA INDÚSTRIA DE CANA-DE-AÇÚCAR Outlook for Sugarcane Ethanol An Update on the Brazilian Sugarcane Industry Leticia Phillips washington@unica.com.br www.unica.com.br

### Third Quarter 2014 Earnings Conference Call. 13 August 2014

Third Quarter 2014 Earnings Conference Call 13 August 2014 Safe Harbor Statement & Disclosures The earnings call and accompanying material include forward-looking comments and information concerning the

### Energy Projections 2006 2030 Price and Policy Considerations. Dr. Randy Hudson Oak Ridge National Laboratory

Energy Projections 2006 2030 Price and Policy Considerations Dr. Randy Hudson Oak Ridge National Laboratory There is perhaps no single current topic so potentially impacting to all life on this planet

### Agriculture & Business Management Notes...

Agriculture & Business Management Notes... Farm Machinery & Equipment -- Buy, Lease or Custom Hire Quick Notes... Selecting the best method to acquire machinery services presents a complex economic problem.

### Guidelines for stakeholders in bio-coal supply chain: Hypothesis based on market study in Finland and Latvia

Baltic Bioenergy and Industrial Charcoal Guidelines for stakeholders in bio-coal supply chain: Hypothesis based on market study in Finland and Latvia Lei Wang, Jukka Hyytiäinen, Esko Mikkonen The Development

### Ethanol & Flex-Fuel Vehicles

Christopher Taylor October 21, 2006 Ethanol & Flex-Fuel Vehicles 1. Introduction The 21 st Century has been referred to as the Century of the Environment by some scholars and thinkers. This term certainly

### 112 March 2011 Journal of Food Distribution Research 42(1) much room for growth to the 36 billion gallons in 2022 as mandated by the RFS2. It has been

Government Policy and Ethanol: What Does the Future Hold? Daniel Staley and Sayed Saghaian The worlds of government and agribusiness have become intertwined with the increase in ethanol production that

### The challenge of Brazilian pension funds imposed by the international crises

Brazilian Economic Insights Nº. 68 August 3, 2009 The challenge of Brazilian pension funds imposed by the international crises By Adriana Inhudes, André Albuquerque Sant Anna, Ernani Teixeira Torres Filho

### Supervisory Software is Critical Component in Sugar Cane Processing Efficiency. InduSoft

Supervisory Software is Critical Component in Sugar Cane Processing Efficiency InduSoft Brazil s ethanol industry holds incredible potential as a renewable source of energy that has already proven itself

### Ethanol Fuel. Biomass to Chemicals and Fuels: Science, Technology and Public Policy.

Ethanol Fuel Biomass to Chemicals and Fuels: Science, Technology and Public Policy. September 25-26, 2006 Rice University Marcelo E. Dias de Oliveira University of Florida Washington State University.

### Ronald Herscovici, Eduardo J Herszkowicz and Carlos Augusto Junqueira

11 The Brazilian factoring industry and receivable investment funds: a successful partnership Ronald Herscovici, Eduardo J Herszkowicz and Carlos Augusto Junqueira Souza Cescon Avedissian Barrieu e Flesch

### Finance 350: Problem Set 6 Alternative Solutions

Finance 350: Problem Set 6 Alternative Solutions Note: Where appropriate, the final answer for each problem is given in bold italics for those not interested in the discussion of the solution. I. Formulas

### The Inmetro LCA Collaboration

The Inmetro LCA Collaboration Introduction Biofuels and the Environment Currently, the default fuels worldwide are from fossil origin. Lately, with the tighter regulations and with the increase in environmental

### 1. Planning - Establishing organizational goals and deciding how to accomplish them

1 : Understanding the Management Process Basic Management Functions 1. Planning - Establishing organizational goals and deciding how to accomplish them SWOT analysis - The identification and evaluation

### Now, I will turn the conference over to the CEO, Mr. Carbonari, who will begin the presentation. Mr. Carbonari, you may begin your conference.

