Joint Venture Agreement between Cosan and Shell São Paulo August 25th, 2010
Disclaimer This presentation contains estimates and forward-looking statements regarding our strategy and opportunities for future growth. Such information is mainly based on our current expectations and estimates or projections of future events and trends, which affect or may affect our business and results of operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us. Our estimates and forward-looking statements may be influenced by the following factors, among others: (1) general economic, political, demographic and business conditions in Brazil and particularly in the geographic markets we serve; (2) inflation, depreciation and devaluation of the real; (3) competitive developments in the ethanol and sugar industries; (4) our ability to implement our capital expenditure plan, including our ability to arrange financing when required and on reasonable terms; (5) our ability to compete and conduct our businesses in the future; (6) changes in customer demand; (7) changes in our businesses; (8) government interventions resulting in changes in the economy, taxes, rates or regulatory environment; and (9) other factors that may affect our financial condition, liquidity and results of our operations. The words believe, may, will, estimate, continue, anticipate, intend, expect and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements speak only as of the date they were made and we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Our future results may differ materially from those expressed in these estimates and forwardlooking statements. In light of the risks and uncertainties described above the estimates and forward-looking statements discussed in this presentation might not occur and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, inclusive, but not limited to the factors mentioned above. Because of these uncertainties you should not make any investment decision based on these estimates and forward-looking statements. 2
Agenda 1. Deal Rationale 2. Transaction Overview 3. Governance 4. Next Steps 3
Deal Rationale Association of two companies which are leaders in their respective core businesses Cosan: world s leading producer of sugar and sugarcane ethanol Shell: global leading energy and petrochemical player Creation of a Joint Venture of unparalleled growth potential in sugar, biofuels and cogeneration Joint Venture to result in a consolidated leading position in the fuel distribution business in Brazil Biomass technology development through Shell s contribution of its participation at IOGEN and CODEXIS should lead the JV to a unique position in sugarcane ethanol Shared values and a strong commitment to sustainable development Substantial value creation from synergies 4
Agenda 1. Deal Rationale 2. Transaction Overview 3. Governance 4. Next Steps 5
JV Capital Structure 50% Management 50% Company JV s face to the market Facilitate the building of a unified corporate culture Cosan - 51% 49% 49% Shell 51% Sugar, Ethanol, Cogeneration & Biotechnology Co Downstream Co Production of sugar and ethanol Co-generation activities Technology activities: Iogen & Codexis Supply, distribution and sale of fuels in Brazil. Network of about 4,500 fuel stations throughout Brazil - third largest fuels retailer in the country as of 2009, with strong potential for future growth 6
Contributed Assets of Cosan and Shell Cosan Shell All of its sugar and ethanol mills; All of its energy co-generation business; Fuel distribution and retail businesses; Ethanol logistics assets; Net debt of approximately US$2.524 million; Additional debt of R$500 million from BNDES used for capital expenditures relating to the sugar and ethanol business; US$25 million in land; Contingent contributions from possible future gains at the proposed Joint Venture, estimated to be US$300 million, to be received by Cosan over a period of approximately 5 years. Brazilian fuel distribution business; Retail businesses (including aviation); Equity stakes in Iogen and Codexis involved in the research and development of biomass fuel, including ethanol; A cash contribution of approximately US$1,600 million: Cash of US$1,275 million over a period of two years, equivalent to US$1,625 million net of payments related to the brand licensing for a period of 10 years; and Other cash payments of approximately US$325 million in relation to other ancillary arrangements between Shell and the JV.
Cosan Assets not contributed to the JV Float CZZ JV Outside JV JV Downstream JV S&E Radar Rumo Lubricants Other Assets Cosan would retain and therefore, would not contribute to the proposed Joint Venture: Lubricants manufacturing and marketing business; Sugar logistics business carried out by Rumo Logística S.A.; Land prospecting and development business carried out by Radar Propriedades Agrícolas S.A.; Food retail brands such as Da Barra and União ; Sugar retail brands which would, at Cosan s election, either be used in a retail sugar business to be operated by Cosan (to the extent negotiated and agreed with Shell before Closing) or licensed to the proposed Joint Venture on a fair market value basis; The right to conduct its own sugar trading business globally; Agriculture land, except US$25 million contributed to the proposed JV.
