Brazilian Development Bank
BNDES Financial Support for Investments in Brazil:Fuels and Chemicals from biomass
Bio World Congress – 2015 Montreal
Agenda
Introduction to BNDES – The Brazilian Development Bank
Recent Study of Investment Opportunities on Chemical Markets in Brazil
New plan (PADIQ) to finance projects on selected chemical segments, including
Chemicals from Biomass
BNDES Highlights
Founded on June 20th, 1952.
100% state-owned company under private law.
Key instrument for implementation of Federal Government’s industrial and infrastructure
policies.
Main provider of long-term financing in Brazil.
Emphasis on financing investment projects.
Support to micro, small and medium-sized companies.
Support to Export and Internationalization of Brazilian companies.
Innovation Investment Financing Infrastructure
Aquisition of Machinery and
EquipmentExports Capital Markets
Aquisition of Capital
goods for Small and
Medium Companies
BNDES Scope of Action
BNDES vs. Other Development Banks
2013
Indicators BNDES CDB KfW JFCBrazil China Germany Japan
Assets (US$ billions) 363,4 1.331,3 619,7 260,4 Loan Portfolio (US$ billions) 263,5 1.162,3 528,8 222,8 Net Profit (US$ billions) 3,6 13,0 1,7 (2,9)
Non-performing loans ratio (%) 0,01 0,48 0,13 2,98Return on Assets (%) 1,01 1,02 0,27 (1,13)Return on Equity (%) 15,34 15,07 6,21 (6,84)
Foundation 1952 1994 1948 2008Number of Employees 2.859 8.468 5.374 7.361
Annual Disbursements (R$ X US$)
4751
65
91
136
168
139
156
190 188
19.6 23.6
34.0
49.0
71.6
96.3
82.378.7
88.1
69.7
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
R$ billion US$ billion
In R$ billion XUS$ billion
BNDES´ English Version Website
www.bndes.gov.br/english
Brazilian Development Bank
Diversification of the Brazilian Chemical IndustryStudy Summary
Study financed by the Brazilian Development Bank (BNDES)
Prioritization and validation
S4
Design of development policies
The Study took place over 18 months
Business model design
Financial and economic analysis
Initial
prioritization
of segments
Mapping and
Segmentation
Identification of opportunities in selected segments
Benchmarking of industrial policies
S2S1
PE
SSeminars PE Industry Panels
Final prioriti-zation
of opport-unities
S3
Report 2
Report 3 Report 4 Report 5 Report 6
En
d o
f S
tud
y
F
Report 7
Report 1
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
20142013
11
Average
price (US$/kg)
Growth of
imports(CAGR 08-12)
0,75 3%
0,93 6%
2,99 10%
Imports + Exports (US$B)
and # of segments
1
1
32 segments were selected for detailed analysis(19 for primary focus and 13 for secondary focus)
Note: (1) Average of the sum of imports and exports during the period 2008-2012; (2) Biochemicals were also selected for study and were analyzed as a segment.
Because it overlaps with the other segments, it is not considered in the analysis above; Source: AliceWeb, Bain/Gas Energy Analysis
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SegmentBrazilian Market
(US$ B, 2012)
Brazilian Share
(%)
Global Growth
(07-12)
Brazilian Growth
(07-12)
Imports
(US$ M)
Exports
(US$ M)
Unit Price
(US$/kg)
Cosmetics 41,8 9,7% 4,1% 12,4% 830 580 5,4
Crop protection 9,7 20,5% 7,6% 16,1% 5.400 500 11,3
Food additives (animals)1 1,10 10,0% 3,7% 10,1% 458 310 2,5
Butadiene and isoprene deriv.2 1,95 5,7% 1,1% 3,2% 860 740 2,5
Aromas, flavors and fragrances 1,20 5,1% 3,3% 6,5% 295 317 5,2
Chemicals for E&P 0,71 3,6% 11,2% 24,6% 85 9 1,7
Surfactants 1,54 5,7% 3,0% 6,9% 315 185 3,0
Aromatics and deriv.3 2,52 1,6% 3,8% 5,2% 1.154 0 1,2
