Interim Results
Clean Energy Brazil PLC
11 December 2007
11 December 2007
CLEAN ENERGY BRAZIL PLC
('CEB' or the 'Company')
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2007
Clean Energy Brazil plc, a leading specialist investment company focused on
Brazil's growing sugar cane/ethanol industry, announces its unaudited interim
results for the six months ended 31 October 2007. The Company's investments
produce sugar, ethanol, electricity and other by-products from their own sugar
cane, a renewable feedstock. CEB's objective is to make investments in the sugar
cane sector in Brazil, utilising its sector relationships and working in
partnership with existing sector participants.
Highlights
•A major joint venture agreement signed with one of the most respected companies
in the Brazilian sugar and ethanol sector and an associated capital increase
completed - full details are contained in a separate announcement to this report
•Completed the acquisition of Pantanal and Agua Limpa greenfield investments
•The Group's management expertise has been demonstrated in the Usaciga joint
venture where a management reorganisation, industrial investments and improved
commercial practices continue to deliver results
•Operational highlights at Usaciga for the six months to 31 October 2007
include:
o 7.8% increase in cane crushed relative to the six months ended 31 October
2006
o Usaciga became profitable at the operating level during the period
o 41% increase in ethanol production relative to the same period last year,
capturing domestic market ethanol price premium over sugar
o Delivery of approximately 8,500 MWh to the electricity grid
o Following efficiency improvements, for the first time Usaciga sold a
significant amount of crystal sugar in the domestic market (approximately
24,000 tonnes) taking advantage of high domestic prices for this quality of
sugar
•CEB paid its second interim dividend of 2.5p per ordinary share on 4 December
2007
Antonio Monteiro de Castro, Chairman of Clean Energy Brazil, commented:
'We believe that Brazilian ethanol consumption is set to continue to enjoy
strong growth driven by the continuing increase in flexfuel car sales and the
price competitiveness of ethanol compared to gasoline. In addition, we are
witnessing growing international demand for ethanol that in our view will
continue in the medium and longer term due to the growing need for Brazil to
supply countries adopting targets for biofuel consumption through ethanol
blending programmes.
CEB continues to grow, investing in partnership with current market operators.
Having made this series of initial investments, our activities will now focus
on the integration of CEB's investments and the development of the projects
under the Group's management. The Company is now invested in businesses with an
aggregate planned crushing capacity of 18.5 million tonnes of cane per year and
in due course will seek to raise additional resources in order to achieve its
longer term target of 30 million tonnes per year. With positive medium and
longer term domestic and international trends, successful track record and
consolidation opportunities in this sector, we continue to look to the future
with optimism.'
www.cleanenergybrazil.com
Further enquiries:
Clean Energy Brazil
Antonio Monteiro de Castro Tel: +44 (0)20 7839 4321
a.castro@cleanenergybrazil.com
Temple Capital Partners
Peter Thompson Tel: +44 (0)20 7972 6643
p.thompson@cleanenergybrazil.com
Numis Securities Limited
David Shapton Tel: +44 (0)20 7260 1000
Smith & Williamson Corporate Finance Limited
Azhic Basirov Tel: +44 (0)20 7131 4000
David Jones
Fishburn Hedges (Financial PR Adviser)
James Benjamin Tel: +44 (0)20 7544 3133
Mob: +44 (0)7747 113 930
ceb@fishburn-hedges.co.uk
CLEAN ENERGY BRAZIL PLC
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2007
Chairman's Statement
I am pleased to report Clean Energy Brazil's interim financial results for the
six months ended 31 October 2007. It has been a very busy and successful period
for the business, which is currently at an early development stage.
Since CEB published its first financial results for the period ended 30 April
on 1 August 2007, the Company has declared and paid its second interim dividend
of 2.5p per ordinary share.
The interim accounts reflect CEB's payment of the final Usaciga investment
tranche. The total consideration for the acquisition of Usaciga was
approximately US$127 million as previously reported.
In addition the Group has completed the acquisition of the Agua Limpa and
Pantanal greenfield projects, and progressed with the initial development of
these projects, which will require additional funding.
Income to date from CEB investments has been from cash deposits because as
expected no dividend income from Usaciga is expected to be received until the
2008/09 financial year.
