Raizen SA Considers Divesting Argentine Energy Assets

Raizen SA is considering the sale of its oil refinery and gas stations in Argentina, hiring JPMorgan Chase & Co. to manage the process. This decision aligns with a trend of multinational firms withdrawing from Argentina, amidst the backdrop of President Javier Milei’s economic reforms and recent financial challenges faced by Raizen. The Dock Sud refinery and gas stations significantly contribute to the country’s fuel market.

Raizen SA, a Brazilian energy firm, is reportedly considering the sale of its oil refinery and network of gas stations located in Argentina. The company, a collaboration between Shell Plc and Cosan SA, has enlisted JPMorgan Chase & Co. to facilitate this divestment, as disclosed by anonymous sources familiar with the situation. Neither Raizen nor JPMorgan has publicly commented on this matter.

This potential sale reflects a trend among multinational corporations, such as Exxon Mobil and Mercedes-Benz, who have divested from Argentina in the past year, despite a sense of optimism regarding the economic reforms introduced by President Javier Milei. Raizen is specifically navigating challenges posed by increased borrowing costs in Brazil, which is prompting reevaluation of its investment strategies.

Raizen operates the Dock Sud oil refinery in Buenos Aires, Argentina’s oldest, with a refining capacity of 100,000 barrels per day, trailing only YPF SA’s facilities. Additionally, Raizen’s extensive network of approximately 700 gas stations constitutes 18% of the nation’s gasoline and diesel market, branding its fuel under Shell. In 2018, Raizen acquired these assets for nearly $1 billion from Shell amid previous market reforms.

The economic landscape in Argentina has shifted significantly since Raizen’s acquisition, transitioning from a period of heavy government regulation between 2019 and 2023 to a more liberal economic approach under Milei, focused on deregulating various sectors, particularly energy and oil. The recent divestment aligns with Milei’s move to remove price controls on fuels, thereby allowing domestic prices to reflect international market rates.

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Raizen SA’s exploration of selling its Argentine energy assets indicates broader trends of multinational firms divesting from the country amidst economic policy changes. With the backing of JPMorgan, Raizen’s move comes in light of financial pressures and a shifting regulatory environment under President Milei’s administration. This situation highlights the complexities of operating in Argentina’s evolving market landscape.

Original Source: www.livemint.com