Polyurethanes 1,50 3,5% 1,6% 5,8% 944 83 2,7
Cellulose deriv. 0,33 1,3% 6,3% 1,1% 190 37 3,5
Lubricants 4,5 3,5% 1,0% 2,6% 1.127 209 2,4
Food additives (humans)1 0,65 3,0% 3,8% 4,1% 367 625 2,8
Oleochemicals 0,66 2,8% 8,1% 23,2% 230 179 1,7
Carbon Fiber 0,10 9,4% 7,9% 107,4% 97 0 24,4
Chemicals for mineral processing 0,19 4,1% 2,3% 7,6% 93 8 2,2
Chemicals for leather 0,38 8,1% 2,8% 3,7% 111 83 1,7
Silicon Deriv. 0,42 3,0% 3,7% 5,2% 190 536 2,5
Chemicals for concrete 0,17 1,7% 3,7% 5,0% 30 4 1,1
Specialty polyamides 1,28 1,7% 1,9% -5,2% 509 14 3,4
High-tenacity polyesters 0,13 2,1% 4,5% -3,0% 70 10 2,0
The 19 segments with a “primary” focus were studied in more depth, as were chemicals from renewables
Co
mp
eti
tive
ne
ss
+
-
(1) The segment food additives was divided to facilitate analysis; (2) Accept butadiene and isoprene; (3) Accept BTX
Note: “Chemicals from renewables”, which overlaps with the other segments, was also analyzed to identify opportunities
+ Chemicals from renewables
13
The Study was documented in Reports which are available to the public on the BNDES website
Report 1 • Proposal for the segmentation of the chemical industry (+ annexes)Report 2 • Proposal for the prioritization of the segments of the chemical industry (+ annexes)
Report 3
• Development policies – Mapping of Best Practices
• Segments of secondary focus (Acrylic Acids; Catalysts; Chlorine; Glues, Adhesives and Sealants; Pigments, Titanium dioxide and dyes; Industrial intermediates; Methane deriv.; Propylene deriv.; Elastomers; Cleaning products; Laboratory reagents)
Analysis of the primary focus segments according to the methodology of Porter’s Diamond• Crop protection • Oleochemicals • Chemicals for E&P• Lubricants • Chemicals for concrete • Mining chemicals
Report 4
Analysis of the primary focus segments according to the methodology of Porter’s Diamond• Food additives • Cellulose derivatives • Polyurethanes• Aromas, flavors and fragrances • Silicon derivatives • Renewable chemicals• Aromatics • Carbon fiber • Leather chemicals• Butadiene and derivatives • Specialty polyamides • Surfactants• Cosmetics and personal hygiene • High tenacity polyester
Report 5• Research about the local competitiveness of the segments• Public policies for development
Report 6• Financial - economic models (Carbon fiber, Methionine, Siloxane, Polyalphaolefins)• Petrochemical raw materials • Regulation • Innovation and technology• Sugarcane raw materials • Infrastructure • Taxation
Report 7 • Final Report (Summary) 14
Existing infrastructure
Recommendations to strengthen chemicals projects
based on sugarcane
• Tax exemption for
investments
• Competitive financing
conditions
• Tax exemption for
renewable products
• Incentives for greenfield projects in
renewable chemicals bio refineries
- Ex. semiarid: make available minimum
logistic infrastructure (for production and
inputs) and water collection system2
- PPP: risk sharing with private investor
Greenfield1 project
Investment
2
1
AGRICULTURAL
INPUTS
Sugarcane juice
Cane straw
Bagasse
PRETREATMENT
FERMENTATION
Sugar and ethanol
(1G and 2G)
(1) Use of sugarcane varieties more adapted to the soil type (ex. “cana-energia”) could improve project’s
profitability and sustainability
(2) Examples: PPP for irrigation (PPP Salitre) and Agrovale (sugar and ethanol mill) in Juazeiros, Bahia
TEXTILES
CHEMICALS E&P COSMETICS
AUTOMOTIVE MACHINES & EQUIP
HOME APPLICANCES SPECIALTY PAINTS
FERTILIZERS
CIVIL CONSTRUCT.
SHOES
APPAREL
FURNITURE
CROP PROTECTION
RUBBER
PLAST. & PACKAGE.
