Sumitomo Corporation to invest in Biomass Fuel Manufacturing Business in Brazil

Sumitomo Corporation (Head Office: Chuo-ku, Tokyo; President and CEO: Kuniharu Nakamura) signed a contract to acquire up to 20 percent of Cosan Biomassa S.A. (Head Office: Sao Paulo; President and CEO: Mark Lyra: Establishment:2012, hereinafter; “Cosan Biomassa”), a subsidiary of the world’s largest sugar company Cosan S.A. Industria e Comercio (Head Office: Sao Paulo; President and CEO: Marcos Lutz; hereinafter,” Cosan S.A.”) and producer and distributor of sugarcane biomass pellets used for power generation, subject to the prior approval of anti-trust authorities in some jurisdictions.

Biomass is a renewable energy source such as solar, wind and mini-hydro power that provides cleaner, sustainable energy. The demand of renewable energy is getting more and more important under the circumstances that Japan declares to reduce its greenhouse gas output by 26% by 2030 as part of the Paris Climate Treaty, having introduced Feed-In-Tariff, a program to enhance renewable energy, in 2012, and the policy of “Best Mix of Power Sources”(increasing the ratio of renewable energy).

“Brazil is already among the largest producers and exporters of agricultural commodities in the world.  Pelletized biomass is a new commodity being created to serve the low carbon economy” said Mark Lyra, Cosan Biomassa CEO.  “By making use of sugarcane residues and benefiting from the economic and environmental advantages that the shift to rail logistics brings to the game, Brazil is positioned to become the Saudi Arabia of renewable energy.”

“By the year 2030, we foresee that Japan will consume  as much as 10million tons of pelletized biomass, or even more. Majority of which would come from overseas. Renewable energy including biomass will play a prominent role in our power generation sector by that time. We envisage  that a relevant portion of this demand will be met by agricultural waste, particularly sugarcane biomass pellets produced in Brazil. Sugarcane’s productivity and abundant availability tied to the fact that we are using its residual byproduct as a raw material gives us an unique sustainability condition when compared to other biomass sources in the world”, said Yoshinobu Kusano, General Manager, Biomass Business, Sumitomo Corporation.

Cosan Biomassa has developed a fuel pellet made from sugarcane residues such as bagasse from sugar mill and straw left-over in sugarcane field and built a large-scale production plant (annual capacity 175,000ton) for the first time in the world last year in September and commenced a commercial production in December, 2015.

Through the participation of Sumitomo Corporation, Cosan Biomassa will increase its exports to Japan and Europe along with increased domestic sales. It is said that there is a potential of 45million tons/year of sugarcane pellet from the sugarcane  farm in Sao Paulo state alone, and Cosan S.A. is a dominant player there thorough its group company..  With this abundant availability, the venture would aim for 2 million tons by 2025,  and even more as 8 million tons in the future, subject to future growth of the market as well as a satisfactory return.

Sumitomo Corporation regards biomass energy as a promising source of renewable energy, and started importing biomass fuel for power generation to Japan in 2008. Also Sumitomo Corporation has a subsidiary, Summit Energy Corporation, which has been managing a biomass power plant and plans to build a couple of more. Sumitomo Corporation has been in search for competitive and sustainable resources outside of Japan to supplement  domestic biomass resources, and also to  step into the European market, where bulk of fuel pellet demands exists. The company regards Cosan Biomassa as an ideal resource to fulfill both needs.

Today, Sumitomo Corporation and Cosan S.A has begun strategic collaboration for the development of sugarcane pellet business through Cosan Biomassa.