UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

CORN PRODUCTS INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		22-3514823
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer
		Identification No.)
5 Westbrook Corporate Center, Westchester, Illinois		60154
(Address of Principal Executive Offices)		(Zip Code)
Registrant’s telephone number, including area code (708) 551-2600

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $.01 par value per share		New York Stock Exchange
Preferred Stock Purchase Rights		New York Stock Exchange
(currently traded with Common Stock)
Securities registered pursuant to Section 12(g) of the Act:

NONE

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

     Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

     Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

     Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     The aggregate market value of the Registrant’s voting stock held by non-affiliates of the Registrant (based upon the per share closing price of $23.76 on June 30, 2005, and, for the purpose of this calculation only, the assumption that all of the Registrant’s directors and executive officers are affiliates) was approximately $1,740,052,000.

     The number of shares outstanding of the Registrant’s Common Stock, par value $.01 per share, as of February 28, 2006, was 73,972,032.

Documents Incorporated by Reference:

Information required by Part I (Items 1 and 2), Part II (Items 5, 6, 7, 7A and 8) and Part IV (Item 15(a)(1)) of this document is incorporated by reference to Exhibit 13.1 included as part of this 2005 Annual Report on Form 10-K.

Information required by Part III (Items 10, 11, 12, 13 and 14) of this document is incorporated by reference to certain portions of the Registrant’s definitive Proxy Statement distributed in connection with its 2006 Annual Meeting of Stockholders.

 

 

PART I.

ITEM 1. BUSINESS

The Company

     Corn Products International, Inc., was incorporated as a Delaware corporation in 1997 and its common stock is traded on the New York Stock Exchange. Corn Products International, Inc., together with its subsidiaries (the “Company” or “Corn Products”), manufactures and sells a number of ingredients to a wide variety of food and industrial customers.

     The Company is a leading regional producer of starches, liquid sweeteners and other ingredients around the world. It is one of the world’s largest corn refiners and is the leading corn refiner in South America.

     The Company had consolidated net sales of $2.36 billion in 2005. Approximately 60 percent of the Company’s 2005 revenues were provided from its North American operations, with the remainder coming from its South America and Asia/Africa operations.

     The Company’s products are derived primarily from the processing of corn and other starch-based materials, such as tapioca. Corn refining is a capital-intensive, two-step process that involves the wet milling and processing of corn. During the front-end process, corn is steeped in a water-based solution and separated into starch and other co-products such as animal feed and germ. The starch is then either dried for sale or further processed to make sweeteners and other ingredients that serve the particular needs of various industries.

     The Company’s sweetener products include high fructose corn syrup (“HFCS”), glucose corn syrups, high maltose corn syrups, caramel color, dextrose, maltodextrins and glucose and corn syrup solids. The Company’s starch-based products include both industrial and food-grade starches.

     The Company supplies a broad range of customers in many diverse industries around the world, including the food and beverage, pharmaceutical, paper products, corrugated, laminated paper, textile and brewing industries, as well as the global animal feed markets.

     The Company believes its local approach to production and service, which focuses on local management and control of its worldwide operations, is of high value to its customers.

Products

     Sweetener Products. The Company’s sweetener products represented approximately 53 percent, 52 percent and 54 percent of the Company’s net sales for 2005, 2004 and 2003, respectively.

     High Fructose Corn Syrup: The Company primarily produces two types of high fructose corn syrup: (i) HFCS-55, which is mainly used as a sweetener in soft drinks; and (ii) HFCS-42, which is used as a sweetener in various consumer products such as fruit-flavored beverages, yeast-raised breads, rolls, dough, ready-to-eat cakes, yogurt and ice cream.

     Glucose Corn Syrups: Corn syrups are fundamental ingredients widely used in food products such as baked goods, snack foods, beverages, canned fruits, condiments, candy and other sweets, dairy products, ice cream, jams and jellies, prepared mixes and table syrups. In many markets, the Company offers corn syrups that are manufactured through an ion exchange process, a method that creates the highest quality, purest corn syrups.

     High Maltose Corn Syrup: This special type of glucose syrup has a unique carbohydrate profile, making it ideal for use as a source of fermentable sugars in brewing beers. High maltose corn syrups are also used in the production of confections, canning and some other food processing applications.

     Dextrose: The Company was granted the first US patent for dextrose in 1923. The Company currently produces dextrose products that are grouped in three different categories — monohydrate, anhydrous and specialty. Monohydrate dextrose is used across the food industry in many of the same products as glucose corn syrups, especially in confectionery applications. Anhydrous dextrose is used to make solutions for intravenous injection and other pharmaceutical applications, as well as some specialty food applications. Specialty dextrose products are used in a wide range of applications, from confectionery tableting to dry mixes to carriers for high intensity sweeteners. Dextrose also has a wide range of industrial applications, including use in wall board and production of biodegradable surfactants (surface agents), humectants (moisture agents), and as the base for fermentation products including vitamins, organic acids, amino acids and alcohol.

     Maltodextrins and Glucose and Corn Syrup Solids: These products have a multitude of food applications, including formulations where liquid corn syrups cannot be used. Maltodextrins are resistant to browning, provide excellent solubility, have a low hydroscopicity (do not retain moisture), and are ideal for their carrier/bulking properties. Corn syrup solids have a bland flavor, remain clear in solution, and are easy to handle and also provide bluing properties.

     Starch Products. Starch products represented approximately 23 percent, 22 percent and 21 percent of the Company’s net sales for 2005, 2004 and 2003, respectively. Starches are an important component in a wide range of processed foods, where they are used particularly as a thickener and binder. Cornstarch is also sold to cornstarch packers for sale to consumers. Starches are also used in paper production to produce a smooth surface for printed communications and to improve strength in today’s recycled papers. In the corrugating industry, starches are used to produce high quality adhesives for the production of shipping containers, display board and other corrugated applications. The textile industry has successfully used starches for over a century to provide size and finishes for manufactured products. Industrial starches are used in the production of construction materials, adhesives, pharmaceuticals and cosmetics, as well as in mining, water filtration and oil and gas drilling.

     Co-Products and others. Co-products and others accounted for 24 percent, 26 percent and 25 percent of the Company’s net sales for 2005, 2004 and 2003, respectively. Refined corn oil (from germ) is sold to packers of cooking oil and to producers of margarine, salad dressings, shortening, mayonnaise and other foods. Corn gluten feed is sold as animal feed. Corn gluten meal is sold as high protein feed for chickens, pet food and aquaculture primarily, and steepwater is sold as an additive for animal feed.

Geographic Scope and Operations

     The Company operates in one business segment, corn refining, and is managed on a geographic regional basis. The business includes regional operations in North America, South America and Asia/Africa. In 2005, approximately 60 percent of the Company’s net sales were derived from operations in North America, while South America and Asia/Africa represented approximately 26 percent and 14 percent, respectively. See Note 15 of the Notes to the Consolidated Financial Statements entitled “Segment Information,” included herewith as part of Exhibit 13.1, for certain financial information with respect to geographic areas.

     The Company’s North America region consists of operations in the US, Canada and Mexico. The region’s facilities include 9 plants producing regular and modified starches, dextrose, high fructose, glucose and high maltose corn syrups and corn syrup solids, dextrins and maltodextrins, caramel color and sorbitol. The Company’s plant in Bedford Park, Illinois is a major supplier of starch and dextrose products for the Company’s US and export customers. The Company’s other US plants in Winston-Salem, North Carolina and Stockton, California enjoy strong market shares in their local areas, as do the Company’s Canadian plants in Cardinal, London and Port Colborne, Ontario. The Winston-Salem, Stockton, Port Colborne and London plants primarily produce high fructose corn syrup. The Company is the largest corn refiner in Mexico with plants in Guadalajara, Mexico City and San Juan del Rio.

     The Company is the largest corn refiner in South America, with strong market shares in Argentina, Brazil, Chile and Colombia. The Company’s South America region includes 11 plants that produce regular, modified, waxy and tapioca starches, high fructose and high maltose corn syrups and corn syrup solids, dextrins and maltodextrins, dextrose, caramel color, sorbitol and vegetable adhesives.

     The Company’s Asia/Africa region consists of corn and tapioca refining operations in South Korea, Pakistan, Thailand, Kenya and China. The region’s facilities include 7 plants that produce modified, regular, waxy and tapioca starches, dextrins, glucose, dextrose, high fructose corn syrups and caramel color.

     In addition to the operations in which it engages directly, the Company has strategic alliances through technical license agreements with companies in South Africa and Venezuela. As a group, the Company’s strategic alliance partners produce high fructose, glucose and high maltose syrups (both corn and tapioca), regular, modified, waxy and tapioca starches, dextrose and dextrins, maltodextrins and caramel color. These products have leading positions in many of their target markets.

Competition

     The corn refining industry is highly competitive. Many of the Company’s products are viewed as commodities that compete with virtually identical products and derivatives manufactured by other companies in the industry. The US is a highly competitive market. Competitors include ADM Corn Processing Division (“ADM”) (a division of Archer-Daniels-Midland Company), Cargill, Tate & Lyle Ingredients Americas, Inc., National Starch and Chemical Company (“National Starch”) (a subsidiary of Imperial Chemicals Industries plc) and several others. Mexico and Canada face competition from US imports and local producers including ALMEX, a Mexican joint venture between ADM and Staley. In South America, Cargill and National Starch have corn-refining operations in Brazil. Other local corn and tapioca refiners also operate in many of our markets. Competition within markets is largely based on price, quality and product availability.

     Several of the Company’s products also compete with products made from raw materials other than corn. High fructose corn syrup and monohydrate dextrose compete principally with cane and beet sugar products. Co-products such as corn oil and gluten meal compete with products of the corn dry milling industry and with soybean oil, soybean meal and others. Fluctuations in prices of these competing products may affect prices of, and profits derived from, the Company’s products.

Customers

     The Company supplies a broad range of customers in over 60 industries. Approximately 19 percent of the Company’s 2005 net sales were to companies engaged in the processed foods industry and approximately 18 percent of the Company’s 2005 net sales were to companies engaged in the soft drink industry. Additionally, approximately 11 percent of the Company’s 2005 net sales were to the animal feed market.

Raw Materials

     The basic raw material of the corn refining industry is yellow dent corn. The supply of corn in the United States has been, and is anticipated to continue to be, adequate for the Company’s domestic needs. The price of corn, which is determined by reference to prices on the Chicago Board of Trade, fluctuates as a result of three primary supply factors: farmer planting decisions, climate, and government policies and three major market demand factors: livestock feeding, shortages or surpluses of world grain supplies, and domestic and foreign government policies and trade agreements.

     Corn is also grown in other areas of the world, including Canada, South Africa, Argentina, Brazil, China, Pakistan and Kenya. The Company’s affiliates outside the United States utilize both local supplies of corn and corn imported from other geographic areas, including the United States. The supply of corn for these affiliates is also generally expected to be adequate for the Company’s needs. Corn prices for the Company’s non-US affiliates generally fluctuate as a result of the same factors that affect US corn prices.

     Due to the competitive nature of the corn refining industry and the availability of substitute products not produced from corn, such as sugar from cane or beet, end product prices may not necessarily fluctuate in a manner that correlates to raw material costs of corn.

     The Company follows a policy of hedging its exposure to commodity fluctuations with commodities futures contracts for certain of its North American corn purchases. All firm-priced business is hedged. Other business may or may not be hedged at any given time based on management’s judgment as to the need to fix the costs of its raw materials to protect the Company’s profitability. See Item 7A, Quantitative and Qualitative Disclosures about Market Risk, section entitled “Commodity Costs” for additional information.

Product Development

     Corn Products has a product application technology center that directs the product development teams worldwide to develop product application solutions to better serve the ingredient needs of the Company’s customers. Product development activity is focused on developing product applications for identified customer and market needs. Through this approach, the Company has developed value-added products for use in the corrugated paper, food, textile, baking and confectionery industries. The Company usually collaborates with customers to develop the desired product application either in the customers’ facilities, the Company’s technical service laboratories or on a contract basis. These efforts are supported by the Company’s marketing, product technology and technology support staff.

Sales and Distribution

     Salaried sales personnel, who are generally dedicated to customers in a geographic region, sell the Company’s products directly to manufacturers and distributors. In addition, the Company has a staff that provides technical support to the sales personnel on an industry basis. The Company generally contracts with trucking companies to deliver bulk products to customer destinations for product delivery. In North America, the trucks generally ship to nearby customers. For customers located considerable distances from Company plants, either rail or a combination of railcars and trucks is used to deliver product. Railcars are generally leased for terms of five to fifteen years.

Patents, Trademarks and Technical License Agreements

     The Company owns a number of patents, which relate to a variety of products and processes, and a number of established trademarks under which the Company markets such products. The Company also has the right to use certain other patents and trademarks pursuant to patent and trademark licenses. The Company does not believe that any individual patent or trademark is material to its business. There is not currently any pending challenge to the use or registration of any of the Company’s significant patents or trademarks that would have a material adverse impact on the Company or its results of operations.

     The Company is a party to technical license agreements with third parties in other countries whereby the Company provides technical, management and business advice on the operations of corn refining businesses and receives royalties in return. These arrangements provide the Company with product penetration in the various countries in which they exist, as well as experience and relationships that could facilitate future expansion. The duration of the agreements range from one to three years, and can be extended by mutual agreement. These relationships have been in place for many years. These agreements in the aggregate provide approximately $3 million of annual income to the Company.

Employees

     As of December 31, 2005, the Company had approximately 6,000 employees. Approximately 32 percent of US and 60 percent of non-US employees are unionized. The Company believes its union and non-union employee relations are good. In addition, the Company has approximately 1,000 temporary employees.

Government Regulation and Environmental Matters

     As a manufacturer and maker of food items and items for use in the pharmaceutical industry, the Company’s operations and the use of many Company products are subject to various US, state, foreign and local statutes and regulations, including the Federal Food, Drug and Cosmetic Act and the Occupational Safety and Health Act, and to regulation by various government agencies, including the United States Food and Drug Administration, which prescribe requirements and establish standards for product quality, purity and labeling. The finding of a failure to comply with one or more regulatory requirements can result in a variety of sanctions, including monetary fines. No such fines of a material nature were imposed on the Company in 2005. The Company may also be required to comply with US, state, foreign and local laws regulating food handling and storage. The Company believes these laws and regulations have not negatively affected its competitive position.

     The operations of the Company are also subject to various US, state, foreign and local laws and regulations with respect to environmental matters, including air and water quality and underground fuel storage tanks, and other regulations intended to protect public health and the environment. Based upon current laws and regulations and the enforcement and interpretations thereof, the Company does not expect that the costs of future environmental compliance will be a material expense, although there can be no assurance that the Company will remain in compliance or that the costs of remaining in compliance will not have a material adverse effect on the Company’s future financial condition and results of operations.

     The Company currently anticipates that it may spend approximately $6 million in fiscal 2006 for environmental control and wastewater treatment equipment to be incorporated into existing facilities and in planned construction projects, including the Argo coal boiler project described in Exhibit 13.1 filed herewith, in the section entitled, “Liquidity and Capital Resources.”

Other

     The Company’s Internet address is www.cornproducts.com. The Company makes available, free of charge through its Internet website, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. These reports are made available as soon as reasonably practicable after the respective reports are electronically filed with or furnished to the Securities and Exchange Commission. The Company’s corporate governance guidelines, Board committee charters and code of ethics are posted on the Company’s website, the address of which is www.cornproducts.com, and each is available in print to any shareholder upon request in writing to Corn Products International, Inc., 5 Westbrook Corporate Center, Westchester, Illinois 60154 Attention: Corporate Secretary. The contents of our website are not incorporated by reference into this report.

Executive Officers of the Registrant

     Set forth below are the names and ages of all executive officers of the Company, indicating their positions and offices with the Company.

Name		Age				All positions and offices with the Company
Samuel C. Scott III			61			Chairman and Chief Executive Officer since February 2001 and President since 1997. Mr. Scott also served as Chief Operating Officer from 1997 through January 2001. Prior thereto, he served as President of the worldwide Corn Refining Business of CPC International, Inc; now Unilever Bestfoods (“CPC”), from 1995 to 1997 and was President of CPC’s North American Corn Refining Business from 1989 to 1997. He was elected a Vice President of CPC in 1991. Mr. Scott is a director of Motorola, Inc., The Bank of New York, ACCION U.S.A. and Inroads Chicago. He is also a Trustee of the Chicago Symphony Orchestra and the Conference Board.
Cheryl K. Beebe			50			Vice President and Chief Financial Officer since February 2004. Ms. Beebe previously served as Vice President, Finance from July 2002 to February 2004, as Vice President from 1999 to 2002 and as Treasurer from 1997 to February 2004. Prior thereto, she served as Director of Finance and Planning for the CPC Corn Refining Business worldwide from 1995 to 1997 and as Director of Financial Analysis and Planning for Corn Products North America from 1993. Ms. Beebe joined CPC in 1980 and served in various financial positions in CPC’s US consumer food business, North American audit group and worldwide corporate treasury function. She is a member of the Board of Trustees for Farleigh Dickinson University.
Marcia E. Doane			64			Vice President, General Counsel and Corporate Secretary since 1997. Ms. Doane served as Vice President, Legal and Regulatory Affairs of the Corn Products Division of CPC from 1996 to 1997. Prior thereto, she served as Counsel to the Corn Products Division from 1994 to 1996. Ms. Doane joined CPC’s Legal Department in 1989 as Operations Attorney for the Corn Products Division.