CHEMICAL
PROCESS
Alcohols and
Polyols
Acids
Other
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Actual
Infrastructure
Greenfield
Project
Investment in the projectR$ 1,4B
Direct impact GDP: R$670M
R$ 3,9B
Direct impact GDP: R$1,8B
Trade BalanceR$ 240M/year
As of 2020
R$ 800M/year
As of 2020
GDPR$ 180M/year
As of 2020
R$ 600M/year
As of 2020
Tax LeviesR$ 40M/year
As of 2020
R$ 100M/year
As of 2020
Jobs 100 direct 2 k1 direct
Go
ve
rnm
en
tIn
ce
nti
ve
s Fiscal Allowances (REPEQUIM)
R$ 8M/year R$ 8M/year
Subsidies/Fin. R$ 13M/year R$ 37M/year
Incentives PPP - R$ 18M/year
TOTAL R$ 21M/year R$ 63M/year
Fiscal Allow. (REIQ)3 R$ 15M/year R$ 15M/year
A Biorefinery creates additional tax levies of R$40-
100M/year, in addition to creating up to 2k jobs
Configuration
of the biorefineries
considered
• Assumptions
- 71th ha planted; 60th
ha harvested
- 5Mt/year of sugar
- n-butanol: 100 kt/year
• Actual Infra
- n-butanol (bagasse
and cane straw)
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(1) Mechanized planting and harvesting; (2) From a government perspective it is necessary to evaluate different alternatives for the use of water
(ex: generation of energy and fruit production) and their respective socioeconomic impacts; (3) considers additional R&D investment of 4% of the gross annual revenues for the producer of bio n-butanol.
• Greenfield1
- Sugarcane
plantation
- Irrigation2 and
logistics
- Sugar and ethanol
plant
- n-butanol (Bagasse
and straw)
SIMULATION
16
Brazilian Development Bank
PADIQ – Plan for the Diversification of the Chemical Industry
To be launched on 2nd semester 2015
Based on the successfull PAISS program
Public call to support business plans on selected chemical segments: PADIQ;
Chemicals from Renewable Sources selected to be supported by PADIQ;
PAISS program: innovation program to finance innovation projects in the sugar-based ethanol
and chemical sectors
1st stage
• 57 companies registered• Potential investiment: US$ 5 billion
2nd stage
• 39 pre-selected companies• Potential investment: US$ 3 billion
Final selection
• 25 selected companies• Potential investment: US$ 1.7 billion
0 500 1,000 1,500 2,000 2,500
After PAISS
Before PAISS*
Estimates of celulosic ethanol production for 2015(million liters)*
2.115
168
0
0 500 1,000 1,500 2,000 2,500
After PAISS
Before PAISS*
Estimates of celulosic ethanol production for 2015(million liters)*
834
114
168
PAISS Results: New scenario on advanced biofuels
Source: FO Licht, Nyko et al (2010) and BNDES.*Because of the lack of data at that time, estimates Pre-PAISS refer to 2014.
Due to the investments generated by PAISS andalso to the delay or standtill of several projects in US and EU, Brazil achieved a completely different
scenario in the segment of 2 G ethanol.
Ethanol 2G Commercial Projects supported by BNDES
Estimated Production Capacity
21
Granbio• Aprox. 80 M de liters
• São Miguel dos Campos, Alagoas
Abengoa• Aprox. 65 M de liters• Pirassununga, São Paulo
Raízen• Aprox. 40 M de litros• Piracicaba, São Paulo
185 millionliters of E2G
Chemicals from Sugars:
Examples of Projects Supported by BNDES
22
AmyrisSolazyme Bunge
What will be the focus of PADIQ?
Focus Biorrefineries:
New chemical projects based on biomass - sugar, wood, bagasse...
In summary…
Opportunities toInvest in Chemicals from
Renewable Sources in Brazil
Many Market Opportunities in Brazil could be supplied from
renewable sources
• Brazil’s Comparative Advantages – land, sun, consolidated sugar industry and innovation system;
• BNDES Diversification Study can provide detailed information on renewable chemicals markets in Brazil;
• BNDES Financing and the new PADIQ plan, starting on the 2nd
semestre of 2015, can support new Biorrefinery projects.
Biorefinery products (chemicals, materials, biofuels) for the:• Energy sector;• Cosmetics and personal care;• Food and feed additives;• Aromas, flavors and fragrancies;• Exploration and Production of oil;• …
23
Gabriel Gomes – [email protected]
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