Raízen Raising the Roof on 2 new cellulosic ethanol plants with $395M investment

May 15, 2022 |

Almost a year ago, The Digest reported that Raízen was rising with about $1.15 billion raised in the biggest Brazil IPO of the year. And this year is no exception to the continued Rising of Raízen with the just announced BRL$2 billion (about USD$395 million) investment package to build two new cellulosic, second-generation ethanol plants in São Paulo, Brazil. And according to Valor Econômico, the new investments consolidate Raízen as the largest producer of cellulosic ethanol in the world.

In today’s Digest, the investment details, the ethanol plant plans, the feedstock, where Raízen’s strategy is taking them, and more.

2 New Second-generation ethanol plants

Raízen’s commitment to renewables was made more obvious with their just announced BRL 2 billion investment package to build two new cellulosic ethanol plants – or second-generation ethanol (E2G), made from sugarcane bagasse (the waste from turning sugarcane into sweetener) – in São Paulo. The units will be built next to the Univalem plants, in Valparaíso, and Barra, in Barra Bonita and are expected to be ready in 2024.

These two new plants will add to the two second-generation ethanol plants they already have – 1) the Piracicaba unit, which has been in operation since the 2014/15 harvest, and 2) the Guariba unit, which was the first plant of its type to be announced after the IPO last year (it will receive investments of R$ 1 billion and should be completed in 2023).

Capacity

Valor Econômico reports that “the three new plants that Raízen has announced so far have a production capacity of 82 million liters of ethanol a year each, while the one in Piracicaba is smaller. With the new investments, the company guarantees an E2G production capacity of 280 million liters. This volume would be able to supply, for example, the demand of a city like Itacoatiara (AM), which has 100 thousand inhabitants. However, volumes are still small in relation to the size of the ethanol market. Raízen alone produced and sold 2.5 billion liters of ethanol in the first nine months of the 2021/22 crop, almost ten times more than the company’s capacity for cellulosic ethanol.”

But second-generation ethanol is more environmentally friendly and is often sold at a higher price than conventional ethanol for industries trying to lower their carbon footprint like aviation and shipping. Recently, Ricardo Mussa , the company’s president, said that the company was already selling cellulosic ethanol at 70% premiums compared to conventional biofuel, according to Valor Econômico.

The emissions savings

According to Valor Econômico, “the hydrous ethanol produced at Raízen’s bioenergy park in Piracicaba, considering jointly the first and second generation production, reduces emissions compared to gasoline by 60.7 grams of carbon dioxide equivalent per megajoule of energy, according to data from company at the National Agency of Petroleum, Natural Gas and Biofuels (ANP) regarding certification in RenovaBio. The reduction in emissions promoted by all the ethanol produced at the unit exceeds the average of companies in the sector certified in the program (59.7 grams of carbon dioxide equivalent per MJ).”

That’s a lot of emissions savings which makes it even more attractive to those industries trying to lower their carbon footprint, though we don’t know exactly who is buying Raízen’s biofuel since they don’t share that information publicly. Though you can see in their public release that 80% of all the installed capacity that Raízen will have in 2024 has already been sold under long-term contracts and in November 2021 we heard that Raizen and Shell signed an agreement to supply cellulosic ethanol to the Ferrari Formula 1 team when it starts racing on 10% ethanol this year. They also partnered up with Volkswagen do Brasil to encourage the use of ethanol in the automotive sector, as reported in The Digest also in November 2021.

Not surprising, as we know the demand for better biofuel is out there.

On the tail of other good news

You may be thinking “Didn’t I just hear about Raizen more recently in The Digest?” Why, yes, you did! Just a few weeks ago, they had other big news that Raízen, the fourth largest Brazilian company in terms of revenue, was investing $60.4 million in a second São Paulo biogas plant. With the $60.4 million, it will begin to build, with its partner Geo Biogás and Tech, a biomethane plant made from residues from ethanol production in Piracicaba, in the interior of São Paulo.

Bottom Line

We knew the IPO last year was big, and we knew this Shell, Cosan joint venture company was going even more into renewables, so these 2 new plants and such huge investment in them is a sign they are putting their money where their mouth is and committing to renewable fuels and biofuels specifically. And for that, we raise a glass for Raízen rising and getting more biofuels into the market.

Check out their slide guide “Sugar, Renewables, Fuel: The Digest’s 2021 Multi-Slide Guide to Raízen” here.

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