State-run oil giant Petrobras (PETR4.SA)(PBR.N) and General Electric Co (GE.N), which helped design the plant, are betting that increased use of ethanol generation by green-conscious countries will boost demand for the product.

Brazil, the top global ethanol exporter, is already in talks with Japan to develop biofuels power generation there.

“We have great expectations to show the viability and economy of generating electricity from … an alternative feedstock to fossil fuels,” Maria das Gracas Foster, head of Petrobras’ natural gas division, said.

Petrobras with the help of GE upgraded the 87-megawatt power plant to switch between running on natural gas or ethanol instantaneously. Brazil primarily relies on hydroelectric power but needs backup thermoelectric generation during the dry season.

John Ingham, Latin America Products Director for GE, said tests showed switching the plant to ethanol reduced carbon dioxide emissions without lowering energy output.

GE has around 770 turbines like those used in the Juiz de Fora plant, including many in Japan, that could be converted to run on ethanol, he said.

“A plant like that consumes a lot of ethanol, so it has to be in a place that makes sense (such as) places that have no access to gas, like Japan, some islands, or places that depend heavily on diesel like the Amazon region,” he said.

Brazil is expected to produce a record 27.8 billion liters of ethanol in the 2009/2010 season. It began its biofuels program 30 years ago and now mandates a minimum 20 percent of ethanol in gasoline.

Petrobras itself is only starting to enter the ethanol market. Brazil’s ethanol production comes from sugar cane milled by companies such as Cosan (CZZ.N) or commodities giants including Cargill Inc [CARG.UL], Bunge (BG.N) and ADM Co (ADM.N).

Domestic demand for ethanol is being driven by the popularity of the flex-fuel car technology that was launched in 2003 and now makes up around 90 percent of new vehicle sales. (Writing by Brian Ellsworth; Editing by Marguerita Choy).

By Denise Luna

Source: Reuters

Moema Par is a holding company that owns one sugarcane mill and has ownership in five others. Together the six mills, known as the Moema Group, have the capacity to crush 15.4 metric tons. This agreement, which is structured as a share exchange worth approximately $896 million, gives Bunge 60 percent effective share of the total capacity.

“This transaction fulfills Bunge’s strategic goal of building a large-scale, fully integrated business in sugar and bioenergy,” stated Alberto Weisser, Chairman and CEO of Bunge Limited. “It adds significant scale to our current milling operations and enables us to vary production among multiple sugar and ethanol products, according to market conditions. The Moema Group cluster is also strategically located near large domestic markets in Brazil and has excellent access to export logistics systems. All of these strengths make it a perfect fit with our global trading and marketing operations.”

The Moema Group cluster is located on the border of São Paulo and Minas Gerais states, the two largest domestic ethanol markets in Brazil. According to Bunge, the mills benefit from cost savings due to their cluster configuration, and have favorable road and rail access to three of Brazil’s largest export ports (Santos, Paranagua and Vitoria). The mills can produce both raw and crystal sugar, as well as hydrous and anhydrous ethanol. In addition, the mills have co-generation facilities, are self-sustaining in terms of energy requirements and sell excess power to the grid. The majority of the cluster’s sugarcane is harvested mechanically, which is now law in São Paulo.

According to Bunge, they may enter into agreements to secure some of all of the remaining interests in the mills that comprise the Moema Group in the next few weeks.

Source: Domestic Fuel