Royal Dutch Shell and Brazil's Cosan ethanol producer announced plans Monday to create a $12 billion joint venture for ethanol production and fuel distribution in Latin America's largest nation.
Under a non-binding memorandum of understanding, the two companies agreed to contribute Brazilian assets to the venture, and a division of Amsterdam-based Royal Dutch Shell PLC would contribute $1.6 billion in cash over the next two years. Cosan's shares soared on the news.
A statement released by Shell and Sao Paulo-based Cosan SA said the joint venture will have annual production of 2 billion liters of ethanol annually.
Brazil is the world's largest ethanol exporter and there is huge demand domestically because most new cars work on ethanol, gasoline or any combination of the two fuels. Brazilian ethanol is made from sugarcane.
Cosan's American depository shares on the New York Stock Exchange jumped 9.2 percent after the news was announced, or 72 cents to $8.52 per share. Shell's American depository shares rose 1.2 percent, or 64 cents to $54.03 each.
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