Name		Age				All positions and offices with the Company
Jorge L. Fiamenghi			50			Vice President and President of the South America Division since 1999. Mr. Fiamenghi served as Acting President, US/Canadian Region from August 2001 to February 2002. Mr. Fiamenghi served as President and General Manager, Corn Products Brazil from 1996 to 1999. Mr. Fiamenghi was General Manager for the CPC Corn Refining affiliate in Argentina beginning in 1991. Prior thereto, he was Financial and Planning Director for the CPC South American Corn Refining Division from 1989 to 1991, and served as Financial and Administrative Manager for the CPC Corn Refining Division in Mexico beginning in 1987. Mr. Fiamenghi joined CPC in 1971 and served in various financial and planning positions in CPC.
Jack C. Fortnum			49			Vice President since 1999 and President of North America Division since May 2004. Mr. Fortnum previously served as President, US/Canadian Region from July 2003 to May 2004, and as President, US Business from February 2002 until July 2003. Prior to that, Mr. Fortnum served as Executive Vice President, US/Canadian Region from August 2001 until February 2002, as the Controller from 1997 to 2001, as the Vice President of Finance for Refineries de Maiz, CPC’s Argentine subsidiary, from 1995 to 1997, as the Director of Finance and Planning for CPC’s Latin America Corn Refining Division from 1993 to 1995, and as the Vice President and Comptroller of Canada Starch Operating Company Inc., the Canadian subsidiary of CPC, and as the Vice President of Finance of the Canadian Corn Refining Business from 1989.
Jeffrey B. Hebble			50			Vice President since 2000 and President of the Asia/Africa Division since February 2001. Prior thereto, Mr. Hebble served as Vice President of the Asia/Africa Division since 1998. Mr. Hebble joined CPC in 1986 and served in various positions in the Corn Products Division and in Stamford Food Industries Sdn. Berhad, a Corn Products subsidiary in Malaysia.

Name		Age				All positions and offices with the Company
James J. Hirchak			52			Vice President — Human Resources since 1997. Mr. Hirchak joined CPC in 1976 and held various Human Resources positions in CPC until 1984, when he joined the CPC Corn Products Division. In 1987, Mr. Hirchak was appointed Director, Human Resources for Corn Products’ North American Operations and he served as Vice President, Human Resources for the Corn Products Division of CPC from 1992 to 1997.
Kimberly A. Hunter			44			Corporate Treasurer since February 2004. Ms. Hunter previously served as Director of Corporate Treasury from September 2001 to February 2004. Prior to that, she served as Managing Director, Investment Grade Securities at Bank One Corporation, a financial institution, from 1997 to 2000 and as Vice President, Capital Markets from 1992 to 1997.
Robin A. Kornmeyer			57			Vice President since September 2002 and Controller since January 2002. Prior to that, Mr. Kornmeyer served as Corporate Controller at Foster Wheeler Ltd., a worldwide engineering and construction company, from 2000 to 2002 and as its Director of Corporate Audit Services from 1997 to 2000.
James W. Ripley			62			Senior Vice President, Planning, Information Technology and Compliance since February 2004. Mr. Ripley previously served as Vice President and Chief Financial Officer since 1997 and Vice President, Finance from 1997 to July 2002. Prior thereto, he served as Comptroller of CPC from 1995 to 1997 and as Vice President of Finance for CPC’s North American Corn Refining Division from 1984 to 1995. Mr. Ripley joined CPC in 1968 as Chief International Accountant and subsequently served as CPC’s Assistant Corporate Comptroller, Corporate General Audit Coordinator and Assistant Comptroller for CPC’s European Consumer Foods Division.

ITEM 1A. RISK FACTORS

     The Company operates in one business segment, corn refining, and the business is managed on a geographic regional basis. In each country where we conduct business, our business and assets are subject to varying degrees of risk and uncertainty. The following are factors that we believe could cause our actual results to differ materially from expected and historical results. Additional risks that are currently unknown to us may also impair our business or adversely affect our financial condition or results of operations. In addition, forward-looking statements within the meaning of the federal securities laws that are contained in this Form 10-K or in other filings or statements made by the Company may be subject to the risks described below as well as other risks and uncertainties. Please read the cautionary notice regarding forward-looking statements in Item 7 below.

     The Company operates a multinational business subject to the economic, political and other risks inherent in operating in foreign countries and with foreign currencies.

     The Company has operated in foreign countries and with foreign currencies for many years. The Company’s US dollar denominated results are subject to foreign currency exchange fluctuations and its operations are subject to political, economic and other risks. Economic changes, terrorist activity and political unrest may result in business interruption or decreased demand for the Company’s products. Protectionist trade measures and import and export licensing requirements could also adversely affect the Company’s results of operations. The Company’s success will depend in part on its ability to manage continued global political and/or economic uncertainty.

     The Company primarily sells world commodities and, historically, local prices have adjusted relatively quickly to offset the effect of a local currency devaluation. The Company may hedge transactions that are denominated in a currency other than the currency of the operating unit entering into the underlying transaction and is subject to the risks normally attendant to such hedging activities.

     Raw material and energy price fluctuations, and supply interruptions and shortages could adversely affect the Company’s results of operations.

     The Company’s finished products are made primarily from corn. Purchased corn accounts for between 40 percent and 65 percent of finished product costs. Energy costs represent approximately 14 percent of the Company’s finished product costs. The primary use of energy is to create steam in the production process and in dryers to dry product. The Company consumes coal, natural gas, electricity, wood and fuel oil to generate energy. The market prices for these commodities vary depending on supply and demand, world economies and other factors. The Company purchases these commodities based on its anticipated usage and the future outlook for these costs. The Company cannot assure that it will be able to purchase these commodities at prices that it can adequately pass on to customers to sustain or increase profitability.

     In the US and Canada, the Company sells a large portion of finished product at firm prices established in supply contracts typically lasting for periods of up to one year. In order to minimize the effect of volatility in the cost of corn related to these firm-priced supply contracts, the Company takes hedging positions by entering into corn futures contracts. From time to time, the Company may also enter into anticipatory hedges. These contracts typically mature within one year. At expiration, the Company settles the derivative contracts at a net amount equal to the difference between the then-current price of corn and the fixed contract price. While these hedging instruments are subject to fluctuations in value, changes in the value of the underlying exposures the Company is hedging generally offset such

fluctuations. While the corn futures contracts or hedging positions are intended to minimize the volatility of corn costs on operating profits, occasionally the hedging activity can result in losses, some of which may be material. Outside of North America, sales of finished product under long-term, firm-priced supply contracts are not material. The Company also periodically uses derivative financial instruments to hedge portions of its natural gas costs, primarily in its North American operations.

     The Company’s ability to generate an adequate return on investment is uncertain.

     The Company’s ability to generate operating income and to increase profitability depends to a large extent upon its ability to price finished products at a level that will cover manufacturing and raw material costs and provide a profit margin. The Company’s ability to maintain appropriate price levels is determined by a number of factors largely beyond the Company’s control, such as aggregate industry supply and market demand, which may vary from time to time, and the economic condition of the geographic region of the Company’s operations.

     The Company’s inability to contain costs could adversely affect its future profitability and growth.

     The Company’s future profitability and growth depends on the Company’s ability to contain operating costs and per-unit product costs and to maintain and/or implement effective cost control programs, while at the same time maintaining competitive pricing and superior quality products, customer service and support. The Company’s ability to maintain a competitive cost structure depends on continued containment of manufacturing, delivery and administrative costs as well as the implementation of cost-effective purchasing programs for raw materials, energy and related manufacturing requirements.

     If the Company is unable to contain its operating costs and maintain the productivity and reliability of its production facilities, the profitability and growth of the Company could be adversely affected.

     The Company may not have access to the funds required for future growth and expansion.

     The Company may need additional funds for working capital to grow and expand its operations. To the extent possible, the Company expects to fund its capital expenditures from operating cash flow. If the Company’s operating cash flow is insufficient to fund such expenditures, the Company may either reduce its capital expenditures or utilize certain general credit facilities. The Company may also seek to generate additional liquidity through the sale of debt or equity securities in private or public markets or through the sale of non-productive assets. The Company cannot provide any assurance that cash flows from operations will be sufficient to fund anticipated capital expenditures or that additional funds can be obtained from financial markets or from the sale of assets at terms favorable to the Company. If the Company is unable to generate sufficient cash flows or raise sufficient additional funds to cover capital expenditures, it may not be able to achieve its desired operating efficiencies and expansion plans, which may adversely impact the Company’s competitiveness and, therefore, its results of operations.

     Increased interest rates could increase our borrowing costs.

     From time to time the Company may issue securities to finance acquisitions, capital expenditures, working capital and for other general corporate purposes. An increase in interest rates in the general economy could result in an increase in the Company’s borrowing costs for these financings, as well as under any existing debt that bears interest at an unhedged floating rate.

     The Company operates in a highly competitive environment and it may be difficult to preserve operating margins and maintain market share.

     The Company operates in a highly competitive environment. Almost all of the Company’s products compete with virtually identical or similar products manufactured by other companies in the corn refining industry. In the United States, there are other corn refiners, several of which are divisions of larger enterprises that have greater financial resources and some of which, unlike the Company, have vertically integrated their corn refining and other operations. Many of the Company’s products also compete with products made from raw materials other than corn. Fluctuation in prices of these competing products may affect prices of, and profits derived from, the Company’s products. Competition within markets is largely based on price, quality and product availability.

     Due to market volatility, the Company cannot assure that it can adequately pass potential increases in the cost of corn on to customers through product price increases or purchase quantities sufficient to sustain or increase its profitability.

     Corn purchasing costs, which include the price of the corn plus delivery cost, account for 40 percent to 65 percent of the Company’s product costs. The price and availability of corn is influenced by economic and industry conditions, including supply and demand factors such as crop disease and severe weather conditions such as drought, floods or frost that are difficult to anticipate and cannot be controlled by the Company. In addition, government programs supporting sugar prices indirectly impact the price of corn sweeteners, especially high fructose corn syrup.

     Volatility in the stock market fluctuations and in quarterly operating results and other factors could adversely affect the market price of the Company’s common stock.

     The market price for the common stock of the Company may be significantly affected by factors such as the announcement of new products or services by the Company or its competitors; technological innovation by the Company, its competitors or other vendors; quarterly variations in the Company’s operating results or the operating results of the Company’s competitors; general conditions in the Company’s and its customers’ markets; changes in the earnings estimates by analysts or reported results that vary materially from such estimates. In addition, the stock market has experienced significant price fluctuations that have affected the market prices of equity securities of many companies that have been unrelated to the operating performance of any individual company.

     Changes in consumer preferences and perceptions may lessen the demand for the Company’s products, which would reduce sales and harm the Company’s business.

     Food products are often affected by changes in consumer tastes, national, regional and local economic conditions and demographic trends. The Company’s sales could also be affected by changing consumer tastes—for instance, if prevailing health or dietary preferences cause consumers to avoid food products containing sweetener products in favor of foods that are perceived as more healthy.

     The uncertainty of acceptance of products developed through biotechnology could effect the profitability of the Company.

     The commercial success of agricultural products developed through biotechnology depends in part on public acceptance of their development, cultivation, distribution and consumption. Public attitudes can be influenced by claims that genetically modified products are unsafe for consumption or that they pose unknown risks to the environment even if such claims are not based on scientific studies. These public attitudes can influence regulatory and legislative decisions about biotechnology even where they are approved. The sale of the Company’s products may in the future be delayed or impaired because of adverse public perception regarding the safety of the Company’s products and the potential effects of these products on animals, human health and the environment.

     Our profitability could be negatively impacted if we fail to maintain satisfactory labor relations.

     Approximately 32 percent of US and 60 percent of non-US employees are unionized. Strikes, lockouts or other work stoppages or slow downs involving the Company’s unionized employees could have a material adverse effect on the Company.

     The Company may not successfully identify and complete acquisitions or strategic alliances on favorable terms or achieve anticipated synergies relating to any acquisitions or alliances, and such acquisitions could result in unforeseen operating difficulties and expenditures and require significant management resources.

     The Company regularly reviews potential acquisitions of complementary businesses, technologies, services or products, as well as potential strategic alliances. The Company may be unable to find suitable acquisition candidates or appropriate partners with which to form partnerships or strategic alliances. Even if the Company identifies appropriate acquisition or alliance candidates, it may be unable to complete such acquisitions or alliances on favorable terms, if at all. In addition, the process of integrating an acquired business, technology, service or product into the Company’s existing business and operations may result in unforeseen operating difficulties and expenditures. Integration of an acquired company also may require significant management resources that otherwise would be available for ongoing development of the Company’s business. Moreover, the Company may not realize the anticipated benefits of any acquisition or strategic alliance, and such transactions may not generate anticipated financial results. Future acquisitions could also require issuances of equity securities, the incurrence of debt, contingent liabilities or amortization expenses related to the other intangible assets, any of which could harm the Company’s business.

     No assurance can be given that the Company will continue to pay dividends.

     The payment of dividends is at the discretion of the Company’s Board of Directors and will be subject to the Company’s financial results and the availability of surplus funds to pay dividends.

     Anti-takeover provisions in the Company’s charter documents and under Delaware law may make it more difficult to acquire the Company.

     Certain provisions of the Company’s Amended and Restated Certificate of Incorporation (the “Corn Products Charter”) and the Company’s Amended By-laws (the “Corn Products By-Laws”) and of the Delaware General Corporation Law (the “DGCL”) may have the effect of delaying, deterring or preventing a change in control of the Company not approved by the Company’s Board. These provisions

include (i) a classified Board of Directors, (ii) a requirement of the unanimous consent of all stockholders for action to be taken without a meeting, (iii) a requirement that special meetings of stockholders be called only by the Chairman of the Board or the Board of Directors, (iv) advance notice requirements for stockholder proposals and nominations, (v) limitations on the ability of stockholders to amend, alter or repeal the Corn Products Amended By-Laws and certain provisions of the Corn Products Charter, (vi) authorization for the Company’s Board to issue without stockholder approval preferred stock with such terms as the Board of Directors may determine and (vii) authorization for the Company’s Board to consider the interests of creditors, customers, employees and other constituencies of the Company and its subsidiaries and the effect upon communities in which the Company and its subsidiaries do business, in evaluating proposed corporate transactions. With certain exceptions, Section 203 of the DGCL (“Section 203”) imposes certain restrictions on mergers and other business combinations between the Company and any holder of 15 percent or more of the Company’s Common Stock. In addition, the Company has adopted a stockholder rights plan (the “Rights Plan”). The Rights Plan is designed to protect stockholders in the event of an unsolicited offer and other takeover tactics, which, in the opinion of the Company’s Board, could impair the Company’s ability to represent stockholder interests. The provisions of the Rights Plan may render an unsolicited takeover of the Company more difficult or less likely to occur or might prevent such a takeover.

     These provisions of the Corn Products Charter and Corn Products By-laws, the DGCL and the Rights Plan could discourage potential acquisition proposals and could delay or prevent a change in control of the Company, although such proposals, if made, might be considered desirable by a majority of the Company’s stockholders. Such provisions could also make it more difficult for third parties to remove and replace the members of the Company’s Board. Moreover, these provisions could diminish the opportunities for a stockholder to participate in certain tender offers, including tender offers at prices above the then-current market value of the Company’s Common Stock, and may also inhibit increases in the market price of the Company’s Common Stock that could result from takeover attempts or speculation.

     The Company’s reliance on certain industries for a significant portion of sales could have a material adverse affect on the business.

     Approximately 19 percent of the Company’s 2005 worldwide sales were made to companies engaged in the processed foods industry and approximately 18 percent were made to companies in the soft drink industry. Additionally, approximately 11 percent of the Company’s 2005 worldwide sales were made to the animal feed market. If the Company’s processed foods customers, soft drink customers or animal feed customers were to substantially decrease their purchases, the business of the Company might be materially adversely affected. However, the Company believes there is no concentration of risk with any single customer or supplier, or small group of customers or suppliers, whose failure or non-performance would materially affect the Company’s results.

     An outbreak of a life threatening communicable disease could negatively impact the Company’s business.

     The outbreak of Severe Acute Respiratory Syndrome (“SARS”) previously affected the economies of certain countries where the Company’s products are manufactured and sold. If the economies of any countries where the company sells or manufactures its products is affected by a similar outbreak of SARS, the Avian Flu, or other life threatening communicable diseases, it could result in decreased sales and unfavorably impact the Company’s business.

     Cross-border disputes between countries in which the Company operates could result in duties, taxes or other costs that could adversely affect the Company’s results of operations.

     Due to cross-border disputes with the United States, the Company’s operations in Mexico and Canada could be adversely affected by actions taken by the governments of those two countries. In 2002, Mexico imposed a discriminatory tax on beverages sweetened with HFCS, which resulted in a substantial reduction of sales of HFCS in Mexico. However, sales of HFCS in Mexico have returned to historical levels and are continuing despite the continuation of the tax. In addition, Canada has recently imposed a significant duty on imported United States grain. If we are unable to maintain sales levels of high fructose corn syrup in Mexico and/or minimize the impact of the duties in Canada, the results of operations for these two countries could be negatively affected and the Company could be required to recognize a charge for impairment.

