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NEW YORK - Abu Dhabi investment fund Mubadala Capital will take an opposite direction from most of its peers in the Brazilian sugar and ethanol industry, which it plans to enter by early next year, betting on expanding output of the biofuel and looking only marginally to sugar.
Bruno Serapiao, CEO of Atvos, one of the country's largest sugarcane processors, told Reuters late Wednesday that a deal by the asset management arm of UAE's investor Mubadala Investment to acquire a 31.5% stake in Atvos should happen later this year or early next year.
Atvos is currently under bankruptcy protection, and Mubadala will pay 500 million reais ($102.83 million) when the Brazilian company lifts its court debt protection, Serapiao said.
Mubadala, which already entered Brazil's oil refining business in Brazil in 2021 and is investing in renewable fuels, earlier dropped out of bidding for ethanol joint venture BP Bunge Bioenergia, the world's third-largest sugarcane processor.
Several sugar and ethanol companies in Brazil are expanding sugar-producing capacity, looking to profit from historically high prices for the sweetener. Prices are high due to smaller production in some countries. A second global supply deficit is expected in 2023/24.
Serapiao, however, said that Atvos is looking to boost ethanol production, possibly adding corn as a feedstock since most of its mills are located in Brazil's main grain belt.
The CEO said current high sugar prices are not sustainable, and ethanol offers better prospects over time due to the prospect that most emerging economies will use the biofuel as a way to cut emissions.
"Countries below the equator tend to use biofuels since there are limitations on power grids for adoption of electric vehicles," he said. "It is nice to have an electric car in Sao Paulo, but if you go 200 km to the countryside, you can hardly find a charging station."
Atvos plants are equipped to make more of the fuel than sugar. Only two of its eight mills can produce the sweetener. It uses 85% of its sugarcane for ethanol. Seven of the plants are located in corn-rich states.
Serapiao said that the ongoing reorganization, with Mubadala taking a controlling stake and banks agreeing to a 50% cut on debt as well as extending maturity until 2043, will allow to company to recover and resume investments.
He said the target is to boost capacity utilization. The company crushed only 22 million metric tons of sugarcane in the 2022/23 season, out of a total installed capacity for 30 million tons.
($1 = 4.8624 reais)
(Reporting by Marcelo Teixeira Editing by Marguerita Choy)