By Brazil Stock Guide – Shell Plc (SHEL LN) will commit up to 3.5 billion reais ($700 million) to recapitalize Raízen SA (RAIZ4 BZ), its Brazilian sugar, ethanol and fuel distribution joint venture with Cosan SA (CSAN3 BZ), according to Shell Brazil President Cristiano Pinto da Costa.
Speaking Tuesday (March 3), Pinto da Costa said the contribution is conditional on Cosan providing a proportional capital injection. Shell does not intend to increase its ownership stake or consolidate Raízen’s debt onto its balance sheet. “Our expectation is that the other shareholder can contribute in a proportional manner,” he said.
Raízen, one of the world’s largest sugar and ethanol producers and a major fuel distributor in Brazil, has faced mounting financial pressure. As of December, the company reported net debt of 55.3 billion reais, up 43.3% from the same period in 2024.
In the fourth quarter of 2024 — the company’s fiscal third quarter — Raízen posted a net loss of 15.6 billion reais, six times larger than a year earlier.
Shareholders replaced management at the end of 2024 and launched a plan to divest non-core assets as part of efforts to address the balance sheet. The company is also in talks with creditors over alternatives to inject fresh capital.
Shell previously sought a new partner for the venture, but those efforts did not succeed. “That’s why the conversations today are very much focused on the current shareholders,” Pinto da Costa said.
While a potential split between Raízen’s fuel distribution and sugar-and-ethanol operations has been discussed, Shell favors first stabilizing the business as an integrated company. “Shell does not oppose a potential break-up of the businesses. We just believe that the correct sequence was to try to recapitalize the company in an integrated way first and, once the company is stabilized, then eventually consider a separation,” he said.
Raízen was formed in 2011 to combine Shell’s fuel distribution infrastructure with Cosan’s agribusiness operations, aiming to capture synergies between the two segments.
Pinto da Costa attributed the current crisis to a combination of factors. “Accelerated expansion, unfavorable macroeconomic factors, low sugar and ethanol prices, a slowdown in the energy transition and leverage that coincided with a high interest-rate cycle,” he said.
He also confirmed a meeting with the government of President Luiz Inácio Lula da Silva to discuss potential solutions for Raízen’s restructuring, but declined to comment on whether Petrobras (PETR4 BZ) was involved. “It is in the interest of the Brazilian government, Raízen being one of the country’s main companies, that it finds a path to restructure,” he said.
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