     The recognition of impairment charges on goodwill or long-lived assets would adversely impact the future financial position and results of operations of the Company.

     The Company performs an annual impairment assessment for goodwill and, as necessary, for long-lived assets. If the results of such assessments were to show that the fair value of the property, plant and equipment or goodwill were less than the carrying values, the Company would be required to recognize a charge for impairment of goodwill and/or long-lived assets and the amount of the impairment charge could be material.

     Unanticipated changes in our tax rates or exposure to additional income tax liabilities could impact the Company’s profitability.

     We are subject to income taxes in both the United States and various other foreign jurisdictions, and our domestic and international tax liabilities are subject to allocation of expenses among different jurisdictions. Our effective tax rates could be adversely affected by changes in the mix of earnings by jurisdiction, changes in tax laws or tax rates, changes in the valuation of deferred tax assets and liabilities, and material adjustments from tax audits.

     In particular, the carrying value of deferred tax assets, which are predominantly in the US, is dependent upon our ability to generate future taxable income in the US. In addition, the amount of income taxes we pay is subject to ongoing audits in various jurisdictions and a material assessment by a governing tax authority could affect our profitability.

     Operating difficulties at the Company’s manufacturing plants could adversely affect our operating results.

     Corn refining is a capital intensive industry. The Company has 27 plants and has preventive maintenance and de-bottlenecking programs designed to maintain and improve grind capacity and facility reliability. This includes the shutdown and replacement of three current coal-fired boilers with one new coal-fired boiler at our Argo facility in Bedford Park, Illinois. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations, section entitled “Liquidity and Capital Resources,” included herewith as part of Exhibit 13.1 for additional information relating to this capital project. If the Company encounters operating difficulties at a plant for an extended period of time or start up problems with the Argo boiler or other improvement projects, we may not be able to meet certain sales order commitments and could incur significantly higher operating expenses which could adversely affect our operating results.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

     None

ITEM 2. PROPERTIES

     The Company operates, directly and through its consolidated subsidiaries, 27 manufacturing facilities, 26 of which are owned and one of which is leased (Jundiai, Brazil). In addition, the Company leases its corporate headquarters in Westchester, Illinois. The following list details the locations of the Company’s manufacturing facilities within each of its three geographic regions:

North America		South America		Asia/Africa
Cardinal, Ontario, Canada		Baradero, Argentina		Shouguang, China
London, Ontario, Canada		Chacabuco, Argentina		Eldoret, Kenya
Port Colborne, Ontario, Canada		Balsa Nova, Brazil		Cornwala, Pakistan
San Juan del Rio, Queretaro, Mexico		Cabo, Brazil		Faisalabad, Pakistan
Guadalajara, Jalisco, Mexico		Conchal, Brazil		Ichon, South Korea
Mexico City, Edo. de Mexico		Jundiai, Brazil		Inchon, South Korea
Stockton, California, U.S.		Mogi-Guacu, Brazil		Sikhiu, Thailand
Bedford Park, Illinois, U.S.		Llay-Llay, Chile
Winston-Salem, North Carolina, U.S.		Barranquilla, Colombia
		Cali, Colombia
		Guayaquil, Ecuador

     The Company believes its manufacturing facilities are sufficient to meet its current production needs. The Company has preventive maintenance and de-bottlenecking programs designed to further improve grind capacity and facility reliability. This includes the shutdown and replacement of three current coal-fired boilers with one new coal-fired boiler at our Argo facility in Bedford Park, Illinois. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations, section entitled “Liquidity and Capital Resources,” included herewith as part of Exhibit 13.1 for additional information relating to this capital project.

     The Company has electricity co-generation facilities at all of its US and Canadian plants, as well as at its plants in San Juan del Rio, Mexico; Baradero, Argentina; and Balsa Nova and Mogi-Guacu, Brazil, that provide electricity at a lower cost than is available from third parties. The Company generally owns and operates such co-generation facilities itself, except for the facilities at its Stockton, California; Cardinal, Ontario; Balsa Nova and Mogi-Guacu, Brazil locations, that are owned by, and operated pursuant to co-generation agreements with, third parties.

     The Company believes it has competitive facilities. In recent years, significant capital expenditures have been made to update, expand and improve the Company’s facilities, averaging $110 million per year for the last three years. The Company believes these capital expenditures will allow the Company to operate efficient facilities for the foreseeable future. The Company currently anticipates that capital expenditures for 2006 will approximate $150 million. Included in this estimate are expenditures relating to the completion of the previously announced $100 million capital project at our Argo plant located in Bedford Park, Illinois. Construction began in the fourth quarter of 2004 and the project is expected to be completed by the end of the third quarter of 2006. It is anticipated that annual capital expenditures beyond 2006 will be in line with historical averages.

ITEM 3. LEGAL PROCEEDINGS

     On October 21, 2003, the Company submitted, on its own behalf and on behalf of its Mexican affiliate, CPIngredientes, S.A. de C.V., (previously known as Compania Proveedora de Ingredientes) a Request for Institution of Arbitration Proceedings Submitted Pursuant to Chapter 11 of the North American Free Trade Agreement (“NAFTA”) (the “Request”). The Request was submitted to the International Centre for Settlement of Investment Disputes and was brought against the United Mexican States. In the Request, the Company asserts that the imposition by Mexico of a discriminatory tax on beverages containing HFCS breached various obligations of Mexico under NAFTA. The Company seeks damages of not less than $325 million. See also Note 3 of the Notes to the Consolidated Financial Statements included in Exhibit 13.1 herewith.

     Between May and June of 2005, the Company, Samuel Scott and Cheryl Beebe were named as defendants in five purported securities class action suits filed in the United States District Court for the Northern District of Illinois. The complaints alleged violations of certain federal securities laws and sought unspecified damages on behalf of a purported class of purchasers of the Company’s common stock between January 25, 2005 and April 4, 2005. In August 2005, all of these class actions were consolidated in the matter of Monty Blatt v. Corn Products International, Inc. (N.D. Ill. 05 C 3033). In November 2005, plaintiffs filed a consolidated amended complaint containing essentially the same legal claims. Cheryl Beebe was not named as a defendant in the consolidated amended complaint. The Company believes the lawsuit is without merit and intends to defend it vigorously. The matter has been tendered by the Company to its insurance carrier for defense and indemnification.

     In July 2005, a shareholder derivative lawsuit, Halverson v. Samuel Scott, et al. (05 CH 12162), was filed in the Circuit Court of Cook County, Illinois against Corn Products International, its directors and certain members of senior management. The lawsuit makes various claims asserting mismanagement and breaches of fiduciary duty related to the Company’s performance in the first quarter of 2005. The subject matter of the derivative lawsuit is substantially the same as that of the shareholder class action, Monty Blatt v. Corn Products International, Inc. (N.D. Ill. 05 C 3033). All proceedings in this lawsuit are currently stayed by agreement of the parties. The Company believes the lawsuit is without merit and intends to defend it vigorously. The matter has been tendered by the Company to its insurance carrier for defense and indemnification.

     The Company is defending claims brought against its predecessor, which was named as one of the defendants in a number of private treble damage state class actions by direct and indirect HFCS customers. The only remaining action still pending is in the state court of Kansas. Preliminary approval of the Kansas settlement was granted by the judge assigned to the case on December 10, 2004 and notice to the class has been completed. The Company expects final approval of the Kansas settlement. The terms of the proposed settlement would not have a material adverse effect on the financial results of the Company.

     In June 2005, certain associations purporting to represent Canadian corn producers filed a request that the Canadian government investigate the effect of United States corn subsidization on the Canadian corn market and the alleged dumping of United States corn into Canada. In September 2005, the Canadian government initiated an anti-dumping and/or countervailing duty investigation on corn imported from the United States. In November 2005, the Canadian government made a positive determination in connection with the preliminary determination of injury and in December 2005 imposed preliminary antidumping and countervailing duties. The Company has been and continues to vigorously oppose the imposition of antidumping and countervailing duties.

     The Company is currently subject to various other claims and suits arising in the ordinary course of business, including certain environmental proceedings. The Company does not believe that the results of such legal proceedings, even if unfavorable to the Company, will be material to the Company. There can be no assurance, however, that any claims or suits arising in the future, whether taken individually or in the aggregate, will not have a material adverse effect on the Company’s financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended December 31, 2005.

PART II

ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

     Shares of Corn Products’ Common Stock are traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “CPO.” Information about the range of the NYSE reported high, low and closing market prices of the Company’s Common Stock, holders of record and quarterly dividends are incorporated by reference from the Supplemental Financial Information filed herewith as part of Exhibit 13.1, section entitled “Common Stock Market Prices and Dividends.”

     The Company’s policy is to pay a modest dividend. The amount and timing of the dividend payment, if any, is based on a number of factors including estimated earnings, financial position and cash flow. The payment of a dividend is solely at the discretion of the Company’s Board of Directors. It is subject to the Company’s financial results and the availability of surplus funds to pay dividends.

Issuer Purchases of Equity Securities:

Maximum Number

(or Approximate

Total Number of

Dollar Value) of

Total

Average

Shares Purchased as

Shares that may yet

Number

Price

part of Publicly

be Purchased Under

of Shares

Paid

Announced Plans or

the Plans or

(shares in thousands)

Purchased

Per Share

Programs

Programs

Oct. 1 – Oct. 31, 2005

—

—

—

2,311 shares

Nov. 1 – Nov. 30, 2005

—

—

—

2,311 shares

Dec. 1 – Dec. 31, 2005

—

—

—

2,311 shares

Total

—

—

—

On February 9, 2005, the Company’s Board of Directors approved a stock repurchase program, which runs through February 28, 2010, under which the Company may repurchase up to 4 million shares of its outstanding common stock. As of December 31, 2005, the Company had repurchased 1.69 million shares under the program, leaving 2.31 million shares available for repurchase.

ITEM 6. SELECTED FINANCIAL DATA

     Incorporated by reference from the Supplemental Financial Infomation filed herewith as part of Exhibit 13.1, section entitled “Ten-Year Financial Highlights.”

ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Incorporated by reference from Exhibit 13.1 filed herewith, section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward Looking Statements

     This Form 10-K contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company intends these forward looking statements to be covered by the safe harbor provisions for such statements. These statements include, among other things, any predictions regarding the Company’s future financial condition, earnings, revenues, expenses or other financial items, any statements concerning the Company’s prospects or future operation, including management’s plans or strategies and objectives therefor and any assumptions underlying the foregoing. These statements can sometimes be identified by the use of forward looking words such as “may,” “will,” “anticipate,” “believe,” “plan,” “project,” “estimate,” “expect,” “intend,” “continue,” “pro forma,” “forecast” or other similar expressions or the negative thereof. All statements other than statements of historical facts in this report or referred to or incorporated by reference into this report are “forward-looking statements.” These statements are subject to certain inherent risks and uncertainties. Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, stockholders are cautioned that no assurance can be given that our expectations will prove correct. Actual results and developments may differ materially from the expectations conveyed in these statements, based on various factors, including fluctuations in worldwide commodities markets and the associated risks of hedging against such fluctuations; fluctuations in aggregate industry supply and market demand; general political, economic, business, market and weather conditions in the various

geographic regions and countries in which we manufacture and/or sell our products; fluctuations in the value of local currencies, energy costs and availability, freight and shipping costs, and changes in regulatory controls regarding quotas, tariffs, duties, taxes and income tax rates; operating difficulties; boiler reliability; labor disputes; genetic and biotechnology issues; changing consumption preferences and trends; increased competitive and/or customer pressure in the corn-refining industry; the outbreak or continuation of hostilities including acts of terrorism; stock market fluctuation and volatility; and our ability to maintain sales levels of HFCS in Mexico. Our forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections. For a further description of risk factors, see Item 1A-Risk Factors above and subsequent reports on Forms 10-Q and 8-K.

ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Interest Rate Exposure. Approximately 61 percent of the Company’s borrowings at December 31, 2005 are fixed rate bonds and loans. Interest on the remaining 39 percent of the Company’s borrowings is subject to change based on changes in short-term rates, which could affect our interest costs. Included in the floating rate indebtedness information above is $150 million of our $200 million Senior Notes due 2009 which, through the use of interest rate swaps, had effectively been converted from fixed to floating rate debt. Included in the fixed rate indebtedness information above is $18 million of Korean term loan debt which, through the use of cross currency interest rate swaps, has effectively been converted from floating rate US dollar to fixed rate Korean Won debt. See also Note 8 of the Notes to the Consolidated Financial Statements entitled “Financing Arrangements” included herewith as part of Exhibit 13.1, for further information. A hypothetical increase of 1 percentage point in the weighted average floating interest rate for 2005 would have increased interest expense and reduced pretax income for 2005 by approximately $3 million.

     At December 31, 2005 and 2004, the carrying and fair values of long-term debt, including the current portion, were as follows:

		2005								2004
		Carrying				Fair				Carrying				Fair
(in millions)		value				value				value				value
8.25% senior notes, due 2007		$	254			$	266			$	254			$	280
8.45% senior notes, due 2009			199				219				199				233
Korean loans			28				28				27				27
Total		$	481			$	513			$	480			$	540

     On February 1, 2006, the Company terminated the fixed to floating interest rate swap agreements associated with $150 million of its 8.45 percent senior notes. The swap termination resulted in a gain of approximately $3 million that will be amortized as a reduction to financing costs over the remaining term of the underlying debt (through August 2009).

     Commodity Costs. The Company’s finished products are made primarily from corn. In the US and Canada, the Company sells a large portion of finished product at firm prices established in supply contracts typically lasting for periods of up to one year. In order to minimize the effect of volatility in the cost of corn related to these firm-priced supply contracts, the Company enters into corn futures contracts, or takes hedging positions in the corn futures market. From time to time, the Company may

also enter into anticipatory hedges. These contracts typically mature within one year. At expiration, the Company settles the derivative contracts at a net amount equal to the difference between the then-current price of corn and the fixed contract price. While these hedging instruments are subject to fluctuations in value, changes in the value of the underlying exposures the Company is hedging generally offset such fluctuations. While the corn futures contracts or hedging positions are intended to minimize the volatility of corn costs on operating profits, occasionally the hedging activity can result in losses, some of which may be material. Outside of North America, sales of finished product under long-term, firm-priced supply contracts are not material.

     Energy costs for the Company represent a significant portion of its operating costs. The primary use of energy is to create steam in the production process and in dryers to dry product. The Company consumes coal, natural gas, electricity, wood and fuel oil to generate energy. The market prices for these commodities vary depending on supply and demand, world economies and other factors. The Company purchases these commodities based on its anticipated usage and the future outlook for these costs. The Company cannot assure that it will be able to purchase these commodities at prices that it can adequately pass on to customers to sustain or increase profitability. The Company periodically uses derivative financial instruments to hedge portions of its natural gas costs, primarily in its North American operations.

     The Company’s commodity price hedging instruments generally relate to contracted firm-priced business. Based on the Company’s overall commodity hedge exposure at December 31, 2005, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to other comprehensive income (loss) of approximately $22 million, net of income tax benefit. It should be noted that any change in the fair value of the contracts, real or hypothetical, would be substantially offset by an inverse change in the value of the underlying hedged item.

ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Incorporated by reference from Exhibit 13.1 filed herewith, sections entitled “Report of Independent Registered Public Accounting Firm,” “Consolidated Financial Statements and Notes” and “Supplemental Financial Information.”

ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

ITEM 9A.		CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

     Management of the Company, including the Chief Executive Officer and the Chief Financial Officer, performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2005. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in providing reasonable assurance that all material information required to be filed in this report has been recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There have been no changes in the Company’s internal controls over financial reporting that were identified during the evaluation that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Management’s Report on Internal Control over Financial Reporting

     Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. This system of internal controls is designed to provide reasonable assurance that assets are safeguarded and transactions are properly recorded and executed in accordance with management’s authorization.

     Internal control over financial reporting includes those policies and procedures that:

	1.		Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company.
	2.		Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with accounting principles generally accepted in the United States, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company.
	3.		Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

     Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework of Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2005. Management’s assessment of the effectiveness of the Company’s internal control over financial reporting has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, a copy of which follows.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Corn Products International, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Corn Products International, Inc. maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Corn Products International, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Corn Products International, Inc. maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Corn Products International, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Corn Products International, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, comprehensive income, stockholders’ equity and redeemable equity, and cash flows for each of the years in the three-year period ended December 31, 2005, and our report dated March 8, 2006 expressed an unqualified opinion thereon.

KPMG LLP
Chicago, Illinois
March 8, 2006

ITEM 9B. OTHER INFORMATION

     None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information contained under the headings “Board of Directors,” “Matters To Be Acted Upon – Proposal 1. Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive proxy statement for the Company’s 2006 Annual Meeting of Stockholders (the “Proxy Statement”) and the information contained under the heading “Executive Officers of the Registrant” in Item 1 hereof is incorporated herein by reference. The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, and controller. The code of ethics is posted on the Company’s Internet website, which is found at www.cornproducts.com. The Company intends to include on its website any amendments to, or waivers from, a provision of its code of ethics that applies to the Company’s principal executive officer, principal financial officer or controller that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K.

ITEM 11. EXECUTIVE COMPENSATION

     The information contained under the heading “Executive Compensation” in the Proxy Statement is incorporated herein by reference.

ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

     The information contained under the headings “Equity Compensation Plan Information as of December 31, 2005” and “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information contained under the heading “Certain Relationships and Related Transactions” in the Proxy Statement is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information contained under the heading “2005 and 2004 Audit Firm Fee Summary” in the Proxy Statement is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Item 15(a)(1) Consolidated Financial Statements

     Incorporated by reference from Exhibit 13.1 filed herewith, sections entitled “Report of Independent Registered Public Accounting Firm,” and “Consolidated Financial Statements and Notes.”

Item 15(a)(2) Financial Statement Schedules

     All financial statement schedules have been omitted because the information either is not required or is otherwise included in the consolidated financial statements and notes thereto.

Item 15(a)(3) Exhibits

     The Exhibits set forth in the accompanying Exhibit Index are filed as a part of this report. Provided below is a list of each exhibit that contains a management contract or compensatory plan or arrangement required to be filed as an Exhibit to this report:

Exhibit Number
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.14
10.15
10.16

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 8th day of March, 2006.

		CORN PRODUCTS INTERNATIONAL, INC.
		By:		/s/ Samuel C. Scott III
				Samuel C. Scott III
				Chairman, President and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant, in the capacities indicated and on the 8th day of March, 2006.

Signature		Title
/s/ Samuel C. Scott III   Samuel C. Scott III		Chairman, President and Chief Executive Officer
/s/ Cheryl K. Beebe   Cheryl K. Beebe		Chief Financial Officer
/s/ Robin A. Kornmeyer   Robin A. Kornmeyer		Controller
*Richard J. Almeida   Richard J. Almeida		Director
*Luis Aranguren   Luis Aranguren		Director
*Guenther E. Greiner   Guenther E. Greiner		Director
*Ronald M. Gross   Ronald M. Gross		Director
*Karen L. Hendricks   Karen L. Hendricks		Director
*Bernard H. Kastory   Bernard H. Kastory		Director

Signature		Title
*Gregory B. Kenny   Gregory B. Kenny		Director
*Barbara A. Klein   Barbara A. Klein		Director
*William S. Norman   William S. Norman		Director
*James M. Ringler   James M. Ringler		Director
*By: /s/ Marcia E. Doane        Marcia E. Doane      Attorney-in-fact

(Being the principal executive officer, the principal financial officer, the controller and all of the directors of Corn Products International, Inc.)

Exhibit No.		Description
3.1*		Amended and Restated Certificate of Incorporation of the Company, filed as Exhibit 3.1 to the Company’s Registration Statement on Form 10, File No. 1-13397
3.2*		Amended By-Laws of the Company, filed as Exhibit 3.i to the Company’s report on Form 8-K dated February 3, 2006, File No. 1-13397
4.1*		Rights Agreement dated as of November 19, 1997 (Amended and Restated as of September 9, 2002), between the Company and The Bank of New York, filed as Exhibit 4 to the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2002, File No. 1-13397
4.2*		Certificate of Designation for the Company’s Series A Junior Participating Preferred Stock, filed as Exhibit 1 to the Company’s Registration Statement on Form 8-Al2B, File No. 1-13397
4.3*		Five year Revolving Credit Agreement dated as of September 2, 2004 among the Company and the agents and banks named therein filed as Exhibit 10 to the Company’s report on Form 10-Q for the quarter ended September 30, 2004
4.4*		First Amendment to Revolving Credit Agreement dated October 8, 2004, filed as Exhibit 4.4 to the Company’s annual report on Form 10-K for the year ended December 31, 2004, File No. 1-13397
4.5*		Indenture Agreement dated as of August 18, 1999 between the Company and The Bank of New York, as Trustee, filed on August 27, 1999 as Exhibit 4.1 to the Company’s current report on Form 8-K, File No. 1-13397, as amended by First Supplemental Indenture filed on July 8, 2002 as Exhibit 99.4 to the Company’s current report on Form 8-K, File No. 1-13397, and by Second Supplemental Indenture filed on November 18, 2002 as Exhibit 4 to the Company’s current report on Form 8-K, File No. 1-13397
4.6*		First Supplemental Indenture dated July 8, 2002 between the Company and The Bank of New York, as Trustee, filed on July 8, 2002 as Exhibit 99.4 to the Company’s current report on Form 8-K, File No. 1-13397
4.7*		Second Supplemental Indenture dated November 18, 2002 between the Company and The Bank of New York, as Trustee, filed on November 18, 2002 as Exhibit 4 to the Company’s current report on Form 8-K, File No. 1-13397
10.1*		The Corn Products International, Inc. Stock Incentive Plan, included as Appendix B to the Company’s Proxy Statement filed on Schedule 14A on March 29, 2005, File No. 1-13397
10.2**		Deferred Stock Unit Plan of the Company
10.3**		Form of Severance Agreement entered into by each of the Named Executive Officers

10.4*		Form of Amendment to Executive Severance Agreement entered into by each of the Named Executive Officers, filed as Exhibit 10.10 to the Company’s annual report on Form 10-K for the year ended December 31, 2000, File No. 1-13397
10.5**		Form of Indemnification Agreement entered into by each of the members of the Company’s Board of Directors and the Named Executive Officers
10.6*		Deferred Compensation Plan for Outside Directors of the Company (Amended and Restated as of September 19, 2001), filed as Exhibit 4(d) to the Company’s Registration Statement on Form S-8, File No. 333-75844, as amended by Amendment No. 1 dated December 1, 2004, filed as Exhibit 10.5 to the Company’s annual report on Form 10-K for the year ended December 31, 2004, File No. 1-13397
10.7*		Supplemental Executive Retirement Plan (Amended and Restated as of January 1, 2001), filed as Exhibit 10 to the Company’s quarterly report on Form 10-Q/A for the quarter ended March 31, 2002, File No. 1-13397
10.8**		Executive Life Insurance Plan
10.9**		Deferred Compensation Plan, as amended by Amendment No. 1 filed as Exhibit 10.21 to the Company’s annual report on Form 10-K/A for the year ended December 31, 2001, File No. 1-13397
10.10*		Annual Incentive Plan, included as Appendix C to the Company’s Proxy Statement filed on Schedule 14A on March 29, 2005, File No. 1-13397
10.11*		Performance Plan, filed as Exhibit 10.19 to the Company’s annual report on Form 10-K for the year ended December 31, 1999, File No. 1-13397
10.12**		Tax Sharing Agreement dated December 1, 1997 between the Company and Bestfoods
10.13*		Employee Benefits Agreement dated December 1, 1997 between the Company and Bestfoods, filed as Exhibit 4.E to the Company’s Registration Statement on Form S-8, File No. 333-43525
10.14*		Executive Life Insurance Plan, Compensation Committee Summary, filed as Exhibit 10.14 to the Company’s annual report on Form 10-K for the year ended December 31, 2004, File No. 1-13397
10.15*		Form of Executive Life Insurance Plan Participation Agreement and Collateral Assignment entered into by the Named Executive Officers with the exception of Jorge Fiamenghi, filed as Exhibit 10.15 to the Company’s annual report on Form 10-K for the year ended December 31, 2004, File No. 1-13397
10.16*		Form of Performance Share Award, filed as Exhibit 10.1 to the Company’s report on Form 8-K dated January 31, 2006, File No. 1-13397
10.17		Natural Gas Purchase and Sale Agreement between Corn Products Brasil-Ingredientes Industrias Ltda. and Companhia de Ga de Sao Paulo-Comgas

11.1		Earnings Per Share Computation
12.1		Computation of Ratio of Earnings to Fixed Charges
13.1		Management’s Discussion and Analysis of Financial Condition and Results of Operations and Consolidated Financial Statements and Notes
18.1*		Preferability letter from KPMG, filed as Exhibit 18.1 to the Company’s annual report on Form 10-K for the year ended December 31, 2000, File No. 1-13397
21.1		Subsidiaries of the Registrant
23.1		Consent of Independent Registered Public Accounting Firm
24.1		Power of Attorney
31.1		CEO Section 302 Certification Pursuant to the Sarbanes-Oxley Act of 2002
31.2		CFO Section 302 Certification Pursuant to the Sarbanes-Oxley Act of 2002
32.1		CEO Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code as created by the Sarbanes-Oxley Act of 2002
32.2		CFO Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code as created by the Sarbanes-Oxley Act of 2002

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Exhibit 10.17

Natural Gas Purchase and Sale Agreement

Cogeneration

Companhia de Gás de São Paulo — Comgás

X

Corn Products Brasil — Ingredientes Industriais Ltda.

January / 2006

2

Natural Gas Purchase and Sale Agreement

Corn Products Brasil and Companhia de Gás de São Paulo — Comgás

TABLE OF CONTENTS

ARTICLE ONE — DEFINITIONS AND INTERPRETATION OF TERMS			4
ARTICLE TWO — PURPOSE			12
ARTICLE THREE – COMMERCIAL SUPPLY			12
ARTICLE FOUR – DAILY CONTRACTED AMOUNT			12
ARTICLE FIVE — QUALITY			13
ARTICLE SIX — DELIVERY POINT AND PROPERTY TRANSFER			16
ARTICLE SEVEN – TERMS FOR DELIVERY OF GAS			16
ARTICLE EIGHT – PRICE			17
ARTICLE NINE — SCHEDULING OF AMOUNTS TO BE TAKEN, COMMITMENTS AND PENALTIES FOR DEFAULT			18
ARTICLE TEN — COMMITMENT OF PRIORITY OF PURCHASE OF DAILY CONTRACTED AMOUNT (DCA) OF THE AGREEMENT AND GAS USAGE RESTRICTION			28
ARTICLE ELEVEN – INVOICING, PAYMENT MANNER AND GUARANTEE			30
ARTICLE TWELVE – MEASUREMENT			36
ARTICLE THIRTEEN — EFFECTIVENESS AND EXTENSION			39
ARTICLE FOURTEEN — FORTUITOUS CASE OR FORCE MAJEURE			39
ARTICLE FIFTEEN- ASSIGNMENT AND ENCUMBRANCE OF RIGHTS AND OBLIGATIONS			43
ARTICLE SIXTEEN – NOVATION AND FORBEARANCE			44
ARTICLE SEVENTEEN — DEFAULT AND TERMINATION			44
ARTICLE EIGHTEEN — NOTICES			49
ARTICLE NINETEEN — DISPUTES RESOLUTION			50
ARTICLE TWENTY- GENERAL LIMIT OF LIABILITY			59
ARTICLE TWENTY-ONE – AMENDMENT			60
ARTICLE TWENTY-TWO — ANNEXES			60
ARTICLE TWENTY-THREE – CONTRACTUAL AMOUNT			60
ARTICLE TWENTY-FOUR – AGREEMENT OF THE PARTIES			60

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		NATURAL GAS PURCHASE AND SALE AGREEMENT ENTERED INTO BY AND BETWEEN, COMPANHIA DE GÁS DE SÃO PAULO - COMGÁS AND, ON THE OTHER SIDE, CORN PRODUCTS BRASIL - INGREDIENTES INDUSTRIAIS LTDA:

By this private instrument of piped natural gas purchase and sale agreement, the parties hereof, on the one side, COMPANHIA DE GÁS DE SÃO PAULO — COMGÁS, concessionaire of piped gas distribution services in the State of São Paulo, a corporation of authorized capital, headquartered in the City of São Paulo, at Rua das Olimpíadas, 205, 10° andar, enrolled with the National Register of Legal Entities of the Ministry of Finance (CNPJ) under No. 61.856.571/0001-17, hereinafter referred to as COMGÁS, herein represented as per its by-laws, and, on the other side

CORN PRODUCTS BRASIL — INGREDIENTES INDUSTRIAIS LTDA., a private limited company, headquartered in the City of São Paulo, State of São Paulo, at Av. do Café, 277, Torre B, 2° andar, enrolled with the National Register of Legal Entities of the Ministry of Finance (CNPJ) under No. 01.730.520/0001-12, hereinafter referred to as the User, herein properly represented, by virtue of the mutual promises and covenants herein contained, agree to be bound as follows:

WHEREAS:

•		the decision of the Federal Government to increase the participation of natural gas in the national energetic matrix;
•		Law No. 9,478/97, which establishes provisions on the National Energetic Policy, has as one of its purposes the development, in economic bases, of the use of natural gas;
•		Decree No. 3,371, of February 24, 2000, which established, within the competency of the Ministry of Mines and Energy, the Priority Program of Thermoelectricity, and MME Ordinance No. 551, of December 6, 2000, which ruled the program of incentive to cogeneration, stimulated entrepreneurs and investors to submit proposals for the implementation of Cogeneration Thermoelectric Projects;

4

•		the Cogeneration Plant was included in said Priority Program of Thermoelectricity by means of GCE Resolution No. 127 of April 16, 2002;
•		as provided for in paragraph 2 of Article 25 of the Constitution of the Republic — with the wording ascribed to it by the Constitutional Amendment No. 5 of August 15, 1995 — , it is incumbent upon the States to exploit directly, or by means of a concession, the piped Gas services pursuant to the law;
•		as per the concession agreement entered into with the State of São Paulo, Comgás is the exclusive concessionaire of public services of piped Gas distribution in the State of São Paulo, covering the location area of the Cogeneration Plant;
•		Comgás entered into the Comgás-Supplier Agreement with the Supplier;
•		Comgás intends to provide to the User and the latter intends to purchase from Comgás, according to the rules and conditions of this Agreement, the Natural Gas to be used exclusively as fuel at the Cogeneration Plant;
•		the last generating unit of the Cogeneration Plant started commercial operation on June 26, 2004, in accordance with ANEEL Decision No. 490 of June 25, 2004; and
•		On December, 29, 2004, Comgás and the User executed a gas supply agreement, within the context of the Priority Program of Thermoelectricity, for the supply of Gas by Comgás to be used exclusively as fuel in the Cogeneration Plant, which was amended on March, 30, 2005, on May 31, 2005 and on July 20, 2005, on November 20, 2005 and on December 20, 2005 (“Short-Term Agreement”), pursuant to which Comgás and the User agreed to execute, a natural gas supply agreement to be used as fuel in the Cogeneration Plant, also under the conditions of the Priority Program of Thermoelectricity, with term of up to 20 years;

do hereby agree to establish that this Natural Gas Purchase and Sale Agreement shall be ruled by the following clauses and conditions:

ARTICLE ONE — DEFINITIONS AND INTERPRETATION OF TERMS

1.1

In this Agreement, whenever they are written in upper case, the terms below will have the definitions that are assigned to them in this article:

Year – shall mean a period of time that:

a)

for the first Year, shall begin on the Commercial Supply Start-up Day and shall end the last Day of the corresponding year;

5

	b)		for each Year succeeding the Year referred to in item (a) above, except for the last Year of effectiveness of the Agreement, shall begin on the first Day of the corresponding year and shall end on the last Day of the corresponding year;
	c)		for the last Year of effectiveness of the Agreement, shall begin on the first Day of the corresponding year and shall end on the last Day of effectiveness of the Agreement;

provided, however, that the term ”year”, where not written in upper case, shall mean a calendar year.

Arbitration - is defined in item 19.1.2.

Arbitrator (First Arbitrator, Second Arbitrator, Third Arbitrator) - shall mean each member of the Arbitration Tribunal appointed pursuant to item 19.2.3.

Calorie – shall mean the quantity of heat required to increase the temperature from one gram (1g) of pure water from fourteen point five Celsius degrees (14.5ºC) up to fifteen point five Celsius degrees (15.5ºC) at the absolute pressure of 0.101325MPa.

Fortuitous Case or Force Majeure - is defined in Article Fourteen.

Cogeneration Plant - shall mean all the equipment of the cogeneration plant called Corn Mogi Co-Generator Central, driven by natural gas, located in the Municipality of Mogi Guaçu, State of São Paulo, which will receive the Gas for purposes of Cogeneration, inserted into the Priority Program of Thermoelectricity.

Cogeneration - corresponds to the process of combined production of useful heat and mechanical energy, usually converted totally or partially into electric energy from the chemical energy made available by one or more fuels, pursuant to Article 3 of ANEEL Resolution No. 21 of January 20, 2000 or in any other Law that amends or replaces it.

Reference Conditions - shall mean a temperature of twenty degrees Celsius (20^oC) and absolute pressure of 0.101325MPa and the Superior Calorific Power (SCP) for the Gas equal to the Reference Calorific Power.

Base Conditions - shall mean a temperature of twenty degrees Celsius (20^oC) and absolute pressure of 0,101325Mpa.

7

Regulation and Measurement Set (CRM) - Set of equipment owned by Comgás intended to regulate the pressure and measure and record the volumes, pressures and temperature of Gas that will supply the Cogeneration Plant, installed at a place to be assigned by User, close to its boundary, as agreed upon between the Parties. This station is the one responsible for officially measuring the Natural Gas supply subject of this Agreement.

Agreement — shall mean this Natural Gas Purchase and Sale Agreement, its annex, as well as any amendments and changes agreed upon and signed by the Parties.

Supplier-Comgás Agreement - shall mean a natural gas purchase and sale agreement entered into between the Supplier and Comgás, having as its purpose the purchase, by Comgás, and the sale, by Supplier of the Natural Gas subject of this Agreement, to be used exclusively as fuel at the Cogeneration Plant.

Short-Term Agreement – shall mean the agreement specified in the last whereas.

Day - shall mean a period of time that will start at 6:00 a.m. (six o’ clock) of each day and will end at 6:00 a.m. (six o’ clock) of the following day; and the term “day” when not written in upper case shall mean a period of twenty-four (24) hours that will start at 0:00 (midnight) of each day and will end at midnight (0:00) of the same day.