The longer term objective of CEB in acquiring strategic stakes in a number of
businesses across the sector is to take a leadership role in forming alliances
and mergers, seeking out synergies and to become a major consolidator of the
cane sector. Given the highly fragmented nature of this sector today, the
directors believe that a consolidation premium could add further significant
value to CEB over the medium to longer term.
The directors also believe that the conflict between the growing global energy
gap and the need to reduce greenhouse gases from current energy production will
lead to the Brazilian cane sector assets moving from a valuation based primarily
on Brazilian agriculture to a valuation based more on international energy. The
directors believe that this creates a current window of opportunity to invest
in the sector despite the short term depressed market conditions for sugar.
Since CEB's admission to AIM and £100 million placing of Ordinary Shares in
December 2006, the net proceeds of that placing (being approximately US$182
million) have been invested in Usaciga, committed to the development of
Pantanal and used for the initial funding of Agua Limpa.
•Usaciga is a joint venture business in which the Group holds 49 per cent.
of the equity and which has existing production and advanced stage greenfield
projects under development.
•Pantanal is a greenfield development directly under the management control
of the Group in which the Group currently holds 92 per cent. of the equity.
•Agua Limpa is a greenfield development directly under the management control
of the Group in which the Group currently holds 100 per cent. of the equity.
As a result of these investments CEB, as at 31 October 2007, had interests
in businesses with a planned crushing capacity of approximately 14 million
tonnes of cane per annum. Active risk management within CEB's existing
investments is intended largely to protect against the effect of short term
price weakness in sugar and ethanol markets whilst maintaining exposure to
medium and longer term trends which the Directors believe to be very positive.
The Group aims to use its expertise to assist its partners in improving
agricultural and industrial productivity, price risk management and
commercialisation of ethanol and sugar within CEB's investee companies. A
typical joint venture that the Group looks to enter into is one where the
Group's partner puts its assets into the joint venture and the Group capitalises
the joint venture against a valuation of those assets. The structure is such
that funds invested remain in the joint venture, with the Group retaining
control and/or protection through majority ownership and/or shareholder
agreements.
The intention is that the joint venture then has funds to accelerate the
expansion of its business. CEB aims to seek out those existing market
participants who, in addition to existing assets, have advanced stage
greenfield developments and/or brownfield developments (which can often take
the form of agricultural investment to increase cane availability up to the
installed industrial capacity of a mill). In addition the Group is developing
its own greenfield sites with the objective of subsequently identifying
potential further joint venture partners with which to work to secure
production and revenue generation.
In applying the Company's strategy, intensive investigations of new investment
opportunities have taken place. Negotiations have been taken forward through
exclusive discussions avoiding tenders and inflation of asset valuations.
I am pleased to announce that such efforts have resulted in a partnership with
Unialco SA, one of the most respected companies in the Brazilian sugar and
ethanol sector and an associated capital increase, of which full details are
being announced in a separate announcement to this report.
This new investment will result in the Company being invested in businesses
with a planned aggregate crushing capacity of 18.5 million tonnes of sugar
cane, when fully developed. CEB will continue to build out its majority-owned
greenfield sites, seeking to work in conjunction with other sector participants
to complete its development programmes.
The directors believe that such business growth has the potential to generate
considerable value for shareholders given that current valuations of fully built
out assets have generally increased significantly above development costs. The
directors believe that the increase in valuations reflects increasing demand for
industrial and agricultural assets from a range of other investors due to
growing acceptance of climate change and understanding of the unique carbon
footprint of sugar cane in producing ethanol and electricity generation.
CEB continues to grow, investing in partnership with current market operators.
Having made this series of initial investments, our activities will now focus
on the integration of CEB's investments and the development of the projects
under the Group's management. The Company is now invested in businesses with
an aggregate planned crushing capacity of 18.5 million tonnes of cane per year
and in due course will seek to raise additional resources in order to achieve
its longer term target of 30 million tonnes per year. With positive medium and
longer term domestic and international trends, successful track record and
consolidation opportunities in this sector, we continue to look to the future
with optimism.
Antonio Monteiro de Castro
Chairman
Investment Manager's Report
Investments
Usaciga
In March 2007, CEB completed its investment of approximately US$127 million for
a 49 per cent. participation in Usaciga based on an agreed enterprise value of
the business, at the time of the investment, of US$213 million. The investment
in Usaciga was made through an increase in capital, diluting Usaciga's other
shareholders (the Barea family) to a 51 per cent. interest. This structure
provides for CEB's contributed funds to stay in the joint venture company, to
be subsequently invested in projects which we believe will add value to Usaciga.
