Brazilian biofuel producer Raizen seeks to raise $ 1.34 million in IPO

A joint venture between Royal Dutch Shell and the energy conglomerate Cosan, which produces sugarcane-derived biofuel, seeks to raise $ 6.9 billion ($ 1.34 million) through a stock exchange that would be ranked as one of the largest of Brazil so far this year.

Raizen, which was formed a decade ago, is the fourth largest Brazilian revenue company with a workforce of about 30,000.

He reported on Wednesday in a securities presentation that he planned to sell a stake of approximately 8% through an initial public offering on the B3 stock exchange in São Paulo.

An indicative share price range was quoted between R $ 7.4 and R $ 9.6, which would give the business a valuation of between approximately $ 70 billion (approximately $ 14 billion) and $ 100 billion , according to a person familiar with the matter.

If successful, this would place it among the 10 most important OPCs registered in Brazil.

In addition to converting sugar cane into ethanol for motor vehicles and other industries, Raizen manages a network of gas stations that also sell conventional fuels and operate renewable energy facilities. It also presents itself as one of the largest exporters of sugar in the international market.

As the climate emergency grabs the money managers ’agenda, Raiz’s list will test investors’ enthusiasm for the transition from fossil fuels to cleaner energy.

Raizen intends to spend the revenue (which at the midpoint of the price range is equivalent to 6.9 billion US dollars) in projects that include the production of “second generation” ethanol, a technology that allows to transform agricultural waste in biofuel.

“We do not exploit the full potential of the [sugarcane] plant still, “said chief executive Roberto Mussa in an interview before the company announced its intention to float.” With second-generation ethanol, 50% more can be produced without more surface area. “

Raizen generated earnings of 6.6 billion Spanish dollars ($ 1.3 trillion) before interest, taxes, depreciation and amortization during the year to March 31 with revenues of $ 114.6 billion.

“Today, if we look at the main business, it is the distribution of gasoline, ethanol and diesel, in addition to selling ethanol and sugar. The other areas are much smaller at the moment, but they are growing, ”said Obede Rodrigues, portfolio manager for asset manager Iridium Gestão.

Ethanol emits much less greenhouse gases when burned compared to traditional equivalents and mixed with diesel or gasoline in several countries. Root also sells it as an ingredient for plastics, beverages, cosmetics and pharmaceuticals.

Promoted by the former military dictatorship in Brasilia after the oil crash of the 1970s, ethanol is a major industry in Brazil, where most new vehicles can run on both gasoline and biofuel.

The country is the second largest producer of ethanol after the United States, where corn is used as the main raw material.

However, there are concerns that the use of crops and trees as energy sources will compete with the production of food for the land.

Analysts predict a more important role for ethanol, as governments try to reduce emissions from motor engines or as a transition fuel in some countries before the widespread adoption of electric vehicles.

Recently, India advanced the target of gasoline containing 20% ​​blended ethanol by 2025. The global ethanol market is expected to grow at an average rate of 2.7% annually between 2020 and 2025, according to IHS Markit.

Root wants to take advantage of one Stock market boom in Brazil, while companies are taking advantage of the growing number of domestic retail investors investing money in public equity. Other releases this year have been the iron ore unit of the steelworks CSN, the insurance company Caixa Seguridade and the laser hair removal company Espacolaser.