Collection Document - shall mean every invoice, trade bill, debt note or document issued by one Party for collection of any amount to be paid, under the Agreement, by the other Party.

Dollar or US$ - shall mean the legal currency of the United States of America.

Affiliate Company – shall mean any company (i) controlled by one of the Parties, (ii) the controlling company of one of the Parties or (iii) under the common control of the controlling company of one of the Parties.

Failure in Supply (FF) - is any situation characterized by the occurrence, on any given Day, at the Delivery Point, of any one of the following events:

a. lack of availability of Gas in accordance with the Daily Requested Amount;

7

	b.		non-acceptance of the Daily Requested Amount (DRA) by Comgás, except under the terms of item 9.9.1.1 or item 17.1;
	c.		restriction or interruption in the supply of Gas as a result of an operating fact not attributable to the User;
	d.		non-conformity in relation to the specifications of Gas defined in item 5.1;
	e.		subject to the provisions of items 7.3 and 7.4, failure to comply with any of the Gas delivery conditions defined in items 7.2 and 7.5;

except for any of the following events — when there will be no Failure in Supply:

	i.		the fact being attributed to an Fortuitous Case or Force Majeure;
	ii.		for a fact attributable to the User;
	iii.		upon the previous agreement by the User in receiving the Gas out of specification or in nonconformity with the provisions of item 5.1, or the receipt of the Gas by the User out of specification or in nonconformity with the provisions of item 5.1, under the terms of item 5.2 (v);
	iv.		Comgás’ refusal to accept a Daily requested amount (DRA) incompatible with the situations of Comgás’ Scheduled Interruptions and/or of Supplier’s Scheduled Interruptions .

Provider — is the party with which the Supplier has entered into or may enter into a natural gas purchase agreement for the supply of Gas subject of this Agreement.

Commercial Supply- shall mean the supply of Natural Gas made by Comgás to the User at the Cogeneration Plant under the conditions set forth in this Agreement.

Guarantee – is the guarantee to be delivered by the User to Comgás, in the terms of item 11.9 and its subitems.

Natural Gas or Gas — is the natural gas subject of this Agreement, consisting of a mixture of hydrocarbons that are essentially comprised of methane, other hydrocarbons and non-fuel gases, which are extracted from natural reservoirs and which are found in the gaseous state under the Base Conditions. When not written in upper case, the terms “gas” and “natural gas” refer to the generality of the product, and not necessarily to this Agreement.

8

Commercial Supply Start-up- shall mean the date, defined under the terms of Article Three, on which the Commercial Supply shall start.

Law - shall mean any law, code, decree, regulation, resolution, ordinance, deliberation, judgment, order, directive, political directions, agreements or any other requirements or restrictions enacted by any Public Body, provided that these latter two be regulated.

Distribution Margin – is defined in items 8.1.2 and 8.1.2.1.

Month — shall mean a period of time that:

	a)		with respect to the first Month, will start on the Commercial Supply Start-up Day and will end on the last Day of the relevant month;
	b)		with respect to each Month of effectiveness of the Agreement following the first Month, except for the last Month of effectiveness of the Agreement, will start on the first Day of the month and end on the last Day of the relevant month;
	c)		with respect to the last Month of effectiveness of the Agreement, will start on the first Day of the relevant month and end on the last Day of effectiveness of the Agreement.

provided, however, that, when not written in upper case, the term “month” shall mean a calendar month.

Cubic Meter (m³) - is the volume of Gas that, under the Base Conditions, occupies the volume of one (1) cubic meter.

Change in Law - shall mean the occurrence, after the execution date of this Agreement, of any of the following events which demonstrably affects the performance of the obligations undertaken by the Parties, under the terms of this instrument:

	i.		enactment, commencement of effectiveness, change, suspension or revocation of any Law;
	ii.		change in the interpretation or application of any Law.

Notice - shall mean any communication in writing sent by one Party to the other, required or allowed under the terms of this Agreement.

Public Body - shall mean a body, agency, entity or public law legal entity that has jurisdiction over either Party or the transactions provided for in this Agreement.

9

Scheduled Interruptions - are transitory situations foreseen and informed by means of a Notice with, at least, ninety (90) days in advance, which demand the restriction or interruption in the supply or receipt of Gas, for purposes of maintenance or repair, technically recommended, in pipelines, in the Cogeneration Plant or in related ducts:

	•		to the supply of Gas by the Carrier to the Supplier or by the Supplier to Comgás (Supplier’s Scheduled Interruptions);
	•		to the supply of Gas by Comgás to the User (Comgás’ Scheduled Interruptions); and
	•		to the receipt of Gas by the User, for maintenance of equipment of the Cogeneration Plant or of the User’s plant (User’s Scheduled Interruptions),

which, for the rightful reasons provided for in this Agreement, shall fit the following rules or principles:

	i.		for the User, the total number of days of Scheduled Interruptions, cumulatively, may not exceed, in each five (5)-Year period, the average of twenty (20) Days per Year, provided that, in each Year, the number of days of interruption shall not exceed sixty (60) Days, Comgás being allowed to coordinate its Scheduled Interruptions within such period, jointly with the User;
	ii.		for Comgás or its Supplier, the total time of Scheduled Interruptions may not exceed, in each three (3)-Year period, the total of fifteen (15) Days;

the Parties shall use their efforts in order to cause the coincidence of their respective Days of Scheduled Interruptions.

Party(ies) — shall mean, in the singular, Comgás or the User, as per the context; and in the plural, shall mean Comgás and the User, concomitantly.

Affected Party- shall mean the Party invoking the occurrence of an Fortuitous Case or Force Majeure, in order to be released from the compliance with any of its obligations under this Agreement.

Expert Proceeding- shall mean the procedure for dispute resolution provided for in item 19.3.

Expert - shall mean the qualified technician pursuant to item 19.3.3 who is appointed for purposes of dispute resolution through Expert Proceeding.

10

Reference Calorific Value (RCV) — shall mean the SCV of nine thousand four hundred Kilocalories per Cubic Meter (9,400 kcal/m3).

Superior Calorific Value (SCV) — shall mean the quantity of heat produced by combustion, under constant pressure, of a mass of gas occupying a volume of one cubic meter (1m³) at the temperature of twenty degrees Celsius (20^oC) and under absolute pressure of 0.101325MPa, with total condensation of the combustion water vapor. Its measurement unit shall be kcal/m³.

Delivery Point — shall mean the location where the Gas shall be made available to the User, as set forth in Article Six.

Price of Gas Sale - is defined in item 8.1, its subitems related thereto.

Gas Price - is defined in item 8.1.1, its subitems and annex(es) related thereto.

Priority Program of Thermoelectricity (PPT) - shall mean the program for implementation of thermoelectric plants established by the Federal Government under the authority of the Ministry of Mines and Energy, in accordance with Decree No. 3,371 of February 24, 2000.

Amount of Gas or Amount of Natural Gas — shall mean any volume of Natural Gas subject of this Agreement, expressed in Cubic Meters under the Reference Conditions.

Daily Contracted Amount (DCA) - is the Amount of Gas subject of this Agreement as defined in Article Four.

Scheduled Daily Amount (SDA) — is the Amount of Gas subject of this Agreement, which the User, in its schedule of amounts to be taken, in accordance with the provisions established in item 9.2, has requested Comgás to made available at the Delivery Point on the corresponding Day and which has been accepted by Comgás.

Daily Taken Amount (DTA) - is defined in item 9.4.

Daily Requested Amount (DRA) - is the Amount of Gas that, in accordance with the rules of this Agreement and subject to the limit of the Daily Contracted Amount, the User requests that Comgás make available to the User, on any given day, at the Delivery Point.

Missing Amount (QF) – corresponds, on each Day, to the shortfall between the Daily Requested Amount and the Amount of Gas actually made available to the User by Comgás at the Delivery Point on that same Day.

11

Measured Amount (QM) - is the Amount of Gas that, in accordance with the ascertainment made by the Measurement Systems of the CRM, has been delivered at the CRM on the Day, corrected for the Reference Conditions on the Day. For purposes of correction of the Measured Amount, the factor resulting from the division of the average daily SCP of Gas on the Day – as determined at the point closest to the CRM where the Gas is sampled for laboratorial analysis – by PCR, with rounding up of the fourth decimal place shall be applied to the measured volume.

Amount Not Taken (ANT) - corresponds, in any given Year or Month of Gas supply, to an Amount of Gas that the User has taken below its Take or Pay commitment.

Amount Paid and Not Taken (APNT) - corresponds to the accrued balance, in Amount of Gas, by the User before Comgás as a result of payments made to Comgás of the Amounts Not Taken (ANT), and it may be recovered by the User within the term and under the conditions provided for in this Agreement.

Amount Paid and Not Taken of the Year (APNT_Y) – is the specific Amount Paid and Not Taken (APNT) of a determined Year, according to item 9.5.2.

Amount Recovered by User (ARU) - is an Amount of Gas that on any given Day or in a given period, in accordance with the rules set forth in Article Nine, is recovered by the User and deducted from its balance of Amount Paid and Not Taken (APNT).

Kilocalorie (kcal) - shall mean one thousand (1,000) Calories.

Real or R$ - shall mean the legal currency in Brazil.

Amounts Taken in Excess of Schedule — are defined in item 9.6.

Amounts Taken Below Schedule - are defined in item 9.7.

Arbitration Award - shall mean the final award (as per items 19.2.5 and 19.2.6) to be presented by the Arbitration Tribunal to the Parties in procedures for disputes resolution.

12

Ship or Pay - is defined in item 9.8.

Measurement System - shall mean the set of primary and secondary elements of flow, temperature and pressure measurement and, if any, converters, transmitters, flow computers, integrators and recorders.

Supplier – shall mean Petróleo Brasileiro S.A – Petrobras, as supplier of Natural Gas to Comgás, under the terms of Supplier-Comgás Agreement or any other that may replace it.

Take or Pay — is defined in item 9.3, items “b” and “c”.

Distribution Take or Pay – is defined in item 9.8.2 (ii).

Exchange Rate - means the average rate for sale of Dollar defined as the effective rate on the respective date of conversion disclosed by the Brazilian Central Bank’s System (SISBACEN), identified as PTAX-800 transaction — Option 5 – Currency 220.

Carrier - shall mean any provider of natural gas transportation service through pipelines, established in accordance with the applicable provisions of the National Petroleum Agency (ANP) or an entity replacing it in the competence of regulating and/or inspecting said activity.

Arbitration Tribunal – is defined in item 19.2.3.

Measured Volume – means any amount of GAS measured by the CRM measurement system in cubic meters under the base conditions.

ARTICLE TWO — PURPOSE

2.1

The purpose of this Agreement is the sale and supply by Comgás, and the purchase and receipt by the User, in the conditions set forth herein, of Natural Gas, exclusively for serving the needs of the Cogeneration Plant

ARTICLE THREE – COMMERCIAL SUPPLY

3.1

For the purposes of this Agreement, it is established, as the date of execution of this Agreement, the Commercial Supply Start-up date.

ARTICLE FOUR – DAILY CONTRACTED AMOUNT

4.1

The Daily Contracted Amount (DCA), at the Reference Conditions, shall be of three hundred thousand Cubic Meters per day (300,000 m3/day).

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4.1.1

After ten (10) years the User shall be entitled to increase, the Daily Contracted Amount (DCA) in up to five percent (5%) upon notice to comgás sent at least twelve (12) months before the new DCA becomes effective.

ARTICLE FIVE — QUALITY

5.1 The Gas to be delivered by Comgás to the User shall present characteristics of quality that meet, at least, the specifications of Ordinance No. 104 of July 8, 2002, issued by the National Petroleum Agency – ANP or those that may replace it in view of a supervening Law.

5.2 Whenever Comgás is aware of the possibility of the Gas being supplied at the Delivery Point, partially or totally, in nonconformity with the specifications set forth in item 5.1, the following provisions shall apply:

	i.		Comgás shall notify, in writing, the User, as soon as possible, of the expected non-conformity in the Gas to be supplied, indicating what would be the probable non-conforming items and, precisely, the respective quality deviations;
	ii.		after the receipt of the Notice referred to in item above, the User shall inform, as soon as possible, whether it accepts or not to receive the Gas out of specification; it being henceforth expressly understood and accepted that the User’s failure to inform its decision within the term stated in the Notice will be considered as the User’s option not to receive the Gas out of specification.
	iii.		if it opts to receive the Gas out of specification, the User shall be entitled to a ten percent (10%) discount on the portion of the price pertaining to the Gas (commodity), except when the nonconformity is only pertaining to a SCP greater than the specified;
	iv.		if, however, the User opts not to receive the Gas out of specification or fails to inform its decision and, it actually does not take said Gas, the Failure in Supply for the non-compliance with the DRA will deemed to have occurred, and Comgás shall bear the payment of the penalties provided for in item 9.9.2;

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v.

if the User has informed that it would reject the Gas out of specification or fails to inform its decision, but, in spite of that, the Gas is taken at the Delivery Point, the Failure in Supply will be not be deemed to have occurred, and Comgás shall not be liable for any penalties and/or liability for damages that may eventually be caused to the equipment and facilities of the User, as well as to the Cogeneration Plant as a result of the informed non-conformity; being preserved, however, the right of the User to the discount referred to in subitem (iii) above.

5.2.1

If Comgás delivers the Gas out of the specification provided for in item 5.1, without giving prior Notice to the User of the existing non-conformity, the following rules shall be applicable:

	a)		If, exclusively as a result of the nonconformity presented by the Gas and the cause-effect relation being duly evidenced, the Cogeneration Plant suffers any damages in its equipment, then, unless the nonconformity has occurred as a result of an Fortuitous Case or Force Majeure, Comgás shall bear, always subject to the limit provided for in Article Twenty, until the damages have been repaired;
	(i)		with the penalties applicable for the cases of Failure in Supply, as provided for in item 9.9.2, subject to the limit established in item 9.9.3;
	(ii)		the costs determined according the procedures set forth in item 19.1.1, effectively incurred with the repair of the equipment of the Cogeneration Plant that has evidently been damaged by the use of the Gas out of specification, subject to the limit established in item 5.2.2 below.
	b)		If the supply of Gas out of specification does not cause any damages to the equipment of the Cogeneration Plant or if the cause-effect relation referred to in item (a) above has not been evidenced, the Failure in Supply shall be deemed not to have occurred, and Comgás shall not be liable for any penalties and indemnification for the repair of damages, being preserved, however, the right of the User to the discount referred to in item 5.2 (iii) above — which discount, however, is not enforceable if the non-conformity has resulted from an Fortuitous Case or Force Majeure.

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c)

In case of item (a) above, during the period required for repairing the equipment of the Cogeneration Plant, the Take or Pay, Ship or Pay and Distribution Take or Pay commitments will be suspended. Said commitments will also be suspended during the period required for repairing the equipment of the Cogeneration Plant in case the damage of such equipment has occurred as a result of the occurrence of an Fortuitous Case or Force Majeure. The period required as stated above will be determined as per the procedure provided for in item 19.1.1.

5.2.2

Subject to the provisions of Article Twenty, in any event, the total of payments of Comgás set forth in item 5.2.1(a)(ii) shall exceed, during the whole effectiveness of this Agreement, the maximum limit corresponding to five per cent (5%) of the value of the Agreement, determined by the following formula:

     IL = K x 0.05 x DCA x N x GP, where:

			IL — is the maximum limit of payment by Comgás;
			DCA — is the Daily Contracted Amount;
			N — is the number of days of effectiveness of the Agreement, calculated as of the execution date of the Agreement up to the final date set forth in item 13.1;
			GP — is the Gas Price in force on the date of occurrence of the event set forth in item 5.2.1(a)(ii) converted to Reais per Cubic Meter at the Reference Conditions according to the Exchange Rate of the last business day of the Month of payment of a certain indemnification.
			K              is the percentage of use of the IL, which shall vary from 0 to 1, and, on the execution date of this Agreement, shall correspond to 1. At each payment made by Comgás under the terms of item 5.2.1(a)(ii), a new K factor shall be determined by the reduction of (i) the percentage corresponding to such payment in relation to the value 0.05 x DCA x N x GP from the (ii) previous K factor.

5.3 Irrespectively of the analyses made by the User, Comgás shall verify the quality of the Gas supplied, by means of analyses whose results shall be forwarded to the User in a periodicity compatible with the frequency of measurement set forth in Ordinance ANP No. 104.

5.3.1

Upon the occurrence of a discrepancy between the results of quality verifications made by the Parties, each of them shall grant free access to the other Party in order to follow up the sampling and the analysis of the Gas, aimed at establishing a solution for the pending matter.

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5.4

In case the dispute is not settled within ten (10) days as of the occurrence of the discrepancy referred to in item 5.3.1, the dispute will be submitted to an Expert Proceeding.

ARTICLE SIX — DELIVERY POINT AND PROPERTY TRANSFER

6.1		The Delivery Point will be located immediately downstream the outlet flange of the Regulation and Measurement Set (CRM), which shall in turn be located in the User’s Unit located at Rua Paula Bueno, 2935 – Mogi Guaçu, State of São Paulo.
6.2		It is established as measurement point the Regulation and Measurement Set (CRM) owned by Comgás, located at the User’s facilities.
6.3		The transfer of ownership of the Gas from Comgás to the User will occur at the Delivery Point.

