{"id":46343,"date":"2026-03-10T12:13:04","date_gmt":"2026-03-10T12:13:04","guid":{"rendered":"https:\/\/naijaglobalnews.org\/?p=46343"},"modified":"2026-03-10T12:13:04","modified_gmt":"2026-03-10T12:13:04","slug":"how-shells-clean-energy-bet-in-brazil-fell-into-crisis","status":"publish","type":"post","link":"https:\/\/naijaglobalnews.org\/?p=46343","title":{"rendered":"How Shell\u2019s clean energy bet in Brazil fell into crisis"},"content":{"rendered":"

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This article is an on-site version of our Energy Source newsletter.\u00a0Premium subscribers can sign up here\u00a0to get the newsletter delivered every Tuesday and Thursday. Standard subscribers can upgrade to Premium here, or explore all FT newsletters<\/p>\n

Hello and welcome to Energy Source, coming to you from New York, where market watchers experienced one of the most volatile days in oil trading history on Monday. <\/p>\n

Concerns about war in the Middle East and the closure of the Strait of Hormuz caused Brent crude to surge to $119.50 when markets opened \u2014 its highest level since 2022. But by the afternoon a combination of comforting words from US President Donald Trump, who declared the war was \u201cvery complete, pretty much\u201d, and discussion of co-ordinated releases of strategic oil stocks by International Energy Agency members calmed oil markets. <\/p>\n

Brent crude settled below $99, which marked the largest drop from an intraday high to a closing price. <\/p>\n

My FT colleague Malcolm Moore has written an in-depth analysis on whether releases from the strategic reserves can do enough to calm the markets. <\/p>\n

Predicting the trajectory of the war over the next week will probably determine whether oil tests the four-year high again. Analysts forecast a short weeks-long interruption to flows through the Strait of Hormuz, whereas anything longer could ignite another fire under prices.<\/p>\n

\u201cThis is not really a situation that we\u2019ve seen before,\u201d said Benjamin Hoff, global head of commodity strategy and research at Soci\u00e9t\u00e9 G\u00e9n\u00e9rale. \u201cAnd so it\u2019s very difficult to actually come up with quantitative analysis and historical precedents that are relevant in all respects.\u201d <\/p>\n

In today\u2019s newsletter, Michael Pooler reports from S\u00e3o Paulo on a debt crisis at Brazilian biofuels group Ra\u00edzen, one of Shell\u2019s biggest bets on clean energy. If a solution can be reached, the ethanol producer could benefit indirectly from the current volatility in oil. Thanks for reading \u2014 Jamie<\/p>\n

Shell\u2019s Brazil biofuels venture in dire straits<\/h2>\n

In the wake of an oil shock sparked by war in the Middle East more than half a century ago, Brazil\u2019s military rulers turned to an old-world commodity in search of energy independence. <\/p>\n

A dictatorship-era policy in the 1970s promoting the production of ethanol from sugarcane paid off. Even after the discovery of massive offshore crude reserves 20 years ago, it remains a vital part of the South American nation\u2019s energy mix, with roughly three-quarters of cars in the country able to run on both the biofuel and petrol.<\/p>\n

That success story is of little comfort today to investors in Ra\u00edzen, the Brazilian company that is the world\u2019s largest producer of sugarcane ethanol. The biofuels group, a joint venture between Shell and S\u00e3o Paulo-headquartered conglomerate Cosan, is in dire straits after being hit by a combination of poor harvests, high interest rates and costly investments.<\/p>\n

With a debt pile of R$55bn (US$10.5bn) and accounts awash with red ink, Ra\u00edzen\u2019s share price has sunk and it is in desperate need of new funding \u2014 as much as R$20bn in the eyes of some creditors.<\/p>\n

Yet despite intense discussions in recent weeks over a rescue package for the business, which has been selling off assets to shore up its finances, a capital injection has so far proven elusive.<\/p>\n

