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December 2008

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Florida and USSC dominates this month ...


USSC FLORIDA

There were all sorts of twists in the USSC story last month as the entire shape of the deal, motivated by Everglades restoration, changed.

New Deal
The original concept was for Florida to buy the whole of USSC [including about 185 000 acres of land], to use perhaps 30 000 acres of the land for restoration and to dispose of the rest of the assets. The new scheme is for the state to buy 180 000 acres of land but not the industrial assets, substantially reducing the purchase price : $1.34 billion instead of the original $1.75 billion.. In addition, the water engineers are substantially talking up the amount of land that they would use for the Everglades preservation scheme : that is now 65 to 95 000 acres, perhaps three times the earlier estimates.

The new terms include a lease-back of the land for $50 per acre per year, for a period covering seven crop cycles.

Competition
A major twist in the story came at the end of the month when the Lawrence Group, a Tennessee farming company which has tried to buy USSC before, announced an offer to buy the company as a going concern at $300 per share plus taking on the company’s roughly $700 million debt. That is about the same price that the state is prepared to pay. The significance of the bid seems to be that it was the Lawrence Group that sparked the current court cases between shareholders and company when it emerged that the company had rejected a previous bid that would have been beneficial to the shareholders.

Price Scrutiny
Meanwhile, it being a public deal, the price being paid is coming under more and more scrutiny. At one level, a valuation commissioned by the state has said that if the entire company was being purchased then a fair price would be only about $1.3 billion – less than the state is prepared to pay for just the land. At another level, people are questioning the ~ $400 million differential between the original deal price and the current deal price when they estimate the assets to be worth at least $600 million.

Land Contamination
Finally, the South Florida Water Management District [the state authority which would implement the purchase and all of the changes] has released a report into the condition of the USSC land and the cost of decontaminating it of the heavy metals and pesticide residues which have accumulated over the decades. The report says that it will cost anywhere between $18 and 119 million with a most probable figure of $44 million.

BRITISH SUGAR WINS EBRO PULEVA

ABF, owner of British Sugar, has reached agreement in principle to buy the sugar division of Ebro Puleva, the Spanish food conglomerate. The agreed price is €385m [$500 million] some eight times the 2007 earnings but ABF shareholders don’t seem to happy with the share price losing 5% on the news.

NANTES REFINERY

Tereos, the French sugar company, has confirmed the much repeated rumour that it will close its 600 t/d RSO Nantes refinery next year. That will leave France with just the St Louis refinery in Marseille, a company owned by Sudzucker.

EU LARGEST IMPORTER

The EU is predicted to become the world’s largest sugar importer in the current year, according to ISO, importing over 1 million tons more than Russia. The switch seems to result from a combination of the change in the EU sugar regime and Russia’s inability to finance the purchase of raws in the current economic climate.

The ISO estimate of 4.25 million tons is more or less in agreement with that of the USDA figure of 4 million tons released in its recent half year report. That shows that the EU is close to achieving its 6 million ton reduction target. A copy of the full report is available on this web domain.

ETHIOPIA

We reported in June that the Tendaho project was somehow delayed. It now turns out that the problem is an internal Indian squabble between two of the country’s contractors Utam and Walchand. The result is that the Indian Exim Bank has suspended the project, leaving the Ethiopians without finance, at least for now.

KENYA PRIVATISATION

Kenya is starting out on the privatisation road again [it privatised Mumias about four years ago]. This time it seems driven by the desire to be rid of the rump of the industry by the time that the COMESA sugar agreement comes into force and the country is flooded with cheap sugar from the Sudan and Ethiopia. Sony, Nzoia and Muhoroni are reported to be the first three factories planned to be privatised but none perform well and Muhoroni has been in receivership for many years while Nzoia has debts in excess of $300 million.

SAVANNAH

The Savannah refinery, devastated by the February explosion that killed 14 people in total, has started production again, albeit only liquid sugar – presumably from melting whites. However, the refinery has received its first new delivery of raw sugar and is expected to start melting in early 2009.

Meanwhile the legal wrangles over the incident continue. This month’s new has been dominated by a story about a lawyer for the families of some of the deceased wanting to subpoena a Georgia Senator who, he believes may have tried to distort the course of justice on behalf of the company.

JAMAICA

The sale of JSC to Infinity Bio-Energy [reported here several times here during the year] still seems nowhere near completion even though it was scheduled for the end of September when, importantly, the workers were promised their redundancy payments. The Government is keeping them placated for now by pointing out that it is EU money which will be paying them.

TRINIDAD

The purchase of St Madeleine by a farmers cooperative, reported here in October, seems to have hit a snag which is somehow related to funding because the sale agreement specifically excludes the assets being used as collateral for further funding : watch this space.

SKELDON II PRODUCES FIRST SUGAR

Following last month’s item about the start of commissioning, the new Skeldon II factory produced its first sugar early in November, albeit with a terrible yield : the Chinese contractor report that 30 tons of A sugar were made from 50 m of massecuite.

INDIA

The crop situation in India is clearly not good : Maharashtra state has announced that there is a 50% reduction in cane availability. It is therefore contemplating halving the crushing permits which will mean that 50 [presumably small?] factories will not operate this year.

AUSTRALIA

The current year’s crop, at 4.4 million tons of sugar, is expected to be about 10% lower than the last one. Although part of the problem is blamed on weather in the Mackay region, there is also an element of limiting fertiliser application due to its high price.

MONSANTO BUYS BREEDING COMPANY

Monsanto, the major agrochemicals company [it calls itself an ‘agricultural’ company] has purchased Brazilian cane breeder Aly Participacoes Ltda for $290 million. Most of the interest seems to be in the applied genomics division which could be re-focused to apply its transgenic technology to a range of crops.

MORE PLASTICS FROM CANE

The University of Queensland’s CRC SIIB [its too long : look it up for yourself!] seems to focus on cane plant breeding. It argues that sugarcane’s high photosynthetic efficiency makes it an idea ‘factory’ for the production of specialist chemicals. One of its latest patents is for a transgenic cane which secretes polyhydroxybutyrate [PHB], a biodegradable plastic.





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