Shell set to ink Brazilian biofuel megadeal

Shell is poised to complete a multibillion-dollar deal with Brazilian ethanol producer Cosan, instantly establishing the company as a major player in the fast-expanding biofuel market.

Cosan's chief executive Marcos Lutz told analysts and investors late last week that plans for the two companies to launch a $12bn joint venture are now close to finalisation.

Lutz could not say when the deal would close, but insisted that it was at a "very advanced" stage.

The companies announced back in February that the deal would create a new biofuels powerhouse. Cosan is to pool its 23 sugar mills and fuel stations with the bulk of Shell's existing biofuel operations.

Cosan is also set to double its existing bioethanol production, establishing it as the third-largest fuel distributor in Brazil and providing the new joint venture with a direct route into the European and North American markets.

The announcement completed a busy week for the biofuel sector, after Colorado-based startup Gevo announced that it was seeking an initial public offering (IPO) worth a reported $150m.

The company, which produces catalysts that convert waste and cellulosic materials into fuels, announced the move just days after PetroAlgae similarly confirmed that it was seeking a $200m IPO.

Gevo said it plans to use the funds raised through an IPO to boost working capital and acquire ethanol facilities.

However, as with PetroAlgae, the plans drew a muted response from market watchers with experts warning that both companies would have to defy their loss-making record and the lukewarm state of the green IPO market to pull off a successful listing.