Mubadala Capital plans $13.5bn biofuels investment in Brazil

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Abu Dhabi’s Mubadala Capital intends to invest about $13.5bn on a major biofuels project in Brazil over the next decade, under broader plans for the country that include the creation of a new stock exchange.

The asset management arm of the Emirati sovereign wealth fund is 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 — alongside Donald Trump’s son-in-law, Jared Kushner. 

In an interview with the Financial Times, Mubadala Capital’s head of Brazil revealed for the first time 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 $2.7bn “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,” said Oscar Fahlgren. “Brazil is to agriculture what Abu Dhabi is to oil.”

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 $13.5bn is to be funded through a mix of equity and debt over a period of five to 10 years, said Fahlgren.  

“It’s a very important capital project,” he added. “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 $6bn of investments in the country, which represents about a quarter of the group’s global portfolio.

Two-thirds of its capital in Brazil is from outside investors, with the remainder from parent organisation Mubadala. Its focus there is on businesses in situations of complexity or distress. 

The eponymous sovereign fund first entered the South American nation in 2012 with a $2bn investment backing former tycoon Eike Batista, once one of the world’s wealthiest people before the meltdown of his energy and commodities empire the following year.  

In the fallout, Mubadala ended up the main creditor of Batista’s holding group EBX and took ownership of several of his assets, including stakes in ports and mines.

Today its portfolio includes a company that organises the São Paulo Formula 1 Grand Prix. Fahlgren described Mubadala’s approach in the country as “contrarian”, having remained through economic and political crises in the past decade.

“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,” he said.

Mubadala Capital had fully invested its second Brazil-focused fund that closed with $710mn of commitments last year, he added. Americas Trading Group, a financial assets trading platform it purchased in 2023, hopes to open a bourse in Brazil next year to rival the incumbent B3 in São Paulo.

“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. “It will probably be a staged launch — perhaps start with equities, then expand. No asset classes are off the table.”

Another focus is Zamp, which franchises Burger King restaurants in Brazil. Mubadala Capital has steadily increased its stake to 58 per cent and recently elected a majority of seats on the board, which now also includes an executive from fellow shareholder Affinity Partners, the private equity firm run by Jared Kushner. Affinity’s investment was first reported by the New York Times.

Fahlgren said he was “very happy” with the partnership with Affinity. “It just happened and we have no other specific investments earmarked, but I wouldn’t rule it out,” he added.

Mubadala Capital is also involved in talks for a proposed new football league in Brazil whose goal is to package up and sell the commercial rights. 

“We’re very bullish on the investment climate in Brazil right now and the opportunities we see,” said Fahlgren. “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.