6.3.1

All risks and losses of Gas:

	•		Up to the Delivery Point shall be for the account of Comgás;
	•		As from the Delivery Point shall be for the account of the User.

ARTICLE SEVEN – TERMS FOR DELIVERY OF GAS

7.1		The Gas will be delivered by Comgás to the User at the Delivery Point in conformity with the quality aspects set forth in Article Five.
7.2		The supply control manometric pressure at the Delivery Point will be no more than seventeen (17) kgf/cm2 and not less than twelve (12) kgf/cm2.

7.2.1

In special situations, the Parties may define control pressures other than that stated in item 7.2.

7.3		The average hourly flow shall be no more than one twenty-fourth (1/24) of the Daily Contracted Amount — DCA, provided that an increase of up to ten percent (10%) shall be allowed.
7.4		The instantaneous flow, in Cubic Meters per hour, shall not be more than one twenty-fourth (1/24) of the Scheduled Daily Amount — SDA,

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			provided that an increase, for periods not greater than fifteen (15) minutes a Day, of up to ten percent (10%) shall be allowed.
7.5		The maximum delivery temperature of the Gas shall be thirty-five degrees Celsius (35ºC).

ARTICLE EIGHT – PRICE

8.1

The Price of Gas Sale (PS) at the Delivery Point to be charged by Comgás for the exclusive purposes of Cogeneration will be comprised of the sum of two portions: one related to the Gas Price (GP) and other related to the Distribution Margin (DM), in accordance with their respective values at each time, so that PS = GP + DM.

8.1.1

The Gas Price (GP), in turn, is comprised of the sum of two portions: one related to the commodity (PC) and the other related to Transportation (PT), so that: GP = PC + PT and shall be determined and readjusted as per the methodology stated in Annex 1.

8.1.1.1

The Gas Price (GP) shall be added by the taxes levied on the purchase of gas by Comgás in the Supplier-Comgás Agreement which are not creditable in view of legal determination or determination of any competent authority.

8.1.2

The Distribution Margin (DM) shall be that set forth by the Commission of Public Energy Services – CSPE for the cogeneration segment stated in Ordinance CSPE No. 366, of May 30, 2005 or any other that may replace it.

8.1.2.1

Pursuant to Annex 2 of CSPE Ordinance No. 366/05, the Distribution Margin (DM) shall be calculated in cascade, i.e., progressively for each class of consumption, considering the amount of Gas consumed by User in the month:

						COGENERATION OF ELECTRIC ENERGY
						FOR SELF CONSUMPTION OR SALE TO
						END CONSUMER (VARIABLE R$/m 3 with
CLASS		m 3/month				PIS and COFINS and without ICMS)
1		Up to 100,000.00 m3					0.1661096
2		100,000.01 through 500,000.00 m3					0.1314942
3		500,000.01 through 2,000,000.00 m3					0.1291321

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						COGENERATION OF ELECTRIC ENERGY
						FOR SELF CONSUMPTION OR SALE TO
						END CONSUMER (VARIABLE R$/m 3 with
CLASS		m 3/month				PIS and COFINS and without ICMS)
4		2,000,000.01 through 4,000,000.00 m3					0.1168830
5		4,000,000.01 through 7,000,000.00m3					0.1022740
6		7,000,000.01 through 10,000,000.00 m3					0.0876628
7		((OVER)) 10,000,000.00 m3					0.0727138

8.2

The Price of Gas Sale (PS) shall be added by the Tax on Operations Pertaining to the Movement of Merchandise and on Interstate and Intermunicipality Transportation Service Provision and Communications – ICMS, under the terms of the applicable legislation, as well as by any other federal, state and municipal taxes (taxes, fees, rates, tax and para-tax contributions) levied or that may be levied on the operation of this Agreement.

ARTICLE NINE — SCHEDULING OF AMOUNTS TO BE TAKEN, COMMITMENTS AND PENALTIES FOR DEFAULT

9.1

Before the date of the first request of Gas, each Party shall inform to the other, by means of Notice, a fax number to which the operating notices shall be transmitted in relation to the performance of this Agreement.

9.2

Scheduling of Amounts of Gas to be Taken

As of the Commercial Supply Start-up, the User shall send on a monthly basis to Comgás, with twelve (12) days in advance from the beginning of the Month of supply, a Notice with the schedule of the amount of Gas to be taken referring to the current Month and to the two subsequent Months.

	9.2.1		The schedule referred to above shall detail the Daily Requested Amounts (DRA) for the next Month, as well as, only for the sake of indication, the total amounts for the two subsequent months, everything taking into account the Scheduled Interruptions and subject to the limit of the Daily Contracted Amount (DCA).
	9.2.2		The schedule of the Month shall detail, for the sake of indication, the portion of the Amount Paid and Not Taken (APNT) which will be used on each Day of that Month — which will become, upon the use, the Amount Recovered by User (ARU). Such amount may not exceed, on the daily average of that Month, forty-four percent (44%) of the Daily Contracted Amount (DCA), except after the end of this Agreement, when, subject to the provisions of item 9.5.3 (b), such amount shall be a hundred per cent (100%) of that would be the old DCA.

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	9.2.3		The Daily Requested Amount (DRA) for any given day may be changed (increased or decreased) by the User, subject to the limit of the DCA, upon delivery of Notice to Comgás up to 8:00 a.m. (eight o’ clock) of the day previous to the corresponding day of supply.
	9.2.4		Until two o’ clock (2:00 p.m.) of the day previous to the corresponding day of supply, Comgás, through delivery of Notice to the User, shall confirm the acceptance of the Daily Requested Amount, which will be considered as the Scheduled Daily Amount. Comgás’ failure to make such confirmation within the term provided for above shall be automatically considered as acceptance of the Daily Requested Amount (DRA) by Comgás, and such DRA shall be automatically considered SDA.
	9.2.5		Exceptionally, upon the occurrence of any operating problems that restrict the capacity of Gas delivery, the Parties may negotiate a reduction of the Scheduled Daily Amount (SDA) for any given Day. Should the Parties agree on such reduction, the Daily Contracted Amount (DCA), exclusively on that Day, will be reduced to the amount of the new Scheduled Daily Amount (SDA), not characterizing thus Failure in Supply.
	9.2.6		If there is availability of Gas and interest of Comgás and the User, the Scheduled Daily Amount (SDA) may be increased during the Day, and the quantity so increased shall be then the Scheduled Daily Amount (SDA) of said Day.

9.3

Commitments of Gas Receipt (Take or Pay)

Except for the situations of non-delivery or non-receipt of Gas for Failure in Supply, Scheduled Interruptions or Fortuitous Case or Force Majeure of either Party, the User undertakes to:

	a)		purchase and take, on a daily basis, from Comgás no more than one hundred and ten percent (110%) of the Scheduled Daily Amount (SDA), limited to one hundred and ten percent (110%) of the Daily Contracted Amount (DCA), and not less than eighty percent (80%) of the Scheduled Daily Amount (SDA) of Gas for the corresponding Day, subject, in case of the noncompliance, to the penalties provided for in items 9.6 and 9.7 and respective subitems;
	b)		at every Month of the effectiveness of the Agreement, purchase and take from Comgás — and, even if it does not take, pay– an Amount of Gas that, at the daily average of the corresponding Month is either equal to or greater than fifty-six percent (56%) of the Daily Contracted Amount in effect referred to by Article Four;

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c)

at every Year of the effectiveness of the Agreement, purchase and take from Comgás — and, even if it does not take, pay– an Amount of Gas that, at the daily average of the corresponding Year is either equal to or greater than eighty percent (80%) of the Daily Contracted Amount (DCA) in effect referred to by Article Four;

9.3.1

The percentages referred to in subitems (b) and (c) of item 9.3 correspond to the monthly and annual Take or Pay commitments, whose compliance will be verified by taking into account only the Daily Taken Amount (DTA) such as defined in item 9.4.

9.4		Daily Taken Amount (DTA)
		The Daily Taken Amount (DTA) will be determined by the formula:
		DTA = QM – ARU
		where :
		DTA — Is the Daily Taken Amount;
		QM — Is the Measured Amount at CRM on the respective Day; and
		ARU — Is the Amount Recovered by the User on the respective Day.

9.4.1

The sum, in the Month, of the Daily Taken Amounts (DTAs) will be used as parameter for purposes of determination of the Amount Not Taken in the Month (ANTM) and the Amount Not Taken of the Year (ANTy), pursuant to item 9.5.

9.5		Amounts Not Taken — Determination
		The Amounts Not Taken (ANTs) of Gas to be paid by the User to Comgás in view of the provisions of subitems (b) and (c) of item 9.3 shall be calculated according to the following formulas:

	a)		amount to be paid in each Month:
	b)		amount to be paid in each Year:

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where:

ANTM		-		is the Amount of Gas not Taken in the Month, being zero if the calculation result is negative;
M		-		is the number of Days of the Month of supply;
PPM		-		is the total number of days (or a fraction thereof) corresponding to Scheduled Interruptions in the Month, at the proportion in which they have affected the receipt or the regular supply of Gas at the Delivery Point
PPPY				is the total number of Days (or a fraction thereof) corresponding to Scheduled Interruptions exclusively from Comgás in the Year, at the proportion in which they have adversely affected the regular supply of the Gas at the Delivery Point;
DCA		-		is the Daily Contracted Amount effective in the Month and/or Year of supply, receptively for subitems (a) and (b) of this item;
QNFFj		-		is the portion of the Scheduled Daily Amount (SDA) which has not been taken on day “j” for a reason of Failure in Supply;
QNFMj		-		is the portion of the Scheduled Daily Amount (SDA) which has not been taken on day “j” due to an Act of God or a Force Majeure Event;
DTAj		-		is the Daily Taken Amount on day “j”;
ANTY		-		is the Amount Not Taken of Gas in the Year, being zero if the calculation result is negative;
Y		-		is the number of the Days in the Year of supply.

9.5.1

Payments for Amounts Not Taken

The amount to be paid by the User to Comgás as Amount Not Taken (Take or Pay) shall be:

	(a)		at every Month, the product of the ANTM (Amount Not Taken in the Month) by the value of the portion pertaining to the commodity of the Gas Price in effect at the end of the last day of the Month of supply, added by the taxes due, as provided for in the applicable legislation.
	(b)		at every Year, the product of the ANTY (Amount Not Taken in the Year) by the value of the portion pertaining to the commodity of the Gas Price in effect at the end of the last day of the Year of supply, added by the taxes due, as provided for in the applicable legislation.

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The amounts referred to in item 9.5.1 shall be paid by the User within the same term and according to the same rules and further conditions set forth in Article Eleven for the payment of Gas invoices pertaining to the invoicing period.

	9.5.2		Amount Paid and Not Taken (APNT)
			Once the payment of each of the amounts referred to in item 9.5.1 has been made, the corresponding Amount Not Taken (ANT) will be added to the Amount Paid and Not Taken of the corresponding Year (APNTy), being the total APNTy on the first moment of the Year equal to zero.

	9.5.3		Recovery of Amounts Paid and Not Taken
			The User may recover, in whole or in part – upon Notice as per item 9.2.2, always for consumption at the Cogeneration Plant, the remainder of the Amounts Paid and Not Taken (APNTs) of Gas (commodity), as follows:

a)

during the effectiveness of the Agreement, including any possible extension pursuant to item 13.1:

	(i)		up to the last Month of the seventh (7th) Year subsequent to the Year of verification of the Amount Paid and Not Taken of a certain Year (APNTy);
	(ii)		on the condition that it has already requested and taken, in the Month in which there is the recovery, an Amount of Gas corresponding, at least, to the monthly Take or Pay commitment;

b)

after the end of the term established in the Article Thirteen, including its eventual extension pursuant to Article Thirteen: except for the event of termination caused by the User or for its fault:

	(i)		up to the limit of the DCA or to such limit that may be agreed by Comgás and the User;
	(ii)		up to the term of three hundred and sixty five (365) days following the end of the Agreement, pursuant to item 13.1.1.

9.5.3.1

The portion taken by the User of the remainder of Amounts Paid and Not Taken (APNT’s) will be referred to as Amount Recovered by the User (ARU) and will be, at the time of such recovery, deducted from the said remainder, by order, from the oldest to the most recent APNTY.

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	9.5.3.2		For the Amount Recovered by the User (ARU), the User shall pay to Comgás the portion corresponding to the taxes levied, under the terms of the applicable legislation.
	9.5.3.3		For the Amounts Recovered by the User (ARU’s) in accordance with item 9.5.3(b), the User shall also pay to Comgás the portion of the Gas Price pertaining to the transportation of the entire volume recovered in the Month or ninety-five percent (95%) of what would be the Daily Contracted Amount (DCA), whichever is higher, with all taxes levied thereon.
	9.5.3.4		After the deadlines referred to in subitems (a) and (b) of item 9.5.3 or after the termination of the Agreement by Comgás as a result of a default by the User, the balance of the Amount Paid and Not Taken will be considered as having been extinguished, whether there is a remainder or not, and the User will not have any right of recovery. In case of termination of the Agreement by the User for a default by Comgás or in case of termination under the terms of item 17.5(a), Comgás shall pay to the User the amounts provided for in item 17.4.1(ii).
	9.5.3.5		In the event of termination of the Agreement under the terms provided for in item 17.5(b):

	(a)		the remainder of the Amount Paid and Not Taken (APNT) of Gas will be considered as being extinguished, whether there is a remainder or not, and the User will not have any right of recovery, in case the termination of the Agreement pursuant to said item 17.5(b) results from unilateral decision by the User or from a default of the User;
	(b)		the amount corresponding to the possible residual amount of the Amount Paid and Not Taken (APNT) of Gas will be paid by Comgás to the User, as provided for in item 17.4.1(ii), if the termination of the Agreement pursuant to said item 17.5(b) results from unilateral decision of Comgás or from a default of Comgás.

9.6		Penalty for Amount Taken in Excess of Schedule
		If, on any given Day, the User takes an Amount of Gas exceeding by more than ten percent (10%) the Scheduled Daily Amount (SDA) for that Day, or ten percent (10%) of the Daily Contracted Amount (DCA) in effect, whichever is lower, then it shall pay to Comgás, unless if agreed upon between the Parties, in addition to the regular invoicing:

i)

a penalty in the amount determined by the following formula:

	PATES		=		0.30 [(QM-QL) x PC + QT x PT], where:
	PATES		-		Is the amount, on the Day, of the penalty for Amount Taken in Excess of Schedule to be paid by the User to Comgás;
	QM		-		is the Measured Amount on such Day;
	QL		-		is the lowest Amount of Gas established below:
					•  the SDA for that Day added by ten percent (10%) or
					•  the DCA added by ten percent (10%);
	PC		-		is the amount of the portion pertaining to the commodity in the Gas Price in effect on the last Day of the Month in which the User has taken a quantity of Gas higher than the Scheduled Daily Amount (SDA), already expressed in R$/m3, considering the Exchange Rate of the last business day of the same Month;
	QT		-		is an Amount of Gas expressed in m3, whose amount is:
					• equal to the difference between Measured Amount (QM) and the smallest Amount of Gas among the following: 110% of the Scheduled Daily Amount (SDA) or 110% of the Daily Contracted Amount (DCA), if 110% of the Scheduled Daily Amount (SDA) of such Day is greater than 95% of the Daily Contracted Amount (DCA);
					• equal to QM – 95% of the DCA, if 110% of the SDA of that Day is lower than 95% of the DCA and QM is greater than 95% of the DCA;
					•  equal to zero, in the other events;
	PT		-		is the amount of the portion pertaining to the transportation in the Gas Price in effect on the last Day of the Month in which the User has taken Amounts of Gas greater than the Scheduled Daily Amount (SDA), already expressed in R$/m3, considering the Exchange Rate of the last business day of the same Month.

	9.6.1		Without prejudice to the provisions of item 9.6, if the User fails to comply with the limits specified in said item, and that implies risk to the operation of the distribution system, Comgás may limit the flow in the Regulation and Measurement Set (CRM), upon prior notice to the User.
	9.6.2		The payment of the penalty referred to in item 9.6 will be made on the maturity date of the invoices pertaining to the concerned Month as provided for in item 11.4 — and the User shall be subject, in case of non-payment within such term, to the same additions and other rules applicable to the invoices paid in delay, pursuant to Article Eleven.

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9.7 Penalty for Amount Taken Below Schedule

If, on any given day, the User takes an Amount of Gas lower than eighty percent (80%) of the Scheduled Daily Amount for that Day, it shall pay to Comgás, as of the second event in any given Month, or as of the seventh event in a certain Year, in addition to the regular invoicing, a penalty in the amount determined by the following formula:

	PATBS	=	(0.80x SDA — QM) x B x PC, where:
	Patbs	-	is the limit amount, on the day, of the Penalty for Amount Taken Below Schedule to be paid by the User to Comgás;
	B	-	the amount of B shall depend on the percentage of deviation to be produced between the Scheduled Daily Amount (SDA) and the amount actually taken, as follows:
			§ If QM ³ (0.80 x SDA), then B = 0 ;
			§ If QM < (0.80 x SDA) and QM ³ (0.75 x SDA), then B = 0.05;
			§ If QM < (0.75 x SDA) and QM ³ (0.70 x SDA), then B = 0.10;
			§ If QM < (0.70 x SDA), then B = 0.15
	QM	-	Is the Measured Amount on such Day;
	SDA	-	Is the Scheduled Daily Amount for that Day;
	PC	-	is the amount of the portion pertaining to the commodity in the Gas Price in effect on the last day of the Month in which the User has taken the Amount of Gas lower than the Scheduled Daily Amount (SDA), already expressed in R$/m3, considering the Exchange Rate of the last business day of the month.

