Daniel Englander
Brenco’s IPO Potential Boosted by Low Average Cost of Labor April 29, 2008 at 11:46 AM
Philippe Reichstul, CEO of Brenco, said yesterday his company will seek an IPO worth $3.2 billion by the end of 2008 or beginning of 2009. The IPO proceeds will help the Brazilian ethanol company expand its refining base to 10 ethanol plants by 2015, with an annual production capacity of around 1 billion gallons. Brenco is at work now constructing four ethanol refineries and a 650-mile pipeline at a combined cost of roughly $2 billion, which makes it one of Brazil’s leading ethanol companies. That Reichstul was once the CEO of Petrobras probably doesn’t hurt the company’s chances either.
Brenco also benefits from some pretty solid fundamentals. One particularly bright spot that should make investors smile is that the company’s average labor cost hovers close to zero. In February 2007, Brenco was the target of a Brazilian Labor Ministry raid, which discovered workers “subjected to degrading, slave-like conditions.” In one housing unit with “1400 workers, there were found exposed electric wire,” while another housing unit had “1500 laborers working in degrading living conditions and residing in hazardous installations.” Workers at other locations “complained they were suffering from hunger and cold, and all of the locations were overcrowded and with terrible sanitary conditions.” And on and on and on. Brenco is currently the subject of three separate public civil suits brought by the Brazil’s public prosecutor.
Well, at least Brenco doesn’t have any ties to former presidents, current presidential candidates, big name VCs, or leading CEOs… oh wait. What’s that you say? Not only has Brenco received $200 million in VC from Vinod Khosla, but it’s also got backing from Ron Burkle’s Yucaipa Company, including investments from Bill and Hillary Clinton and AOL founder Steve Case. And, just to get a sense of what it might be like to work at Khosla Ventures, Vinod himself responded to the Brenco allegations by saying “we have a very professional management team.” But hey, this particular crew seems to have a knack for getting into ethanol-related trouble.
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