During the period, CEB has paid the last tranche of its investment in Usaciga
and released escrow funds following the completion of the condition precedent
related to possible delays in the operations of the electricity cogeneration
plant. The cogeneration plant is now fully operational and selling electricity
to the domestic market. As of 31 October, Usaciga has sold approximately 8,500
MWh to the electricity grid, and is expected to sell a total of 26,000MWh up to
the end of the combined 2007/08 crop.
Since our last update on Usaciga's operations on 1 August 2007, the company has
been performing very well, with sugar cane crushed in the period to 31 October
up 7.8% compared with the same period for the last crop season. Total output
has been focused on ethanol in order to capture the premium in the domestic
market compared to sugar; this policy has resulted in an increase of 41% in
ethanol production compared with the last crop season.
Usaciga management made a strategic decision to stop crushing cane earlier this
crop season, leaving approximately 300,000 tonnes of cane standing. This
strategy will allow Usaciga to start crushing the 2008/09 crop earlier than
other mills in the region, aiming to take advantage of the expected seasonal
premium in prices during the off-crop period, which would be reflected in the
Company's 2007/08 results (ending April 2008). Management expect to crush a
total of c.2.0 million tonnes in the current financial year.
Following efficiency improvements, for the first time Usaciga has sold a
significant quantity of crystal sugar in the domestic market (approximately
24,000 tonnes), taking advantage of high domestic prices for this quality of
sugar.
The implementation by CEB of a pro-active risk management policy for Usaciga
has also resulted in realisation prices well above current international sugar
market levels. Through a combination of sugar and ethanol domestic sales and
active hedging for the export production, CEB has ensured that Usaciga has now
sold or hedged approximately 68% of its combined 2007/08 production at US12.29
cents/lb as of 3 December 2007 (based on the raw sugar futures market price as
quoted on the New York Exchange No.11 contract). In addition, Usaciga's strategy
to carry over stocks of ethanol produced at the beginning of the crop season
has proved to be very successful, as such stocks are now being sold at
significantly higher prices. We estimate that the sale of its outstanding
exposure at current domestic market prices would result in a realisation price
of US12.85 cents/lb for the combined 2007/08 crop, which contrasts favourably
with current international sugar prices of approximately US9.8 cents/lb. In
addition, 35% of the anticipated 2008/09 exposure has been hedged at US10.74
cents/lb, as of 3 December 2007.
Management's decision to focus on the domestic market has led to Usaciga
benefiting from the strength of the Brazilian Real whilst US Dollar/Real
exposures relating to export sugars have been hedged by the Company through to
April 2009 through the use of currency derivative instruments, which CEB
believes should continue to benefit the Group.
The management reorganisation implemented by CEB at Usaciga is working very
well, with the new executives fully committed to the Company's expansion and
operational strategy. Usaciga's strategy and development plans for the next
five years are being implemented. Management has already increased the potential
crushing capacity of Usaciga's greenfield projects to 2.5 million tonnes per
year each up from the initial forecast of 2.3 million tonnes, bringing the
total processing capacity of the whole group to 10 million tonnes when fully
developed. The development of these projects will follow a progressive
timetable, with the Rio Parana project planned to start crushing cane in the
2009/10 crop season and Santa Monica and Santa Cruz de Montecastelo in 2010/11
and 2011/2012 respectively.
The development of the greenfield projects is progressing well, with over
10,000 additional hectares of cane being planted and equipment acquisition
underway.
A long term financing line is currently under negotiation with a number of
banks. This will be applied to the development of the greenfield projects.
The planned production of the Usaciga facility following CEB's turnaround
programme is illustrated below:
06/07crop 07/08*crop 08/09*crop
Cane (million tonnes) 1.5 2.0 2.5
Agricultural yield
(tonnes of cane per hectare) 70 74.5 78.4
Sugar/ethanol split 70/30 59/41 Open
Industrial efficiency (%) 86 90 90
Average interest rate on
pre-payments (%) 10.01 8.9 8.2
Co-generation output (MWh) n/a 26.5k 129k
*estimated target
Pantanal
Pantanal Agroindustrial Ldta. was created in 2001 with the aim of developing a
sugar cane plantation, sugar mill and ethanol distillery in Sidrolandia city
region, Mato Grosso do Sul state. The project has a planned annual cane crushing
capacity of 2.0 million tonnes, with a planned annual production of 187,000
cubic metres of ethanol plus cogeneration of 94,000MWh of electricity. It is
expected that operations will commence with the 2009/10 season crop.
