INTERVIEW-Gevo seeks partners to enter Brazil ethanol sector

By Inae Riveras

SAO PAULO, Aug 1 (Reuters) - Gevo Inc, a U.S. developer of second-generation biofuels, wants to sell in Brazil a new technology that can turn cane-based ethanol into a more expensive biofuel -- potentially boosting mills' profits, an executive said late Thursday.

With minor equipment changes, the technology allows ethanol mills to produce isobutanol, a biofuel that has an energy content equivalent to conventional gasoline and therefore a higher value than ethanol.

Funded by Khosla Ventures and Virgin Fuels, the company plans to ship Brazilian isobutanol to the United States, where the product can replace a gasoline additive whose usage is mandatory.

"The business model is to retrofit ethanol plants down here at a very low cost and instead of producing ethanol they would produce isobutanol, which can be sold for a premium over gasoline," said Gevo vice president Brett Lund.

The company estimates the necessary investment at mills at 0.10 real (US6.5 cents) per liter.

An extra benefit for mills is that exports of isobutanol to the United States are tariff free. This would be a loophole for Brazilian producers, who face a 54-cent-per-gallon import tariff in direct sales to the U.S. market.

"We've found a way to export Brazilian sugar in a different shape because it doesn't matter if it's ethanol or butanol, it can go to the United States and Europe and compete (in equal conditions with local ethanol)," said Dimitri Pauwels, adviser for Virgin in Latin America.

This would be Richard Branson's first step into the Brazilian ethanol sector. The billionaire British entrepreneur and head of Virgin Group has publicly defended the advantages of the biofuel over corn-based ethanol, which is less energy efficient and more costly.