Amyris buys out Crystalsev stake in cane diesel JV

SAO PAULO, May 27 (Reuters) - U.S.-based Amyris Biotechnologies has bought out Brazilian sugar and ethanol marketer Crystalsev's stake in a joint venture owned by both companies to produce diesel from sugarcane in Brazil.

Amyris now plans to buy a sugar-ethanol mill in the South American country to guarantee its own cane supply and to look for partnerships with other Brazilian groups, said Roel Collier, general director at the company's local subsidiary.

"We would like to buy a mill to produce ethanol at first and then, next year, convert it to our product (diesel), which has more added value," Collier told Reuters late on Tuesday.

Crystalsev's main shareholder, Santelisa Vale, saddled with 3 billion reais ($1.5 billion) of debt and some $300 million in losses on currency derivatives, signed a deal in April to be incorporated by French commodities group Louis Dreyfus.

Santelisa Vale's restructuring process and Amyris' plans to build a commercial-scale plant contributed to the decision to buy Crystalsev's 30-percent stake in the joint venture, Collier said.

The project had been announced in April 2008. Brazil is the world's largest producer of ethanol from sugar cane and is also the world's largest sugar producer and exporter.

Brazil currently mandates a 3 percent biodiesel blend on all commercial diesel and will raise the blend to 4 percent on July 1 and to 5 percent in January 2010. Nearly all of Brazil's current biodiesel production comes form soyoil as feedstock.

The U.S. company has developed the so-called second-generation biofuels technology, using microorganisms to take juice extracted from crushing sugar cane and turn it into a biodiesel closely resembling the mineral-based fossil fuel.

The first demonstration production unit, which was originally planned to be installed next to the Santa Elisa mill, was built in Campinas, also in Sao Paulo state, and will come on-line in June.

Amyris is now in talks with several groups to install industrial-scale plants next to existing mills and start producing diesel from 2011/12.

It is searching to buy a sugar and ethanol mill with a crushing capacity of 2 million to 5 million tonnes of cane to guarantee its own supply of cane.

Brazil's ethanol industry had leveraged to expand its capacity in the recent years and was then hit hard by the financial global crisis, which dried up credit lines.

Several groups are in a delicate financial situation and an increased consolidation is expected to happen in the coming years, with stronger groups buying weaker ones.

Amyris already produces diesel from cane in two pilot plants, one in California and another one in Campinas, in Sao Paulo state.

The company is still negotiating with Brazil's National Petroleum Agency to get permission to market the new biodiesel product. In April, the renewable diesel was cleared in the United States by the Environmental Protection Agency (EPA).

Founded in 2003, Amyris had raised over $120 million in equity fund until April.

Collier said new private equity funds, some with Brazilian investors, had taken a stake in the company before it bought out Crystalsev's share. (Reporting by Inae Riveras; Editing by Reese Ewing and Christian Wiessner)