We believe that the project is located in an attractive area, due to high
agricultural yields and low land lease costs compared to other regions and its
proximity to Mato Grosso do Sul's capital, Campo Grande (which facilitates
access to one of the biggest ethanol consumers in the region).
The Group has finalised the effective acquisition of 92% of Pantanal for a
consideration of c.US$250,000, and has entered into leases of over 6,000
hectares of land in which US$15 million is being invested in sugar cane
planting that is already underway.
The corporate structure of Pantanal has also been set up. Claudio Belodi has
been hired as general manager of both Pantanal and Agua Limpa projects.
Mr Belodi has extensive technical and managerial experience in recognised
companies in the sector, such as Equipav S/A Acucar e Alcool and Central
Energetica Moreno Acucar e Alcool Ltda.
The Group will seek to bring sector participants as co-investors in Pantanal
to develop the project fully, which we intend to execute at the appropriate
stage of development to maximise value of the investment.
Agua Limpa
Destilaria Agua Limpa is a greenfield sugar plantation located in Santa Fe de
Goias, Goias state. The project involves the construction of a sugar cane mill
and ethanol distillery with an anticipated annual cane crushing capacity of 2.0
million tonnes, 193,000 cubic metres of hydrous ethanol production and 94,000MWh
of electricity (part of which will be used for the factory's own needs and part
sold to the national grid).
The Group has finalised the acquisition and now owns the entire share capital
of the company and is the sole developer of this project which, we believe,
will give the Group the opportunity to benefit from an anticipated capital gain
associated with its development. The environmental licence for the project has
been awarded and the Group has commissioned the planting of 120 hectares of
seed cane.
Agua Limpa is located in a flat region, which allows for higher levels of
mechanisation in the agricultural operations. In addition, the region offers
attractive land leasing costs when compared to other states. We believe that
the project has the potential to take advantage of Petrobras' investment in
Goias state, which consists of a pipeline infrastructure project that will
give low cost access to both export logistics facilities and to the Sao Paulo
city market for the project's ethanol.
The construction of the Agua Limpa project is subject to additional funding,
which would finance the industrial and agricultural development. Following
CEB's strategy, the Group will seek to bring sector participants as co-investors
to Agua Limpa in order to develop fully the project. As with Pantanal, this is
intended to be done at a stage of development at which we judge the value to be
optimised.
Investment market / TCP's sugar and ethanol view
The international sugar market continues to be negatively affected by Indian
exports. The increase in exports is on account of the large surpluses of Indian
cane, which in turn is caused by state government subsidies which support local
farmers, leading to Indian sugar production exceeding consumption. We believe
that Indian cane exports are not sustainable without subsidies due to India's
high cost of production but that this has created the negative sentiment which
has in turn allowed speculators to pressure the sugar market lower. We also
believe that incentives for the production of other crops will result in Indian
cane farmers switching from growing cane and that this in turn will help support
the international sugar price.
We believe that one of the key supports to the market environment has been the
rise in hydrous ethanol demand within Brazil. This year, Brazilian producers
have focused on increasing ethanol production to the detriment of sugar, largely
because domestic Brazilian sugar and ethanol prices are providing significantly
higher returns to producers when compared with depressed international sugar
prices. The increasing popularity of flexfuel cars in Brazil coupled with the
relative competitiveness of the ethanol price compared with gasoline, in
addition to the healthy growth in the Brazilian economy, are driving a strong
demand for ethanol, which has in turn been reflected in higher ethanol prices.
Consequently, although analysts expect a large increase in cane availability
in Brazil, the country's sugar export forecasts for the 2007/08 crop season are
actually below the 2006/07 crop season.
Another impact on Brazilian sugar/ethanol prices is the relationship between the
prices of different energy source. This is due to expanding Brazilian energy
consumption from an increasingly wider variety of sources. For instance, recent
supply concerns in the electricity sector are diverting natural gas consumption
from vehicles to power generation plants and this demand has been reflected in
higher natural gas prices. Such an environment is adding to the existing
dynamism of the domestic market and in conjunction with the approach of the end
of the cane crop, have resulted in a strong increase in domestic ethanol prices,
which are currently trading at a premium of approximately 50% when compared with
international sugar market prices.