9.7.1

The payment of the penalty referred to in item 9.7 will be made on the maturity date of the invoices pertaining to the concerned Month as provided for in item 11.4 – and the User shall be subject, in case of non-payment within such term, to the same additions and other rules applicable to the invoices paid in delay, pursuant to Article Eleven.

9.8.1

On a monthly basis, the User shall pay to Comgás, within the term set forth in item 11.4, the product of the portion pertaining to the

transportation of the Gas Price (PT) by the greater amount between the following (QT) added by the taxes levied, as provided for in the applicable legislation:

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	i.		the sum, in the Month, of the Daily Taken Amount (DTA) plus the Amount Recovered by the User (ARU).
	ii.		the product of ninety-five percent (95%) ¾ Ship or Pay ¾ of the Daily Contracted Amount (DCA) by the number of Days of the corresponding Month, deducted from this calculation the situations of non-delivery or non-receipt of Gas for Failure in Supply, Fortuitous Case or Force Majeure by either Party and/or Scheduled Interruption by Supplier and/or Comgás, in the proportion that they have adversely affected the receipt or the regular supply of Gas at the Delivery Point.

9.8.2

On a monthly basis, the User shall pay to Comgás, within the term set forth in item 11.4, the product of the portion pertaining to the Distribution Margin by the greater among between the following (QT) added by the taxes levied, as provided for in the applicable legislation:

	i.		the sum, in the Month, of the Daily Taken Amount (DTA) plus the Amount Recovered by the User (ARU).
	ii.		the product of eighty percent (80%) of the Daily Contracted Amount (DCA) –the Distribution Take or Pay — by the number of Days of the corresponding Month, deducted from this calculation the situations of non-delivery or non-receipt of Gas for Failure in Supply, Fortuitous Case or Force Majeure by either Party and/or Comgás’ Scheduled Interruption or the Supplier’s Scheduled Interruptions, in the proportion it has adversely affected the receipt or the regular supply of Gas at the Delivery Point.

9.9.1

Comgás undertakes to accept the Daily Requested Amounts (DRA) as Scheduled Daily Amounts (SDA), as well as to make available to the User, at the Delivery Point, at every Day, an Amount of Gas equal to the Daily Requested Amount (DRA) for the corresponding Day.

9.9.1.1

Comgás is released from its obligation to accept, as Daily Requested Amount (DRA), Daily Requested Amounts (DRA) that are incompatible with situations of Comgás’ and/or Supplier’s Scheduled Interruptions.

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	9.9.2		In the event of proven Failure in Supply, Comgás shall pay to the User, as the sole and enforceable compensation, the amount determined by the following formula, always subject to the limit set forth in item 9.9.3 below:
			Md = 0.15 x GP x QF
			where:
			Md — daily fine, in national currency;
			QF — Missing Amount on the Day on which there was a Failure in Supply;
			GP — Gas Price at the Delivery Point, pursuant to item 8.1.1 of Article Eight, in effect in the Month.

9.9.2.1

The payment of the penalty referred to by item 9.9.2 shall be made on the maturity date of the invoices pertaining to the concerned Month as provided for in item 11.4 — the User shall be subject, in case of non-payment within such term, to the same additions and other rules applicable to the invoices paid in delay, pursuant to Article Eleven.

9.9.3

Under no circumstance, the total of payments by Comgás as a result of Failure in Supply may exceed, in each Year, the non-cumulative limits specified below, subject to the provisions of Article Twenty.

(i)

in case the Failure in Supply is the result of a failure in supply by the Supplier in the Supplier-Comgás Agreement: limit corresponding to 3,285,000 m 3 multiplied by the Gas Price in effect, converted to Reais per Cubic Meters, calculated according to the following formula:

IL		=		K x 3,285,000 x GP, where
IL		-		is the maximum limit of payment by Comgás in case of Failure in Supply resulting from a failure in supply by the Supplier in the Supplier-Comgás Agreement;
GP		-		is the Gas Price in force on the date of occurrence of each Failure in Supply converted to Reais per Cubic Meter at the Reference Conditions according to the Exchange Rate of the last business day of the Month of payment of an indemnification.
K				is the percentage of use of the IL, which shall vary from 0 to 1, and, on the execution date of this Agreement and on the beginning of each Year, shall correspond to 1. At each payment made by Comgás for Failure in Supply, a new K factor shall be determined by the reduction of (i) the percentage corresponding to such payment in relation to the value 3,285,000 x GP from the (ii) previous K factor.

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(ii)

in case the Failure in Supply is exclusively attributable to Comgás: limit corresponding to 3,285,000 m 3 multiplied by the Gas Price in effect, converted to Reais per Cubic Meters, calculated according to the following formula:

IL		=		K x 3,285,000 x GP, where
IL		-		is the maximum limit of payment by Comgás in case of Failure in Supply exclusively of Comgás;
GP		-		is the Gas Price in force on the date of occurrence of each Failure in Supply converted to Reais per Cubic Meter at the Reference Conditions according to the Exchange Rate of the last business day of the Month of payment of an indemnification.
K				is the percentage of use of the IL, which shall vary from 0 to 1, and, on the execution date of this Agreement and on the beginning of each Year, shall correspond to 1. At each payment made by Comgás for Failure in Supply, a new K factor shall be determined by the reduction of (i) the percentage corresponding to such payment in relation to the value 3,285,000 x GP from the (ii) previous K factor.

9.9.3.1

The Parties agree that the indemnification limits provided for in item 9.9.3 above are exclusively established for each Year and are not cumulative with the limits of other Years. Therefore, any possible balance of the indemnification limit of any given Year, which has not been used for such Year, will not be added to the indemnification limits of the subsequent Year.

ARTICLE TEN — COMMITMENT OF PRIORITY OF PURCHASE OF DAILY CONTRACTED AMOUNT (DCA) OF THE AGREEMENT AND GAS USAGE RESTRICTION

10.1

Priority of Acquisition of Daily Contracted Amount (DCA) of the Agreement

	10.1.1		The User agrees that the supply of Gas, subject of this Agreement, will have priority in relation to any other supply of piped gas to the Cogeneration Plant which it may possibly request to Comgás until the Daily Contracted Amount (DCA) set forth in this Agreement is reached.
	10.1.2		If the User consumes gas from other agreement in violation with the provisions of 10.1.1 above, the User shall pay to Comgás, as penalty, the amount calculated by the formula P = GP x QT, where:

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P		-		is the amount of the penalty pertaining to the Day;
GP		-		is the total unit price of the Gas at the Delivery Point in effect on the last day of the month of occurrence of the fact generating the penalty, converted into Reais per Cubic Meter at the Reference Conditions, according to the Exchange Rate of the day prior to the payment day to Comgás.
QT		-		is the Amount of Gas (expressed in Cubic Meters at the Reference Conditions) taken on the Day by the User which is not the Gas subject of this Agreement, limited to the difference [DCA — QR – QFF], in which:
				DCA		-		Is the Daily Contracted Amount;
				QR		-		Is the Amount of Gas subject of this Agreement which has been used on that Day by the User;
				QFF		-		Is the Amount of Gas which, on that Day, has been subject of proven Failure in Supply;

	10.1.3		The payment of the penalty referred to by item 10.1.2 shall be made on the maturity date of the invoices pertaining to the supply of Gas of the concerned Month – the User shall be subject, in case of non-payment within such term, to the same additions and other rules applicable to the Gas supply invoices paid in delay, pursuant to Article Eleven of this Agreement.
	10.1.4		The payment obligation of the penalty referred to in item 10.1.2 will be irrespectively of all the other obligations under the Agreement, including the Take or Pay, Ship or Pay and Distribution Take or Pay obligations and the payment of the full price for any amount of Gas supplied at the Delivery Point.
	10.2		Gas Usage Restriction
	10.2.1		The User agrees that all the Gas subject of this Agreement shall be consumed at the Cogeneration Plant.
	10.2.2		If the User destines any Amount of Gas to any other use(s) in violation with the provisions above, the User shall pay to Comgás, as a penalty, the amount corresponding to the product of such Amount of Gas by seventy percent (70%) of its total unit price (PS) at the Delivery Point in effect on the last Day of the month of occurrence of the fact generating the penalty.

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	10.2.3		The payment of the penalty referred to by item 10.2.2 shall be made on the maturity date of the invoices pertaining to the supply of Gas of the concerned Month as provided for in item 11.4 – the User shall be subject, in case of non-payment within such a term, to the same additions and other rules applicable to the Gas supply invoices paid in delay, pursuant to Article Eleven of this Agreement.
	10.2.4		The payment obligation of the penalty referred to in item 10.2.2 will be irrespectively of all the other penalties and obligations of the Agreement, including the ones related to termination, Take or Pay, Ship or Pay, Distribution Take or Pay and the obligation to pay the full price of the totality of Gas supplied at the Delivery Point.

ARTICLE ELEVEN – INVOICING, PAYMENT MANNER AND GUARANTEE

11.1 Amounts to Be Invoiced

11.1.1

Portion Pertaining to the Commodity:

For the supply of Gas (commodity), the invoicing amount will be determined by the application of the following formula:

where:

	FC	-	is the amount of the invoicing of the commodity in each period of invoicing to be paid by the User on the maturity date defined pursuant to item 11.4;
	DTAj	-	is the Daily Taken Amount on day “j”;
	PC	-	is the unit amount of the portion pertaining to the commodity added by the taxes and converted into national currency per Cubic Meter at the Reference Conditions in accordance with the Exchange Rate of the last business day of the Month of supply;
	K	-	is the first Day of Gas supply in the invoicing period;
	J	-	is each one of the Days of Gas supply in the concerned invoicing period;
	N	-	corresponds to the last Day of Gas supply in the concerned invoicing period;
	DFc	-	is the supplementary amount of the invoicing of the commodity pertaining to the previous supply period, calculated by means of the difference between (i) the amount ascertained in accordance with the Exchange Rate published on the business days previous to the 25th day of the Month of supply and (ii) the amount invoiced in the previous period being deducted therefrom the supplementary amount of the DFc previously applied.

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11.1.2

Portion Pertaining to the Transportation

In relation to the Gas transportation, the invoicing amount will be determined by means of the application of the following formula:

     where:

	FT	-		is the invoicing amount pertaining to the transportation in each period of invoicing, to be paid by the User on the maturity date as defined pursuant to item 11.4;
	QT	-		is the Amount of Gas defined pursuant to item 9.8
	PT	-		is the amount of the portion pertaining to the transportation of the Gas Price in force on the Month of supply and converted into national currency per Cubic Meter at the Reference Conditions by the Exchange Rate of the last business day of the Month of supply.
	DFt	-		is the supplementary amount of the invoicing of the transportation pertaining to the previous supply period, calculated by means of the difference between (i) the amount ascertained in accordance with the Exchange Rate published on the business day previous to the 25th day of the Month of supply and (ii) the amount invoiced in the previous period being deducted therefrom the supplementary amount of the DFt previously applied.

	11.1.3		Portion pertaining to the Distribution Margin
			In relation to Comgás’ Distribution Margin, the invoicing amount shall be as established hereinafter:

where:

	Fm	-		is the invoicing amount pertaining to the Distribution Margin in each Month of invoicing, to be paid by the User on the maturity date as defined pursuant to item 11.4;
	QMi	-		is the Amount Measured on Day i, in m3.
	N	-		is the last Day of Gas supply in the Month or the considered supply period
	Mg	-		is the Distribution Margin calculated as defined in items 8.1.2 and 8.1.2.1
	I	-		is each one of the Days of Gas supply in the Month or period of invoicing considered

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	11.1.4		Portion Pertaining to the Amount Not Taken
			In relation to the Amount Not Taken, the invoicing amount shall be determined by the application of the formulas provided for in item 9.5.

11.2		- Periodicity of Invoicing and other Collections.
		Invoicing shall be made on a monthly basis, and each Month shall correspond to a Gas supply period. The other Collection Documents shall be issued with the same periodicity, without prejudice to the provisions of item 11.3.

11.3		Submission of Bill of Sales and Collection Documents
		Comgás shall submit to the User the bill of sales and the Collection Documents up to the tenth (10th) day of the Month following the Month to which they refer and up to the tenth (10th) day of the first Month of the subsequent Year for the invoicing related to annual Take or Pay. The failure by Comgás to submit the Collection Documents within the established term shall result in the extension of the maturity date for a period equivalent to the delay.

11.4		Collection Documents – Maturity Dates
		The amounts of the Collection Documents shall be paid in the country legal currency, by way of credit into the current account of Comgás (to be previously informed), up to the twenty-fifth (25th) day of the month following the Month to which they refer, or, if such is not a business day, on the first (1st ) subsequent business day.

	11.4.1		In case of delay in the delivery of the Collection Document, the maturity date shall be extended for a term identical to the number of days of delay, remaining applicable, however, the original dates set forth in items 11.1.1 and 11.1.2 for the determination of the Exchange Rate.
	11.4.2		The Collection Document(s) shall be issued by Comgás, in the name of:
			Corn Products Brasil – Ingredientes Industriais Ltda
			Rua Paula Bueno, 2935
			Mogi Guaçu – SP — CEP 13841-010
	11.4.3		Comgás shall include into each invoice the calculation of any penalties due by the User in accordance with Article Nine.

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11.5		Compensation of Fines Imposed by the User to Comgás
		In the event Comgás has incurred in any fines properly notified and charged by way of a Collection Document issued by the User, its amount, if acknowledged by Comgás, may be used by the User to set-off its debt towards Comgás in the Month of payment.

11.5.1

In the event the total of fines referred to by item 11.5 is higher than the debt of the User towards Comgás in any given Month, the difference in favor of the User shall be credited by Comgás into a current account of the User, to be timely informed, on the same maturity date of the invoice pertaining to the Gas which has been supplied in the Month of occurrence of the fact generating the fine.

11.6		Late Payment Charges
		The payments made in delay shall be updated by the accumulated variation of the IGP-M/FGV (General Index of Market Prices, published by Fundação Getúlio Vargas) ¾ or any other index that may replace it — and added by interest of one percent (1%) per month, everything on a pro rata tempore basis, considering the period between the effective payment date and the maturity date, in addition to a fine of two percent (2%) on the updated principal amount. If the IGP-M/FGV is extinguished and not officially replaced by any other index, the Parties shall agree, within the term of fifteen (15) days, on a new index for the same purpose.

11.6.1

If within the term of fifteen (15) days the Parties fail to reach an agreement on the index to be used in replacement of the IGP-M/FGV, the dispute shall be settled by an Expert.

11.7		Error in Collection Document.
		In the event that an error is found in the amount of a Collection Document, whether a shortfall or an excess, Comgás shall make the appropriate correction for set-off in the next succeeding month. In case of an error in the amount of a Collection Document, the User may notify Comgás within three (3) days after the receipt of the Collection Document, requiring Comgás to correct the error and reissue the Collection Document. If the Collection Document is corrected in 3 days and delivered to the User within such term, it shall be settled within the original term. If the corrected Collection Document is delivered to the User after 3 days, it shall be settled by the User within twenty (20) days as of the receipt of the corrected Collection Document.

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11.8		Disputed Collections
		In case any amount charged by one Party to the other in any Collection Document is disputed, the following procedures shall be applied:

	a)		The disputing Party ( “Disputing Party”) shall give notice of such dispute to the other Party (“Non-Disputing Party”) on or before the due date of the Collection Document, describing in detail the disputed amount, the reasons for its disagreement, the alternative adopted in relation to the amount charged, in addition to any other elements it deems important in order to settle the dispute;
	b)		The Non-Disputing Party shall make the payment of the total amount charged on a timely basis, informing the portion subject to potential refund.
	c)		If the Non-Disputing Party agrees with the Disputing Party, the Non-Disputing Party shall give notice to the Disputing Party of its agreement and refund the latter, within the maximum term of fifteen (15) days, the disputed amount, in case such amount was paid subject to potential refund.
	d)		If the Non-Disputing Party does not agree with the Disputing Party, then the Non-Disputing Party shall give notice to the Disputing Party of its disagreement and the dispute shall be immediately submitted to an Arbitration Tribunal, unless the Parties decide to submit the dispute first to an Expert.

11.8.1

If, at any time, a Party waives or reconsider its opinion with respect to a dispute, such Party may, as the case may be:

	i.		refund to the other Party the amount paid subject to potential refund, added by the charges provided for in item 11.8.1.2;
	ii.		release any amount paid “subject to potential refund” from such condition;
	iii.		pay the costs and expenses incurred so far with the procedures of Arbitration or Expert Proceeding.

	11.8.1.1		Said waiver or review shall be formally notified to the other Party and to the president of the Arbitration Tribunal or Expert, and the controversy shall be extinguished.
	11.8.1.2		The Party which, upon decision by the Arbitration Tribunal or the Expert, shall be required to return the amount paid subject to the potential refund, shall also pay to the other Party the corresponding financial charges on the previously disputed amount, the total of which shall be calculated in view of:

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	i.		the time elapsed from the maturity of the debt – or since its payment subject to potential refund;
	ii.		the monthly charge corresponding to the variation of the IGPM-FGV, plus one percent (1%) per month.

