Oct 31, 2001

Streamlining Brazil's Chemicals Ownership.
Copene Consolidation is First Step

THE RESTRUCTURING OF Brazil's domestic petrochemical sector took a major step forward recently when
Odebrecht and Mariani assumed control of Brazil's largest cracker, Copene (Camacari), through their purchase of government-owned holding company Companhia Nordeste de Participaciao (Conepar) . Odebrecht and Mariani, which each already owned a stake in Copene, bought Conepar for R785 million ($320 million).

Brazil's Central Bank sold Economico group's 63.82% stake in Conepar, a company which has a 23.69% share in Norquisa, a holding company with a 58.4% control stake in Copene. The sale was an auction in which Odebrecht and Mariani were the sole bidders.

Odebrecht already had a
16.02% stake in Norquisa, through its PVC-producing Trikem subsidiary. Mariani already had a 16.09% stake in Norquisa via its Pronor holding company.

The long-anticipated auction of Conepar was a key step in reducing the number of owners at Brazil's three crackers--Copene, Copesul (Triunfo), and Petroquimica Uniao (PqU; Sao Paulo). Odebrecht also owns a controlling stake in Copesul. Having fewer owners should mean fewer management disputes and conflicts of interest, local industry leaders say.

Odebrecht and Mariani will consolidate their assets at Camacari into a new company,
Braskem. Assets include the controlling stake in Copene, Odebrecht's chemicals division OPP Petroquimica, as well as affiliates of Odebrecht and Mariani including vinyls company Trikem, polyethylene terephthalate (PET) maker Proppet, caprolactam producer Nitrocarbono, and polyethylene (PE) producer Polialden.

Consolidating the assets into Braskem will save $500 million over the next 10 years, says Osvaldo Deiro, v.p./technology at OPP Petroquimica. An estimated $300 million of that total will come from savings on the 3.65% tax the Brazilian government charges for every transaction between separate companies operating at Camacari. The remainder will come from streamlining administrative and operational functions, says Odebrecht, and union leaders fear job cuts are on the horizon.

Analysts say the $500 million in cost savings is optimistic, hut it is needed to help pay down Odebrecht's more than $1 billion in debt. Odebrecht and Mariani used loans to pay for the Conepar purchase, exacerbating the debt burden at Odebrecht's petrochemical and vinyls divisions.

"To achieve anywhere dose to the kind of savings it needs, Odebrecht must consolidate those assets today," says Luiz Laydner, oil and petrochemical analyst at investment bank Pactual (Rio de Janeiro). "Odebrecht is running against the clock because it has a large amount of debt and reduced margins," says Laydner. "At the same time, it will not be easy to consolidate all the companies because minority shareholders--some of which are public companies--will demand a premium be paid on their stock."

Critics say the Odebrecht-Mariani deal was good for Odebrecht but bad for Copene. "Odebrecht had a very high debt, and now it has control of a company that generates a lot of cash," an industry observer says. "But for Copene itself, it was not such a good deal because it now has much more debt." The first company to be incorporated into Braskem was PET producer Proppet, an Odebrecht-Mariani joint venture.

The Copene sale to Odebrecht and Mariani took many turns and at least two years to complete. Analysts wam that streamlining management at Brazil's other petrochemical production centers, PqU and Copesul, also will take time. Local executives expect PqU, which produces 500,000 m.t./year of ethylene and is Brazil's smallest cracker, to merge with the gas-fed ethylene complex that will be built by Rio Polimeros at Duque de Caxias. Rio Polimeros, a consortium of Unipar, Suzano, Petrobras, and national economic development bank BNDES (Rio de Janeiro), will build a 500,000-m.t./year ethylene cracker and a 500,000-m.t./year PE unit. Unipar and Suzano are also partners in PqU.