In this context, CEB benefits from Usaciga's ability to supply the Brazilian
domestic market. Usaciga is focusing on the production of hydrous ethanol for
domestic sales and capturing high premiums in the domestic sugar market through
the production of crystal sugar, as previously described. Such a strategy also
means that CEB benefits from the strength of the Brazilian Real in relation to
the US Dollar, which we believe to be a long term trend.
Outlook
We continue to be optimistic about the medium and longer term prospects for
Clean Energy Brazil. The dynamics of the current Indian sugar market gives us
good reason to question the sustainability of India's sugar production. We
strongly believe that the demand driven by the underlying increase in
international sugar consumption will lead to higher sugar prices in order to
attract Brazilian exports, which instead are currently focused on the supply of
ethanol to the domestic market.
Furthermore, the directors believe that Brazilian ethanol consumption is set to
continue to enjoy strong growth in demand driven by the continuing increase in
flexfuel car sales and the price competitiveness of ethanol compared to gasoline.
In addition, we are witnessing growing international demand for ethanol that in
our view will continue in the medium and longer term due to the growing need for
Brazil to supply countries adopting targets for biofuel consumption through
ethanol blending programmes.
Peter Thompson
Chairman, Temple Capital Partners
Marcelo Junqueira
Director, Temple Capital Partners
Condensed consolidated income statement
For the six months to 31 October 2007
(Unaudited) (Audited)
1 May 2007 to 19 September 2006
31 October 2007 to 30 April 2007
$'000 $'000
Bank interest received 1,909 2,662
Foreign exchange gain 767 934
Fees and commissions - 240
------------------------------------------------------------------------------
Net investment income 2,676 3,836
------------------------------------------------------------------------------
Investment manager's fees (1,476) (952)
Other administration fees and expenses (1,278) (728)
------------------------------------------------------------------------------
Administrative expenses (2,754) (1,680)
------------------------------------------------------------------------------
Finance costs (294) (31)
------------------------------------------------------------------------------
(Loss) / profit for the period before tax (372) 2,125
------------------------------------------------------------------------------
Tax - -
------------------------------------------------------------------------------
(Loss) / profit for the period after tax (372) 2,125
------------------------------------------------------------------------------
Earnings per share $0.00 $ 0.02
Condensed consolidated interim balance sheet
At 31 October 2007
(Unaudited) (Audited)
31 October 2007 30 April 2007
$'000 $'000
ASSETS
Non-current assets
Investments 122,256 93,768
Goodwill 215 -
Other fixed assets 60 -
------------------------------------------------------------------------------
Total non-current assets 122,531 93,768
------------------------------------------------------------------------------
Current assets
Trade and other receivables 1,836 413
Cash and cash equivalents 65,517 98,386
------------------------------------------------------------------------------
Total current assets 67,353 98,799
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total assets 189,884 192,567
------------------------------------------------------------------------------
LIABILITIES
Non-current liabilities
Loan from portfolio company (6,730) (6,730)
Current liabilities
Trade and other payables (975) (451)
------------------------------------------------------------------------------
Total liabilities (7,705) (7,181)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net Assets 182,179 185,386
------------------------------------------------------------------------------
Represented by:
Share capital 1,964 1,964
Share premium - 181,297
Distributable reserves 178,052 2,125
Other reserves 2,163 -
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182,179 185,386
------------------------------------------------------------------------------
Condensed consolidated statement of changes in equity
For the six months to 31 October 2007
Audited
Unaudited 19 September 2006
1 May 2007 to 31 October 2007 to 30 April 2007
Share Share Distributable Other
Capital premium reserves Reserves Total Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at the 1,964 181,297 2,125 - 185,386 -
start of the
period
Share issue - - - - - 198,040
proceeds
Placing costs - - - - - (13,084)
Cancellation of - (181,297) 181,297 - - -
share premium
Net (loss) / - - (372) - (372) 2,125
profit for the
period
Dividend - - (4,999) - (4,999) -
Foreign exchange - - - 2,163 2,163 -
on translation
of subsidiaries
-------------------------------------------------------------
Balance at the
end of the
period 1,964 - 178,052 2,163 182,179 185,386
=============================================================
Condensed consolidated interim cash flow statement
For the six months to 31 October 2007
(Unaudited) (Audited)
1 May 2007 to 19 September
31 October 2006 to 30
2007 April 2007
$'000 $'000
Cash flows from operating activities
(Loss) / profit for the period after tax (372) 2,125