Operator: Good morning, ladies and gentlemen. At this time we would like to welcome everyone to Anhanguera Educacional s 1Q07 results conference call. Today with us we have Mr. Antonio Carbonari, CEO;

### Hedging Natural Gas Prices

Hedging Natural Gas Prices Luke Miller Assistant Professor of Finance Office of Economic Analysis & Business Research School of Business Administration Fort Lewis College Natural Gas Industry U.S. natural

### Earnings Release. Investor Relations HIGHLIGHTS. Brasil Insurance discloses its 4Q10 results

Investor Relations Bruno Padilha de Lima Costa Investor Relations Officer (55 21) 3433-5060 ri@brasilinsurance.com.br 4Q10 Earnings Conference Call Thursday, March 31, 2010 Portuguese 10:00 a.m. (BR);

### Impairment of Assets

Compiled AASB Standard AASB 136 Impairment of Assets This compiled Standard applies to annual reporting periods beginning on or after 1 January 2010. Early application is permitted. It incorporates relevant

### China Clean Energy Announces Third Quarter 2011 Financial Results

China Clean Energy Inc. ccontact: China Clean Energy Inc. William Chen, CFO Email: william.chen@chinacleanenergyinc.com Website: http://www.chinacleanenergyinc.com CCG Investor Relations Inc. David Rudnick,

### Ethanol as Fuel: Energy, Carbon Dioxide Balances, and Ecological Footprint

Ethanol as Fuel: Energy, Carbon Dioxide Balances, and Ecological Footprint Marcelo E. Dias de Oliveira Dr: Burton Vaughan -adjunct professor Biological Sciences - WSU Dr: Edward Rykiel Jr - associate professor

### Reserve Requirements. Information up to March Frequently Asked Questions Series

Reserve Requirements Information up to March 2016 Frequently Asked Questions Series 1 Frequently Asked Questions Series Central Bank of Brazil 1. Interest Rates and Bank Spreads 2. Price Indices in Brazil

### ABENGOA. 2014: Financial Review. Barbara Zubiria. 8th Annual Analyst and Investor Day. EVP, Capital Markets & IR

Innovative Technology Solutions for Sustainability ABENGOA 2014: Financial Review Barbara Zubiria EVP, Capital Markets & IR 8th Annual Analyst and Investor Day April 3 & 4, 2014 Forward-looking Statement

### Biofuels: Demand. Ethanol and Biodiesel

Biofuels: Demand for Ethanol and Biodiesel Example: India Compiled by Dr Shoumen Palit Austin Datta School of Engineering Massachusetts Institute of Technology Dr Shoumen Palit Austin Datta, MIT shoumen@mit.edu

### Weiqiao Textile Announces its 2015 Interim Results

Weiqiao Textile Announces its 2015 Interim Results Seize new opportunities in new normal development phase Continued leadership against the backdrop of industry changes Financial Summary Revenue was approximately

### Policy Options for Integrated Energy and Agricultural Markets. Wally Tyner Farzad Taheripour

Policy Options for Integrated Energy and Agricultural Markets Wally Tyner Farzad Taheripour Market Integration In the past, agricultural markets have been well integrated. Markets for different energy

### Highlights of 1H FY2015 Results. November 18, 2015

Highlights of 1H FY2015 Results November 18, 2015 Table of Contents 1. Trend of business results 3. Domestic life insurance Summary of 1H FY2015 results 3 Overview of 1H FY2015 results Himawari Life 27

### 3 rd Brazil - China Capital Markets Forum

3 rd Brazil - China Capital Markets Forum Ilan Goldfajn Chief Economist, Itaú Unibanco Partner, Itaú BBA August 30 th, 2012 In Brief World: consolidating a scenario of low growth. Slow recovery in the

### Institutional Presentation SEPTEMBER / 2015

Institutional Presentation SEPTEMBER / 2015 WHO WE ARE 2 WHO WE ARE TOTVS is a business solutions company founded and based in Brazil, with clients in 39 countries and 11 Development Centers located in

