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Mubadala Capital to invest $13.5b in Brazil’s biofuel sector

The move is part of a broader investment plan, including the creation of a new stock exchange

Published: Mon 13 May 2024, 6:11 PM

Updated: Mon 13 May 2024, 6:23 PM

By
Issac John

Mubadala Capital, the investment arm of Abu Dhabi’s sovereign wealth fund, has committed to invest $13.5 billion on a major biofuels project in Brazil over the next decade.

The move is part of a broader investment plan, including the creation of a new stock exchange, by the asset management company for the Latin American country.

Oscar Fahlgren, head of Brazil strategy at the sovereign wealth fund, during an interview with the Financial Times revealed the full budget of its flagship scheme to produce renewable diesel and “sustainable” aviation kerosene mainly using non-food plant matter. The large-scale development by its energy company, Acelen, will comprise five $2.7 billion “modules,” with the first due to begin production by the end of 2026.

Each will consist of a new biorefinery with capacity to process 20,000 barrels of fuel per day, associated infrastructure and planted areas to grow the input crop.

“It’s all about feedstock [which] in reality is agriculture. And Brazil is probably the best-placed country on the planet when it comes to agricultural proficiency because of the climate and the fertile soil. Brazil is to agriculture what Abu Dhabi is to oil,” he said.

The initiative will also involve the conversion of an existing oil refinery in the north-eastern Brazilian state of Bahia acquired from state-controlled Petrobras in 2021. An expected total amount of $13.5 billion is to be funded through a mix of equity and debt over a period of five to 10 years, said Fahlgren.

“I see tremendous opportunity to invest in the green energy transition space in Brazil.” The group had previously only announced the estimated cost for the development’s initial module. Mubadala Capital’s bioenergy play will build on its $6 billion of investments in the country, which represents about a quarter of the group’s global portfolio.

“We’ve been very active investing in Brazil, for the past 10-plus years, in an environment where most foreign investors have been shying away,” Fahlgren said.

Mubadala also plans to open a stock exchange in Brazil next year through its Americas Trading Group. “Brazil is a very large country. It has only one stock exchange. And I think that’s suboptimal infrastructure for the players that operate in this segment,” said Fahlgren.

The asset management arm of the sovereign wealth fund has been increasing its bets on Latin America’s largest economy, where its holdings span metro lines and medical universities to a majority stake in the local owner of the Burger King brand.

“We’re very bullish on the investment climate in Brazil right now and the opportunities we see. We do have a number of assets that are relatively mature today, and could be potential exit candidates in the not-too-distant future,” he added.

In March, Bloomberg reported that Mubadala Capital is looking to acquire international food franchises in Brazil, including Outback Steakhouse, to expand its Latin American portfolio. The report said the investment arm of the Abu Dhabi sovereign wealth fund is looking to acquire franchises that are struggling to make a profit in the country as it seeks to bolster its footprint in Latin America.

Mubadala Capital recently assumed control of Zamp, the operator of Burger King and Popeyes outlets in Brazil, with plans to consolidate multiple foreign food franchises under one umbrella.