Change in trade and other receivables (1,111) (413)
Change in trade and other payables 484 451
--------------------------------------------------------------------------------
Net cash flows used in / from operating activities (999) 2,163
--------------------------------------------------------------------------------
Cash flows from investing activities
Purchase of investments (28,695) (93,768)
Acquisition of subsidiary, net of cash acquired (263) -
Loan from portfolio company - 6,730
--------------------------------------------------------------------------------
Net cash flows used in investing activities (28,958) (87,038)
--------------------------------------------------------------------------------
Cash flows from financing activities
Net proceeds on issue of equity shares - 196,345
Issue costs paid - (13,084)
Dividends paid (4,999) -
--------------------------------------------------------------------------------
Net cash flows used in / from financing activities (4,999) 183,261
--------------------------------------------------------------------------------
Net (decrease) increase in cash and cash (34,956) 98,386
equivalents
Foreign exchange 2,087 -
Cash and cash equivalents at start of period 98,386 -
--------------------------------------------------------------------------------
Cash and cash equivalents at end of period 65,517 98,386
--------------------------------------------------------------------------------
Selected notes to the condensed consolidated financial information
For the six months to 31 October 2007
1. General information
The Company is a closed-end investment company incorporated on 19 September 2006
in the Isle of Man as a public limited company. The address of its registered
office is IOMA House, Hope Street, Douglas, Isle of Man.
The Company is listed on the Alternative Investment Market of the London Stock
Exchange.
The Group has no employees.
The condensed consolidated financial information comprises the results of the
Company and its subsidiaries (together referred to as the 'Group') and is
unaudited.
2. Accounting policies
Basis of preparation
This condensed interim financial information for the period ended 31 October
2007 has been prepared in accordance with IAS 34, Interim Financial Reporting
and on a basis consistent with the accounting policies set out in the Company's
audited annual report and accounts for the period ended 30th April 2007.
The financial information has been presented in US Dollars.
Investments
Investments of the Group where the Group does not have control are initially
recognised at cost at the date of investment. Investments are subsequently
re-measured at fair value at least every six months by the Directors using the
most appropriate valuation techniques for each investment. Unrealised gains
and losses arising from the revaluation of investments at the period end are
taken directly to the income statement.
Investments in entities over which the Group has control are consolidated in
accordance with IAS 27.
Segment reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that
are subject to risks and return that are different from those of segments
operating in other economic environments.
The directors are of the opinion that the Group is engaged in a single segment
of business being the sugar and bio-ethanol business in one geographical area
being Brazil.
3. Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the net profit attributable
to shareholders by the weighted average number of ordinary shares outstanding
during the year.
Net (loss) attributable to shareholders ($372,000)
Weighted average number of ordinary shares in issue (thousands) 100,000
Basic earnings per share $ 0.00
The Company has issued 25,000,000 warrants (see note 9) which have a dilutive
effect on the ordinary shares in issue. However, the diluted earnings per
share for the period is the same as the basic earnings per share.
4. Investment manager fees and performance fees
Under the terms of the Investment Advisory Agreement the Investment Adviser
will receive a management fee of 2 per cent per annum of the amount invested
plus 0.5 per cent of any cash retained by the Company. The management fee will
be paid quarterly in arrears and the Investment Adviser will also have the right
to reimbursement of its expenses (including professional advisers' fees
incurred in connection with acquisitions on behalf of the Company).
The agreement is for an initial term of ten years with a right to extend on
12 month notice periods thereafter. The agreement is subject to certain early
termination rights.
The Investment Adviser is entitled to a carried interest subject to meeting a
minimum return. The hurdle is 8 per cent IRR on the total amount of cash
returned on invested amounts. If the hurdle has been exceeded then the
Investment Adviser will be entitled to receive a profit share of 20 per cent of
the gain generated by the Group.
5. Subsidiaries
The subsidiaries of Clean Energy Brazil PLC are recorded at cost in the accounts
of the Company and included in the consolidated financial statements.
Name Country of Proportion of
Incorporation ownership interest
Clean Energy Brazil Ltd Cayman Islands 100%
In addition to the direct subsidiary noted above, the Company has an indirect
interest in the following entities through its subsidiary.