### ETHANOL: LESSONS FROM BRAZIL. by David Sandalow

May 2006 ETHANOL: LESSONS FROM BRAZIL by David Sandalow Ethanol is hot. In the United States, production increased by more than 20% in 2005. The nation s 97 ethanol plants are operating at close to full

### We have seen in the How

: Examples Using Hedging, Forward Contracting, Crop Insurance, and Revenue Insurance To what extent can hedging, forward contracting, and crop and revenue insurance reduce uncertainty within the year (intrayear)

### EFFECTS OF AN RFS ON U.S. ENERGY SAVINGS, NATIONAL COSTS OF GASOLINE PRODUCTION, AND THE REGIONAL PATTERN OF ETHANOL USE

EFFECTS OF AN RFS ON U.S. ENERGY SAVINGS, NATIONAL COSTS OF GASOLINE PRODUCTION, AND THE REGIONAL PATTERN OF ETHANOL USE Prepared for American Petroleum Institute By MathPro Inc. May 23, 25 MathPro Inc.

### Honduras. Sugar Annual

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: GAIN Report Number:

### Will the future benefits of this project be large enough to justify the investment given the risk involved?

Chapter 1 The Overall Process Capital Expenditures Whenever we make an expenditure that generates a cash flow benefit for more than one year, this is a capital expenditure. Examples include the purchase

### WORKING CAPITAL MANAGEMENT

CHAPTER 9 WORKING CAPITAL MANAGEMENT Working capital is the long term fund required to run the day to day operations of the business. The company starts with cash. It buys raw materials, employs staff

### HW 2 Macroeconomics 102 Due on 06/12

HW 2 Macroeconomics 102 Due on 06/12 1.What are the three important macroeconomic goals about which most economists, and society at large, agree? a. economic growth, full employment, and low interest rates

### Reference 1 Status of Related Laws and Regulations in Japan

Reference 0 Reference Reference 1 Status of Related Laws and Regulations in Japan Reference 2 Assessing Operational Revenue and Expenditure Reference 3 Reference 4 Examples of Biomass Town in Japan Reference

### The 2024 prospects for EU agricultural markets: drivers and uncertainties. Tassos Haniotis

1. Introduction The 2024 prospects for EU agricultural markets: drivers and uncertainties Tassos Haniotis Director of Economic Analysis, Perspectives and Evaluations; Communication DG Agriculture and Rural

### Rating Methodology by Sector. Life Insurance

Last Updated: July 1, 2013 Rating Methodology by Sector Life Insurance The following mainly applies to life insurance companies in Japan. The credit ratings of a life insurance company is assessed by focusing

### Department of Economics. Agricultural Finance Economics 466 Capital budgeting with finance, inflation, taxes and risk (Chapters 10 &11)

Agricultural Finance Economics 466 Capital budgeting with finance, inflation, taxes and risk (Chapters 10 &11) Review of Team Project #6 Your conclusions: Investment is profitable NPV > 0 Investment is

### Ultrapar Participações S.A. Earnings conference call Comments on the company s 4Q15 / 2015 performance and outlook 02.19.16

Ultrapar Participações S.A. Earnings conference call Comments on the company s / 2015 performance and outlook 02.19.16 Considerations Forward-looking statements This document may include forward-looking

### The Real Options Attached to an Investment Project

The Real Options Attached to an Investment Project Mihai-Cristian DINICĂ 1 ABSTRACT The real options capture the importance of the managerial team s role in creating value through investment projects.