The impasse has thrown into doubt the future of one of Shell\u2019s main bets on clean energy. It\u2019s also an unwelcome distraction for the UK group as it grapples with the worst disruption in the global oil market for decades as a result of the Iran conflict.<\/p>\n

In parallel, the situation has stirred anxiety in Bras\u00edlia, which wants to avoid one of the country\u2019s largest companies failing in an election year. Ra\u00edzen last month posted a R$15.6bn net loss in its third quarter.<\/p>\n

The crisis deepened last week when Cosan pulled out of providing a financial lifeline for Ra\u00edzen after Shell opposed a break-up of the company. (The pair each own 44 per cent of Ra\u00edzen following its 2021 stock market listing).<\/p>\n

Under the proposal that had been discussed, Shell was to pump in R$3.5bn of fresh capital, with R$1bn from Cosan and a further R$500mn from the Brazilian group\u2019s founder and controlling shareholder, Rubens Ometto. Banks and bondholders were to be asked to convert some 35 per cent of their debt into equity under the restructuring.<\/p>\n

Cosan and one of its top shareholders, the Brazilian investment bank BTG Pactual, had also hoped to tie the funding agreement to a spinout of Ra\u00edzen\u2019s fuel distribution arm, which operates nearly 9,000 Shell-branded petrol stations across Brazil, Paraguay and Argentina.<\/p>\n

BTG wanted to acquire a stake in the new standalone unit, but Shell was not on board. And with Cosan having doubts about the effectiveness of the size of the proposed cash infusion, the deal fell apart.<\/p>\n

Instead, the talks are now focused on a R$4bn shot \u2014 Shell\u2019s R$3.5bn pledge, with half a billion from Ometto \u2014 alongside a debt-for-equity swap and maturity extension. This would likely involve a bigger hit to creditors \u2014 including Ita\u00fa Unibanco, Latin America\u2019s largest lender, as well as Bank of America, Citigroup, JPMorgan and Mitsubishi UFJ Financial Group.<\/p>\n

Yet there may be light at the end of the tunnel. Ra\u00edzen hopes in the coming days to obtain the one-third approval of creditors required to begin an out-of-court restructuring process, according to people involved in talks. This would start the clock on a 90-day standstill period for negotiations, in which debt repayments are suspended.<\/p>\n

One creditor says an \u201cenormous distance\u201d exists between the money on the table from Ra\u00edzen\u2019s shareholders and what is needed to fix its balance sheet. But they also acknowledged that pursuing an out-of-court process is preferable to a judicial reorganisation \u2014 the Brazilian equivalent of US Chapter 11 bankruptcy protection \u2014 which is typically longer, more complex and reduces creditors\u2019 bargaining power.<\/p>\n

\u201cA judicial reorganisation is so damaging because it doesn\u2019t just affect the financial side, it affects everything \u2014 employees and suppliers too,\u201d says Marcelo Gasparino, an experienced board member at large Brazilian companies such as Vale. Mediation is another option, he adds.<\/p>\n

Resolving the deadlock is important for Shell, which faces a potentially delicate political situation as the largest foreign oil and gas producer in Brazil. President Luiz In\u00e1cio Lula da Silva last month summoned the UK energy giant and other Ra\u00edzen stakeholders to discuss how to salvage the business, said people familiar with the situation.<\/p>\n

\u201cHe said it was unacceptable for the world\u2019s largest ethanol producer, backed by one of the top oil majors and a major national group [Cosan], to enter into bankruptcy protection,\u201d said one person present at the meeting.<\/p>\n

Pessimists note that in addition to its debt problems, Ra\u00edzen is competing with Brazil\u2019s expanding output of corn-based ethanol, which is now often cheaper to produce than the sugarcane version.<\/p>\n

But if a solution can be reached, the company could stand to benefit indirectly from current geopolitical turmoil. High oil prices, like those which gave birth to the country\u2019s modern ethanol industry, tend to make the biofuel more competitive against petrol. (Michael Pooler)<\/em><\/p>\n

Power Points<\/h2>\n