Name Country of Proportion of
Incorporation ownership interest
CEB Unicorn S.A.R.L. Luxembourg 100%
CEB Pantanal S.A.R.L. Luxembourg 100%
CEB Agua Limpa S.A.R.L. Luxembourg 100%
CEB Unialco S.A.R.L. Luxembourg 100%
CEB Cesar S.A.R.L. Luxembourg 100%
CEB Alpha Participacoes Ltda. Brazil 100%
CEB Beta Participacoes Ltda. Brazil 100%
CEB Gamma Participacoes Ltda. Brazil 100%
CEB Omega Participacoes Ltda. Brazil 100%
Pantanal Agro Industrial Ltda. Brazil 100%
Destilaria Agua Limpa Ltda. Brazil 100%
6. Investments
Investments comprise one holding as follows:
Name Country of Proportion of
Incorporation ownership interest
Usaciga - Acucar,Alcool E Energia
Eletrica SA Brazil 49%
The investment is stated at fair value, which the Directors estimate to be
equivalent to cost.
7. Escrow Account
Under the terms of the Investment Agreement with Usaciga - Acucar,Alcool E
Energia Eletrica SA, an Escrow account was established to protect the Company
against certain possible liabilities. At 31 October 2007 $8.0 million (30
April 2007: $16.8 million) was held in the Escrow account and is included
within cash and cash equivalents on the balance sheet.
8. Loan
The Group has borrowed $6,730,000 from Usaciga - Acucar,Alcool E Energia
Eletrica SA on a market based floating rate. The loan is repayable no later
than 2012, but may be paid at the rate of 1/5 of the total outstanding per year.
Repayment may be effected through offsetting against dividends due from the
lender. Interest on the loan is payable at Libor + 3%.
9. Share capital
Ordinary shares of 1p each Number of shares Ordinary
(thousands) shares
£'000
Issued 100,000,000 1,000
Authorised 600,000,000 6,000
All shares are fully paid and each ordinary share carries one vote.
In addition to the placing of ordinary shares, 25,000,000 equity warrants were
admitted to trading on the Alternative Investment Market. Each warrant entitles
the holder to subscribe for new ordinary shares at £1.00 per share, subject to
adjustment as detailed in the Admission Document.
10. Share premium
On 15 June 2007, the High Court in the Isle of Man approved a reduction in the
share capital of the Company by way of cancellation of the share premium
account. The amount cancelled has been credited to distributable reserve.
11. Net asset value per share
The net asset value per share is calculated by dividing the net assets
attributable to shareholders by the number of ordinary shares in issue at
31 October 2007.
Net assets attributable to shareholders $182,179,000
Number of ordinary shares in issue 100,000,000
Net asset value per share $ 1.82
12. Commitments
The Group has capital commitments of $ 8.0 million in respect of capital
expenditures contracted for at the balance sheet date but not yet incurred, for
completion of the investment in Usaciga - Acucar, Alcool E Energia Eletrica SA.
13. Related party transactions
There are no transactions carried out with related parties except the following:
Mr Marcelo Junqueira, a director of the Company is also a director of Temple
Capital Partners Limited (the Investment Adviser). Mr Junqueira is joint owner
of Agropecaria Orlando Prado Diniz Junqueira, a shareholder in the Investment
Adviser.
As part of the terms of the Placing of shares on Admission, investors were
allocated B shares in the Investment Adviser. As a result, directors had
interests in the Investment Adviser as follows:
Number of B shares
Timothy Walker 45
Richard Jewson 90
Marcelo Junqueira 180
Fees paid to the Investment Adviser are detailed in note 4.
Czarnikow is a shareholder in both the Company and the Investment Adviser.
Czarnikow also receives fees from Usaciga in connection as acting as a physical
offtaker of sugar and ethanol and other services.
Any investment recommendation made by the Investment Adviser must include in the
proposal details of any potential conflicts of interest that may arise.
14. Directors' interests
The following directors had interests in the shares of the Company as at 31
October 2007
Number of shares Number of Warrants
Timothy Walker 25,000 6,250
Antonio de Castro 236,000 0
Richard Jewson 50,000 12,500
Marcelo Junqueira 1,356,000 25,000
15. Events after the balance sheet date
A second interim dividend of 2.5p per ordinary share was paid on 4 December 2007
to shareholders on the register as at close of business on 9 November 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
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