### ANALYSIS OF THE ADMINISTRATION S PROPOSED TAX INCENTIVES FOR ENERGY EFFICIENCY AND THE ENVIRONMENT

June 28, 1999 ANALYSIS OF THE ADMINISTRATION S PROPOSED TAX INCENTIVES FOR ENERGY EFFICIENCY AND THE ENVIRONMENT INTRODUCTION A few months ago in the FY 2000 budget the President proposed a \$3.6 billion

### ABENGOA. Bioenergy Outlook. Javier Garoz. 8th Annual Analyst and Investor Day. Chief Executive Officer, Abengoa Bioenergy

Innovative Technology Solutions for Sustainability ABENGOA Bioenergy Outlook Javier Garoz 8th Annual Analyst and Investor Day Chief Executive Officer, Abengoa Bioenergy April 3 & 4, 2014 Forward-looking

### Schnitzer Investor Presentation. Cowen Global Metals and Mining Conference. November Nasdaq: SCHN

Schnitzer Investor Presentation Cowen Global Metals and Mining Conference November 2015 Nasdaq: SCHN SAFE HARBOR Statements and information included in this presentation that are not purely historical

### CRS Report Summaries WORKING DRAFT

CRS Report Summaries R40147 Green Buildings This is a definition and analysis of the cost and benefits of green buildings. It also cites agencies and laws that encourage the building of environmentally

### Fundamentals of Futures and Options (a summary)

Fundamentals of Futures and Options (a summary) Roger G. Clarke, Harindra de Silva, CFA, and Steven Thorley, CFA Published 2013 by the Research Foundation of CFA Institute Summary prepared by Roger G.

### Supply chain design and planning accounting for the Triple Bottom Line

Krist V. Gernaey, Jakob K. Huusom and Rafiqul Gani (Eds.), 12th International Symposium on Process Systems Engineering and 25th European Symposium on Computer Aided Process Engineering. 31 May 4 June 2015,

### CSP. Feranova Reflect Technology. klimaneutral natureoffice.com DE-296-558771 gedruckt

RENEWABLE SOURCES RENEWABLE SOURCES CSP Feranova Reflect Technology klimaneutral natureoffice.com DE-296-558771 gedruckt Gedruckt auf 100% Recyclingpapier Circlesilk Premium White 200/150 g/m 2 2012 Feranova

### Walmart reports Q1 FY 16 EPS of \$1.03

Walmart reports Q FY 6 EPS of.03 Q diluted EPS from continuing operations was.03, within guidance of 0.95 to.0. Currency negatively impacted EPS by approximately 0.03. Walmart U.S..% comp includes positive

### Rating Methodology by Sector. Life Insurance

Last Updated: March 26, 2012 Rating Methodology by Sector Life Insurance *This rating methodology is a modification of the rating methodology made public on July 13, 2011, and modifications are made to

### CHANGING INTERNATIONAL INVESTMENT STRATEGIES: THE NEW FORMS OF FOREIGN INVESTMENT IN BRAZIL

9 Originally published by Ipea in January 1982 as number 45 of the series Texto para Discussão. CHANGING INTERNATIONAL INVESTMENT STRATEGIES: THE NEW FORMS OF FOREIGN INVESTMENT IN BRAZIL Eduardo A. Guimarães

### HANDOUTS Property Taxation Review Committee

HANDOUTS Property Taxation Review Committee Legislative Services Agency September 1, 2004 Criteria For Good Proposals for Property Tax Reform Dr. Thomas Pogue, University of Iowa DISCLAIMER The Iowa General

### Chapter Five: Risk Management and Commodity Markets

Chapter Five: Risk Management and Commodity Markets All business firms face risk; agricultural businesses more than most. Temperature and precipitation are largely beyond anyone s control, yet these factors

### USE OF BIO-FUELS IN BRAZIL

USE OF BIO-FUELS IN BRAZIL Alfred Szwarc Consultant Ministry of Science and Technology In-Session Workshop on Mitigation SBSTA 21 / COP 10 December 9, 2004 Buenos Aires Brazilian experience with fuel grade

### SIGNIFICANT GROUP ACCOUNTING POLICIES

SIGNIFICANT GROUP ACCOUNTING POLICIES Basis of consolidation Subsidiaries Subsidiaries are all entities over which the Group has the sole right to exercise control over the operations and govern the financial

