2 Sep 2009 07:00
2 September, 2009
Clean Energy Brazil PLC
("CEB" or the "Company")
Usaciga sale and CEB cost reduction measures
Sale of Usaciga
Clean Energy Brazil PLC, an investment company focused on Brazil's sugar cane/ethanol industry, announces that it has sold its 49% shareholding in Usaciga Acucar, Alcool e Energia Electrica Ltda. ("Usaciga") to Agrocana Participacoes Ltda, the 51% owner of the business, for US$8.7 million. The consideration will be payable in cash as follows: (i) US$5.8 million through the immediate release of this amount from an escrow account already held by CEB and (ii) US$2.9 million due by March 2010. Usaciga's liabilities are estimated to be approximately US$185 million in total. It is intended that the net sale proceeds will be returned to shareholders in due course as part of the ongoing process of returning available funds.
Background
The Usaciga Group comprises an operational sugar mill located in Cidade Gaucha, with a cane crushing capacity of 2.3 million tones, and a partly-developed greenfield project at Rio Parana together with minority shareholdings in certain sugar terminal and trading businesses.
As previously announced, due primarily to the financial burden of high debt levels, industry/market conditions and the liquidity crisis, Usaciga has encountered significant trading and debt servicing problems and CEB has explored a number of strategic options for this investment over a protracted period. Several alternatives were evaluated in detail before the decision to sell was reached. Usaciga was unable to attract further equity investment due principally to the liquidity squeeze, and no viable solution was found to alleviate the debt burden of the business. Bank of America Merrill Lynch acted as advisor to CEB in relation to the sale.
Notwithstanding the recent strength of the sugar futures market, the relatively low profitability of ethanol together with the continued shortage of credit for most of the industry and the volatility in the foreign exchange market, mean that the sector continues to face significant challenges.
Usaciga's 2008/09 crop season resulted in an estimated net loss of approximately US$50 million for the year ended 30 April 2009 and Usaciga was included in the Company's unaudited interim balance sheet at 31 October 2008 at a book value of US$50 million. CEB is reviewing the carrying value of its other investments as part of the finalisation of its accounts for the year ended 30 April 2009 and further investment write downs may be made by the Company. CEB expects to publish its final results for the year ended 30 April 2009 by the end of October 2009.
CEB cost reduction measures
In view of CEB's reduced level of investment activity, the Company has initiated a number of restructuring and cost reduction measures which are now well underway. As part of these changes, Marcelo Junqueira, current CEO of CEB, will no longer have a daily role in the Company with effect from 1 September 2009, but he will continue to support the organization by remaining on the Board as a non-executive director. In addition, the fees of all CEB directors are to be reduced by 30%. These measures, which are being implemented, are expected to lower the Company's ongoing overhead by US$300,000 on a quarterly basis; representing a reduction of over 50%. The overall savings include reductions in head office staff and third party services. John S. Koutras, current CFO of CEB, will lead the organization through the restructuring period.
Further enquiries:
| Clean Energy Brazil plc John S. Koutras (Chief Financial Officer) | Tel: +55 (0) 11 3556 8750 |
| Smith & Williamson Corporate Finance Limited (Nominated Adviser) Azhic Basirov David Jones | Tel: +44 (0) 20 7131 4000 |
| Numis Securities Limited (Broker) Charles Farquhar Lee Aston | Tel: +44 (0) 20 7260 1000 |
| Fishburn Hedges (Financial PR Adviser) Andy Berry Michelle James | Tel: +44 (0) 20 7839 4321 ceb@fishburn-hedges.co.uk +44 (0) 7767 374421 +44 (0) 7958 451446 |