11.9		Payment Guarantee
		As guarantee to the fulfillment of all of its obligations provided for in the Agreement, specially the payment obligations by the User of any amount owed under this Agreement, the User shall deliver to Comgás a Guarantee consisting in a bank letter of credit, in a form acceptable to Comgás, issued by a financial institution acceptable to Comgás, in the amount corresponding to 90 multiplied by the Daily Contracted Amount multiplied by the Gas Sale Price. The guarantee shall be delivered by the User to Comgás in the event of, in any Year, the sum of days in delay of payment by the User is equal to more than 10 days or in the event there are more than 2 events of delay of payment by the User. The User shall deliver the guarantee to Comgás within thirty (30) days counted as of the date on which the obligation to deliver the guarantee had been constituted, in the terms provided above.

11.9.1

The Guarantee shall be valid and effective in its full amount until the full compliance with all obligations of the User provided in this Agreement.

11.9.1.1

In case the GUARANTY has a term of existence shorter than the date of full compliance with all the USER’s payment obligations as set forth herein, the USER shall renew the GUARANTY or deliver a new GUARANTY according to the AGREEMENT, up to thirty (30) days before the end of its effectiveness. In case the USER does not renew the GUARANTY or does not delivery a new GUARANTY to COMGÁS within the above stated term, COMGÁS may enforce the existing GUARANTY to cover any amounts due by the user and/ or suspend the supply of GAS to the USER until the GUARANTY has been renewed, or until a new GUARANTY is delivered to COMGÁS.

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	11.9.2		In case of change or adjustment in the Gas Sale Price, the User shall (i) update the value of the Guarantee within the maximum term of thirty (30) days counted as of the date on which the change or update had occurred and (ii) deliver the updated version of the bank letter of credit to Comgás within such term.
	11.9.3		In case the Guarantee granted by the User is used by Comgás, in the terms set forth in item 17.1, the User shall renew the Guarantee, in the value and terms established in item 11.9, within the maximum term of thirty (30) days counted as of the date of its use.

ARTICLE TWELVE – MEASUREMENT

12.1 Except as otherwise provided in this Agreement, the Parties agree to use the measurement units of the International Unit System — SI.

12.2 The measurements of Gas delivered to the User shall be made in the Measurement System integrating the CRM, as follows:

	i.		the volume unit shall be the Cubic Meter;
	ii.		the local atmospheric pressure value (for Campinas and Region, Patm = 0.93 kgf/cm 2) shall be assumed as being constant during the effectiveness of the Agreement, if such an amount is required for converting the volume into the Base Conditions;
	iii.		the calorific power shall be determined by calculation, based on ISO Rule 6976, as from the composition of the Gas determined by chromatography based on ISO Rule 6974;
	iv.		the measured volumes shall be expressed at the Base Conditions.

12.2.1

The measurement signal, if any, shall be made available by Comgás if requested by the User.

12.3		- The measurement of the total volume of Gas supplied to the User shall be made by the instruments of the Measurement System installed at CRM at the Delivery Point. Comgás shall be responsible for the operation, maintenance, calibration and adjustments of the Measurement System installed at CRM.
12.4		- The ascertainment of the total volume of Gas supplied to the User shall be made by the Comgás, by applying the following procedures, depending on the type of Measurement System that is installed at CRM:

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	i.		orifice meter: procedures described in API-MPMS 14.3 (“Natural Gas Fluids Measurement — Concentric, Square-Edged Orifice Meters”);
	ii.		turbine meter: procedures described in INMETRO Ordinance No. 114, of 1997, or in ABNT ISO Rule 9951;
	iii.		ultra-sonic meter: procedures described in AGA Report No. 9 (“Measurement of Gas by Multipath Ultrasonic Meters”);
	iv.		other meter: as agreed in advance by the Parties.

12.4.1

For the Measurement Systems indicated in item 12.4, the compressibility factor shall be calculated pursuant to ISO 12 213 (“Compressibility Factors of Natural Gas and Other Related Hydrocarbon Gases”).

12.5

- The calibration and adjustments of CRM shall always be made by Comgás, Notice given to the User no less than five (5) days  in advance, so as to allow the User, if it so wishes, to send a representative in order to follow up the works.

12.5.1

The User shall always provide access to Comgás or any third parties accompanied by Comgás to CRM.

12.6		The period between two calibrations and successive ordinary adjustments of the CRM’s Measurement System, as of the Commercial Supply Start-up, shall be of 1 year. The other calibration procedures are to be agreed upon between the Parties.
12.7		The User may, upon delivery of a Notice to Comgás, request an extra calibration of any instrument integrating the CRM’s Measurement System, on which case the corresponding costs shall be fully borne by the User, if the instrument is considered adjusted, or by Comgás, if the instrument is considered out of adjustment. Comgás undertakes to make the calibration within the lowest possible term. The instruments of the CRM’s Measurement System that, after the calibration, present measurement errors not greater than the value of one point five percent (1.5%), either upwards or downwards, as a reference, shall be considered adjusted.
12.8		In case, after the calibration of the CRM’s Measurement System, such calibration indicates that the Measurement System was not adjusted, i.e., it is evidenced that the Measurement System had a deviation in the measured amount greater than 1.5%, either upwards or downwards, the respective correction factor shall be technically determined by Comgás; and the User shall be allowed to follow up the works.

12.8.1

No correction shall be applicable in the cases in which the measurement error of any given component of the CRM’s Measurement System is lower than those stated in item 12.7 above.

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	12.8.2		Once the period in which the CRM’s Measurement System had presented measurement errors above the ones permitted is perfectly defined, corrections of value equal to the deviation verified shall be applied, either upwards or downwards, on the amounts actually registered in that period by the Measurement Systems.
	12.8.3		If the period in which the CRM’s Measurement System was out of calibration is unknown, the corrections referred to in item 12.8.2 shall be applied on the amounts actually recorded by the Measurement Systems in the past forty-five (45) Days of consumption or in the last half of the period of time between the two latest calibrations of the Measurement System, whichever is the lower period of time.

12.9

If, on any given day, there is a dispute as regards the Amounts of Gas made available at the CRM or failure in the CRM, including removal of any of its components for maintenance, without interruption in the supply of Gas — the daily volume of Gas supplied in relation to such Day shall be determined as follows, in order of preference:

	a)		in the measurement systems of gas of the Cogeneration Plant in the period, if any, provided that access by Comgás and any third parties accompanied by Comgás to the measurement instruments installed at the Cogeneration Plant, as well as to the information referring to their calibration, is allowed. For purposes of using such resource, Comgás shall previously inspect and approve, based on the metrological legislation in effect and the technical rules applicable, the use of such measurement instruments for that purpose.
	b)		based on the measurements made in any other Comgás’ Measurement Systems — by difference, if, as from the difference, it is possible to calculate, on a safety way, said volume of Gas taken by the User;
	c)		indirectly calculated, if possible, based on the electric energy and steam generated at the Cogeneration Plant in the period, provided that access by Comgás and any third parties accompanied by Comgás to the meters installed at the Cogeneration Plant, as well to the information pertaining to their calibration, is allowed;
	d)		in an amount equal to the average of the Daily Taken Amounts (DTA’s) of the last ninety (90) Days on which there was effective supply — subject to later adjustments, upon agreement between the Parties.

12.10

All the other matters or disputes pertaining to this Article, whose determinations in relation to their settlement have not been differently stated in the previous items, shall be submitted to Expert Proceeding — with sharing in equal portions between both Parties of the corresponding expenses and costs of such procedure.

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ARTICLE THIRTEEN — EFFECTIVENESS AND EXTENSION

13.1

- This Agreement shall be valid on its execution date and its end shall occur on 03/31/2023, which may be extended, by means of agreement by the Parties, in writing, provided that such agreement is formalized with twenty four (24) months in advance to the term initially agreed for its end.

13.1.1

In the end, pursuant to the provisions of item 13.1, an additional maximum period of three hundred and sixty five (365) days shall be added for purposes of recovery by the User of its eventual remaining balance of the Amounts Paid and Not Taken, being effective, in this period, all the provisions of the Agreement related to and necessary for the recovery of such Amounts of Gas. Exclusively during the additional period referred to in this item and for the sole purpose of recovery of APNTs, the User shall be released from its Take or Pay commitment, remaining effective, however, the Ship or Pay and Distribution Take or Pay commitments.

ARTICLE FOURTEEN - FORTUITOUS CASE OR FORCE MAJEURE

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14.3		Obligations Not Excluded
		No Fortuitous Case or Force Majeure shall relieve the Affected Party from performing any of its obligations arising or accruing prior to the occurrence thereof, event though any such obligation may become due during or following the Fortuitous Case or Force Majeure, especially the obligations to pay sums of money contained herein.
14.4		Procedures in Occurrences of Fortuitous Case or Force Majeure

14.4.1

The Affected Party wishing to claim the occurrence of an Fortuitous Case or Force Majeure for the purposes of item 14.2 above shall take the following steps:

	a)		notify the other Party of the occurrence of the event or condition constituting Fortuitous Case or Force Majeure — as soon as possible, but in no event later than four (4) days from the date on which the Affected Party became aware of the occurrence of such event of condition, indicating its estimated duration and its likely impact on the performance of its obligations;
	b)		take the necessary actions to correct or mitigate the consequences of such event, in order to resume its contractual obligations as soon as possible;
	c)		regularly inform the other Party about its actions and planned actions with respect to item (b) above;
	d)		promptly notify the other Party of the cessation of the event and its consequences;
	e)		grant to the other Party, whenever possible, access to any facility affected by the event, for the purpose of local inspection, which may be conducted at the expense and risk of such other Party;
	f)		substantiate all facts and actions with documentation or available records;
	g)		exercise its rights in good faith and with due regard for the interests of the other Party with respect to the performance of all contractual obligations affected by the occurrence of such Fortuitous Case or Force Majeure.

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	14.4.2		In connection with item 14.4.1(b) above, the Affected Party shall not be required, in the case of labor disputes, to act differently from what it may deem appropriate in its sole judgment, to the extent that it acts in a manner consistent with pas practices adopted in similar situations.
	14.4.3		In the event of dispute as to the characterization of the fact as an Fortuitous Case or Force Majeure, the Parties shall submit the dispute to Arbitration, which shall decide based on the provisions of the applicable article of this Agreement. Until the dispute is decided by the Arbitration Tribunal, all obligations and rights of the Parties provided for in the Agreement shall remain valid and applicable.

14.5		Scope
		Without limiting the generality of the concept of force majeure contained in Article 393 and its sole paragraph of the Brazilian Civil Code, an Fortuitous Case or Force Majeure may include the following events, listed by way of illustration only:

	i.		acts of terrorism or public attacks, war whether declared or not, threatened war, guerrilla, insurrection, civil commotion, revolution, riot, rebellion, military insurrection, coup d’état, siege, declaration of state of emergency or martial law, embargo or blockade or other situations not falling within the exceptions referred to item 14.6;
	ii.		acts of sabotage, terrorism, vandalism or accidental destruction, even if partially, of facilities of the Affected Party, as long as it has not contributed to such occurrence;
	iii.		cataclysms, lightning, earthquakes, tornadoes, storms that result in the evacuation of the affected areas, floods, explosions and exceptional and unpredictable weather events;
	iv.		Change in Law (except for the extinction of the tax benefits provided for in the Priority Program of Thermoelectricity) that materially adversely affects the object of the Agreement, the Supplier-Comgás Agreement or the Party claiming the occurrence of Fortuitous Case or Force Majeure;
	v.		expropriation, seizure, compulsory acquisition or nationalization by any Public Body of all or a substantially all assets of the Affected Party required for the performance of such Party’s obligations under this Agreement.

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14.6		Excluded Events
		The following events shall be excluded from the scope of an Fortuitous Case or Force Majeure:

	i.		strike or any other disturbance of similar nature involving solely the employees, agents, contractors or subcontractors of the Affected Party;
	ii.		change in the economic and financial situation of the Affected Party, as well as changes in the market conditions for delivery of Gas, whether or not arising by virtue of a drop in the demand for electric energy generated by the Cogeneration Plant;
	iii.		any accidental loss, damage or failure in any part of the industry plant, facilities, machinery or equipment of the Affected Party or the Cogeneration Plant, or any event related to their businesses, except if resulting directly from the occurrence of an Fortuitous Case or Force Majeure; and
	iv.		delay in the performance of obligations undertaken by contractors or subcontractors of the Affected Party which affects the performance of any obligations undertaken by the Affected Party under this Agreement, except where there is evidence that such delay on the part of the contractors or subcontractors has resulted directly from the occurrence of an Fortuitous Case or Force Majeure.

14.7		Fortuitous Case or Force Majeure Incorporated by Reference
		For all purposes of this Article, and to the extent that the requirements indicated in this Article Fourteen are evidenced and met, there shall be also considered:

	(a)		Fortuitous Case or Force Majeure of Comgás: Fortuitous Case or Force Majeure that affects: (i) the ability of the Carrier and/or the Supplier to perform their respective obligations provided for in the agreements executed with the Supplier that are required for the performance of the Supplier-Comgás Agreement by the Supplier or (ii) the Supplier’s ability to perform its respective obligations provided for in the Supplier-Comgás Agreement; and
	(b)		Fortuitous Case or Force Majeure of the User: Fortuitous Case or Force Majeure that affects the ability of the User to receive the Gas in view of damages at the Cogeneration Plant.

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ARTICLE FIFTEEN- ASSIGNMENT AND ENCUMBRANCE OF RIGHTS AND OBLIGATIONS

15.1

This Agreement, as well as the rights and obligations arising hereof, may not be assigned, totally or partially, expect with the written agreement of the other Party, which may not be unreasonably denied by the non-assigning Party, provided that the requirements of item 15.1.1 are fulfilled.

15.1.1

For the agreement referred to in item 15.1, it is an essential requirement that the proposed assignee fulfill the conditions of technical guarantee and satisfactory economic solvency to assume, in whole or in part, the obligations arising from the assignment. Without such requirements, the other party would incur in a commercial risk substantially greater than the one assumed. The non-assigning party shall be incumbent upon determining, at its sole criteria, if the assignee fulfill the necessary conditions to the implementation of the proposed assignment, provided that, in case the non-assigning party disagrees with the assignment, it shall be incumbent upon evidencing the lack or insufficiency of the conditions presented against the proposed assignee.

15.1.1.1

Without prejudice to the provisions above and, if demanded, the User shall obtain previously to the assignment of the Agreement, all and any authorizations of the competent public bodies necessary for such assignment, including authorization of the competent public body linked to the Priority Program of Thermoelectricity.

	15.1.2		In case of an authorized assignment according to this Article, the assigning party shall actually transfer to the assignee, in whole or in part, the rights and obligations established in the Agreement.
	15.1.3		Provided that the requirements established in this Articles are fulfilled, the Parties agree to formalize any and all agreement and other documents necessary for the assignment, as requested, as well to give reasonable mutual assistance in the formalization of any assignment.

15.2

In addition to the fulfillment of the terms of the legislation in force and of the provisions of this Article, the Party that whishes to transfer its rights and/or obligations under this Agreement shall express its intention by means of delivery of Notice to the other Party.

15.2.1

Within ninety (90) days following the date of receipt of the Notice referred to in item 15.2, the non-assigning Party shall give its authorization or justify its refusal.

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	15.2.1.1		The lack of formal unfavorable manifestation within the term set forth in item 15.2.1 shall be considered as full agreement with the assignment by the omitting Party.
	15.2.1.2		In case of a refusal by the non-assigning Party that is considered ungrounded by the assigning Party, the subject shall be submitted to a decision of the Arbitration Tribunal.

15.3

This Agreement, as well as the rights and obligations arising hereof, may not be pledged or in any other way encumbered by any of the Parties, except with the written prior agreement of the other Party

ARTICLE SIXTEEN – NOVATION AND FORBEARANCE

16.1		The provisions set forth in this Agreement are limited to the supply of Gas as contemplated herein, and shall not be deemed to constitute novation of any arrangement, covenant or agreement of a similar nature already existing between the Parties, which shall remain unchanged, except for the Short-Term Agreement.
16.2		Any and all forbearance with respect to the observance by the Parties of the terms and conditions set forth in this Agreement shall not operate as change or novation of the provisions agreed upon.
16.3		Comgás and the User decide to ratify the end of the term of the Short-Term Agreement in view of the execution of this Agreement, considering that the Short-Term Agreement set forth that its final term would occur on January 20, 2006 or on the execution date of this Agreement, whichever occurs first.

ARTICLE SEVENTEEN — DEFAULT AND TERMINATION

A) Default

17.1		Default by the User
		Subject to the provisions of subitem 17.1.1, if the User, at any time, fails to (i) pay, in whole or in part, until its maturity date, the amount corresponding to any Collection Document submitted to the User by Comgás in view of this Agreement or, (ii) for disputed amounts, failed to proceed in accordance with the provisions of item 11.8, (iii) establish, update, reestablish and/or renew the Guarantee, according to the provisions and terms contained in item 11.9 and its subitems, then, the default by the User shall be deemed to have occurred on the maturity date of the respective Collection Document. After ten (10) days counted as of the date of the default by the User, Comgás may, at any time from such moment on, at its sole criteria, foreclose the Guarantee in the amount corresponding to the