Fibria Plans Brazil Wood-to-Fuel Plant to Diversify Sales

Fibria Celulose SA (FIBR3), the world’s largest pulp producer, is expanding into biofuels as an expected global oversupply of the main raw material in paper threatens to depress prices, Chief Executive Officer Marcelo Castelli said.

Its first plant will be able to produce about 22 million gallons (83 million liters) of fuel a year from wood and will open in 2015 after about two years of construction, Castelli said yesterday in a telephone interview.

Fibria, based in Sao Paulo, expects to get as much as a quarter of its revenue by 2025 from biofuels and other products made from its forestry assets. That will reduce its reliance on pulp, which accounted for about 94 percent of its 5.9 billion reais ($2.9 billion) in sales last year, he said. The company may build as many as ten more biofuel plants through 2020.

“A lot of players are building capacity and we are going to have an oversupply” of pulp in the next few years, he said. The planned biofuel plant is “an amazing project that will give us very high competitiveness.”

The fuel plant is the result of a joint venture Fibria announced Oct. 3 with Wilmington, Delaware-based Ensyn Corp., which has developed technology to convert wood into transportation fuel. Fibria also agreed to pay $20 million for 6 percent of closely held Ensyn and has the option of boosting its stake to 9 percent.

The facility will cost as much as $100 million and will be built next to one of Fibria’s three pulp mills. The company expects to sell the output to U.S. distributors, which pay a premium for renewable fuels, Castelli said.

“We want to add an extra portfolio that will be less capital intensive,” he said. “That will maximize the value of forestry and also will be an anti-cyclical business.”

To contact the reporter on this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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