Platts 2003/8/13

Braskem CEO envisions consolidated industry, few majors

The future of Brazil's petrochemical industry would likely be a consolidated one controlled by two or three major groups, Braskem CEO Jose Carlos Grubisich told Platts in an interview Tuesday.
Of these rulers of a consolidated market, one player would be Braskem, and the others would likely be the Suzano and/or Unipar groups. "In the next five to ten years, I see
two or, at most, three petrochemical groups emerging as part of a consolidated and restructured petrochemical sector.

Braskem, controlled by the Odebrecht and Mariani groups, owns Brazil's largest cracker at the Camacari petchem complex in northeastern Bahia state and various Camacari polymer producers.
Suzano has a 50% stake in Polibrasil Resins, Brazil's major PP producer, a 35% stake in PE major Politeno and a 20% stake in synthetic rubber producer Petroflex.
Unipar owns Polietilenos Unio, a major PE producer, and has the largest (37.5%) stake in the Petroquimica Uniao, Brazil's No. 3 cracker.

Brazil's three crackers--Copene, Copesul (Triunfo), and Petroquimica Uniao (PqU; Sao Paulo).

Odebrecht also owns a controlling stake in Copesul.


Classified as a large-size cracker, Copesul produces about 40% of ethylene consumed in Brazil, nameplate capacity of 1.135 million tons/year. Besides ethylene, its main product, Copesul produces propylene, butadiene, benzene, toluene, xylenes, MTBE, butene-1, propane, and others, a total of 3 million tons per year of petrochemicals. More than 80% are consumed in South Petrochemical Complex. Remaining products are sold to other Brazilian states or exported.

World Bank

Brazil: Triunfo Petrochemical Complex Expansion

IFC organized the financing for a major expansion of this world scale petrochemical complex in southern Brazil.
IFC raised a total of US$ 490 million from a combination of its own funds and syndicated loans with major international Banks. The Truinfo petrochemical complex is now one of the largest, most modern complexes of its type, in the world.

IFC' s investments were:
COPESUL (Compania Petroquimica du Sul) US $220 million funding for the:

Expansion of the naphtha based ethylene cracker capacity from 685,000 tonnes/year to 1,135,000 tonnes /year of ethylene, with corresponding increases in propylene and aromatics capacity.
The expansion also included: a new high purity benzene unit, expansion of the MTBE plant and a site wide optimization of steam and utility services.

COPESUL's expansion allowed the further development of downstream plants in the Triunfo complex. These expansions were also financed by IFC.

IPIRANGA (Ipiranga Petroquimica SA) $190 million

COPESUL's increased ethylene and propylene production allowed Ipiranga to build :
A new 150,000 tonnes/year " swing " plant to produce an extended range of both HDPE and LLDPE polyethylene resins and a new 150,000 tonnes/year polypropylene resins plant.
These new plants enabled Ipiranga to widen its range of polyethylene resins and to add polypropylene resins to its extended product mix.

INNOVA (INNOVA SA) $80 million

The expansion of COPESUL's ethylene production, coupled with the production of high purity benzene provided the necessary feed stocks for the economic production of styrene and polystyrene resins at Triunfo.
INNOVA, a new company, was established to rehabilitate an existing ethyl benzene plant and build new styrene and polystyrene plants. Innova now produces:
190,000 tonnes/year of ethyl benzene, 180,000 tonnes/year of styrene and combined total of 120,000 tonnes/year of General Purpose (GPPS) and High Impact (HIPS) grades of polystyrene.

Petroquimica Uniao S.A (PQU)

Petroquimica Uniao S.A. is the central raw materials manufacturing plant of the Sao Paulo petrochemical complex. It was the first company of its kind in the country, and started production in 1972. Since then, it has been growing in size, quality and variety of products for the domestic market and export.

PQU's plant nowadays occupies an area of 741 thousand square meters in the townships of Santo Andre and Maua, in Greater Sao Paulo, manufacturing
half a million tons of ethylene and over one million tons of petrochemical products per year, in addition to the Unilene Resins.