Scope of the Joint Venture The production, sale and trading of Sugar in Brazil and globally; Distribution, commercialization and retail sale of fuel products and sale of aviation fuels in Brazil; The production of ethanol globally, the sale within any country in which the JV has production, and the trading in Brazil and globally subject to compliance with a Global Ethanol Trading Agreement with Shell; Production and sale of electricity, steam and other cogeneration by-products in Brazil; The further development and licensing of Sugar and Ethanol production-related technology; Investment in, and the operation of, Sugar-related or ethanol-related logistics infrastructure within Brazil and within any other countries in which the JV produces Sugar and/or ethanol; and Research and development on improvements to the Iogen Energy technology. Cosan will be able to: Trade Sugar outside of Brazil; Engage, outside of Brazil, in the retail sugar business. 9
Agenda 1. Deal Rationale 2. Transaction Overview 3. Governance 4. Next Steps 10
Governance Three Decision levels Shareholders Representative Mr. Silveira Mello has a bachelor s degree in Mechanical Production Engineering from the University of São Paulo. In 1974, at the age of 24 years old, he became the CFO of S.A. Indústrias Votorantim, until 1980, when he assumed the position of vice-president of Pedro Ometto S.A. Participações e Administração. In 1988, Mr. Silveira Mello joined Cosan, leading its expansion over the years. Mr. Williams joined Shell in 1979 as a research physicist in US, taking positions as Engineering Manager, Operations Manager, Head of EP Staff Planning and Head of Downstream Strategy, VP Transportation for Equilon Enterprises LLC, the Shell and Texaco joint venture in the USA until in 2009 he became Downstream Director for Shell worldwide. Executive Body Mr. Vasco Dias will be the CEO of the JV, reporting to its Supervisory Board. Vasco joined Shell in 1979, having occupied positions of increasing responsibility in Brazil and abroad throughout his career. He participated, in The Hague, in the team that led the global restructuring of the Shell Group. He returned to Brazil in 1997 to hold the position of CEO of Shell Gas and, as of 2005, Retail Vice President for Latin America and Country Chair of Shell in Brazil. Shareholders Representative Rubens O. Silveira Mello Supervisory Board Rubens O. Silveira Mello Chairman TBD TBD Mark Williams TBD TBD TBD Mr. Pedro Mizutani, has 27 years of experience in the sugar & energy sector and initiated his professional career in Cosan in the 1980's, having taken positions of increasing responsibility up to his current one. He is a member of the Board of Directors of UNICA (Sugar Cane Industry Association) and professor of Fundação Getúlio Vargas's post graduation course; Executive Body Vasco Dias JV CEO Mr. Luis Henrique Guimarães joined Shell in 1987 and worked in several positions in the lubricants and retail businesses in Brazil and abroad, in London. In 2007 he took the position of Shell's Chief Marketing Officer for Lubricants in North America, based in Houston; Mr. Leonardo Gadotti Filho, joined Esso Brasileira in 1980 as an intern and took positions of increasing responsibility in Brazil and abroad. He is currently the President of Sindicom (Distribution Companies Association) and board member of ETCO and IBP; Mr. Carlos Alberto Piotrowski, joined Esso Brasileira in 1984 and worked in different areas in Brazil and abroad, having led the transition of the Latin America area of fuels distribution during the Exxon-Mobil merge. He returned to the country in 2007 to take the position of President of Esso Brasileira from 2007 until 2009, when it became Cosan Combustíveis e Lubrificantes. 11 Pedro Isamu Mizutani Sugar, Ethanol & Cogen Leonardo Gadotti Supply & Distribution Carlos Piotrowski CAN TBD CFO Luiz H. Guimarães Fuel & Aviation Evandro Gueires Sustaining Kilda Magalhães Human Resources Paulo Lopes Legal Counsel
Options and Lock-ups Lock-up from Year 0 to Year 6 6 months Lock-up 6 months Lock-up Year 0 Year 5 Year 10 Year 15 Closing Year 10 Call option by Shell Mutual Call/Put Options Shell will have the right to call half or all of Cosan s JV shares Year 15 options Shell has the right to call all of Cosan s JV shares; If Shell has not exercised the year 10 of year 15 calls, Cosan has the right to call all of Shell s JV shares or Shell s shares in the upstream JV, depending on whether Shell has elected to retain its stake in the downstream JV; If Shell purchased 50% of Cosan s JV shares at year 10, but it does not purchase Cosan s remaining JV shares at year 15, Cosan has the right to put to Shell all of its remaining JV shares; If Shell purchased 50% of Cosan s JV shares at year 10, but it does not purchase Cosan s remaining shares at year 15, Cosan has the right to call from Shell the JV shares it sold to Shell at year 10 at a discount. Lock-Up periods Subject to certain limited exceptions (including intra-group transfers and sales of non-controlling interests in (Cosan/CZZ), ROSM, Cosan, CZZ and Shell may not transfer (directly or indirectly) their JV interests (or the interests in Cosan or CZZ) during: the period from the closing to the 6th anniversary of the closing the six month period prior to the 10th anniversary of the closing the six month period prior to the 15th anniversary of the closing 12
Qualified Lock-ups and RoFRs Controlling interests in Cosan and Cosan Limited may be sold on an unsolicited basis after the 6th anniversary of the Closing (but before the 9 year and six month anniversary of the Closing) and between the 10th and the 15th anniversaries of the Closing after the lapse of the 10 year call option; provided that: Shell will have a right of first refusal with respect to the proposed transaction on the same terms offered by the 3rd party offer; Shell will be granted the right to equalize the voting interests in the Sugar and Ethanol JV for a nominal price; and Shell will be granted the right to acquire all of the Cosan interests in the Joint Venture for their fair market value to be determined based on a customary appraisal and dispute resolution process. If either the Cosan or ROSM interest in the is sold to an third party, immediately upon such sale: Role and responsibilities of the Chairperson limited to those of chairing the meetings, and managing the affairs, of the Supervisory Board, together with any other roles and responsibilities required by Brazilian law Shell will have the right to appoint, for an initial three year term, the Chairperson; and will alternate the appointment with the third party 13
Agenda 1. Deal Rationale 2. Transaction Overview 3. Governance 4. Next Steps 14
Next Steps Initially, Cosan and Shell will continue to act as independent companies and competitors in the downstream until the approval of the European Commission Both parties will now focus on securing the required regulatory approvals During a Transition Period, Cosan and Shell will take legal actions in order to form the JVs and will work towards the integration of their systems Closing of the JV: Cosan and Shell no longer compete, starting to operate as one company The formation of the proposed Joint Venture is expected to occur in the first half of 2011 At this point, the proposed JV will be proportionally consolidated according to BRGAAP / IFRS rules.
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