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MATERIAL FACT
São Martinho Announces Cogeneration Investment
at São Martinho Mill

São Paulo, August 16, 2010 - São Martinho S.A. (BM&FBovespa: SMTO3; Reuters: SMTO3 SA and Bloomberg: SMTO3 BZ), one of Brazil‘s largest sugar and ethanol producers, announces the approval, by the Company‘s Board of Directors in a meeting held on August 16, 2010, of the first phase of a Cogeneration project at Usina São Martinho S.A.

The investment in this first phase will total R$ 173 million for the generation of surplus power for sale of 244,000 MWh as of the 2013/14 harvest year.

The approved investment will be used to buy a high-pressure boiler and condensation turbo generator and to make adaptations to the plant to prepare for the project‘s installation. The disbursement timetable is distributed as follows: R$ 43.2 million (2010/11 harvest year); R$ 69.2 million (2011/12 harvest year); and R$ 61.6 million (2012/13 harvest year).

Sincerely,

João Carvalho do Val
Chief Financial and Investor Relations Officer

Felipe Vicchiato

Investor Relations Manager

Telefone: 11 2105-4100
Email: ri@saomartinho.ind.br
IR Website: www.saomartinho.ind.br/ir

About São Martinho

The São Martinho Group is one of the largest sugar and ethanol groups in Brazil, and operates three mills: São Martinho, in Pradópolis (in the Ribeirão Preto region of São Paulo state); Iracema, in Iracemápolis (in the Limeira region of São Paulo state); and Boa Vista (in Quirinópolis, 300 km from Goiânia, in Goiás state); as well as a unit producing a ribonucleic acid known as Omtek, which is also based in Iracemápolis. For more information, please visit the website at www.saomartinho.ind.br.

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