### Biomass production and energy utilisation of biomass in Slovakia Dr. Milan Oravec Dr. Marián Slamka

Biomass production and energy utilisation of biomass in Slovakia Dr. Milan Oravec Dr. Marián Slamka Moscow, October 2013 VISION Two facts are determining for the vision of development in Slovakia: Due

### Main Street. Economic information. By Jason P. Brown, Economist, and Andres Kodaka, Research Associate

THE Main Street ECONOMIST: ECONOMIST Economic information Agricultural for the and Cornhusker Rural Analysis State S e Issue p t e m b2, e r 214 2 1 Feed de er ra al l RR e es se er rv ve e BBa an nk k

### USDA Loans, Loan Guarantees, and Grants for Rural Energy Projects

August 20, 2009 USDA Loans, Loan Guarantees, and Grants for Rural Energy Projects Opportunities for Renewable Energy Companies and Suppliers The U.S. Department of Agriculture ( USDA ) has established

Presentation Agribusiness Sector GreenFinance Agribusiness specialized Company, focused on the support to institutional investors, individuals and corporations, interested in establishing professional

### Jersey Energy Trends 2005

Jersey Energy Trends 25 Headlines In 25 total final energy demand in Jersey was 187 million toe (2,17, 9 MWh) an increase of.1% on 24. Final consumption of electricity grew by 1.2% between 24 and 25. Over

### How to improve the Banco Santander Brasil business model by analyzing opportunities of Cross Sell

Case Study - 2012 How to improve the Banco Santander Brasil business model by analyzing opportunities of Cross Sell Is it possible to increase client relationship efficiency and revenue by collect, analyze

### Brookfield financial Review q2 2010

Brookfield financial Review q2 2010 Overview Operating cash flow and gains totalled \$327 million in the second quarter or \$0.53 per share compared to \$294 million in the prior year. This brings operating

### Fixed Income 2015 Update. Kathy Jones, Senior Vice President Chief Fixed Income Strategist, Schwab Center for Financial Research

Fixed Income 2015 Update Kathy Jones, Senior Vice President Chief Fixed Income Strategist, Schwab Center for Financial Research 1 Fed: Slow and Low 2015 Fixed Income Outlook 2 Yield Curve Flattening 3

### Biofuels policy: Some insights from Brazil

A Global Perspective on the EU Biofuel Subsidies Reform Biofuels policy: Some insights from Brazil Géraldine Kutas Senior Advisor to the President for International Affairs Head of International Affairs

### We produce energy from domestic sources

We produce energy from domestic sources 1 2 WE PRODUCE ENERGY FROM DOMESTIC SOURCES The Republic of Moldova is dependent on energy imports and more than 95% of its energy needs are covered by imports.

### 9 Hedging the Risk of an Energy Futures Portfolio UNCORRECTED PROOFS. Carol Alexander 9.1 MAPPING PORTFOLIOS TO CONSTANT MATURITY FUTURES 12 T 1)

Helyette Geman c0.tex V - 0//0 :00 P.M. Page Hedging the Risk of an Energy Futures Portfolio Carol Alexander This chapter considers a hedging problem for a trader in futures on crude oil, heating oil and

### OVERVIEW & OUTLOOK: BRAZILIAN SUGARCANE INDUSTRY

OVERVIEW & OUTLOOK: BRAZILIAN SUGARCANE INDUSTRY Leticia Phillips Representative, North America Washington, August 1, 2012 Fonte: LMC, F.O.Licht s, Secex, UNICA e Rais. KEY NUMBERS - BRAZILIAN SUGARCANE

### Course 3: Capital Budgeting Analysis

Excellence in Financial Management Course 3: Capital Budgeting Analysis Prepared by: Matt H. Evans, CPA, CMA, CFM This course provides a concise overview of capital budgeting analysis. This course is recommended

### Chapter 22 Real Options

Chapter 22 Real Options Multiple Choice Questions 1. The following are the main types of real options: (I) The option to expand if the immediate investment project succeeds (II) The option to wait (and