French firm Tereos plans tenfold expansion of power client base in Brazil

Tereos, a French agribusiness group, plans to expand its base of corporate power customers in Brazil from roughly 100 to more than 1,000 during the next two years, as per a report by Reuters.

The firm, Brazil's second-largest sugar producer, sees significant potential to grow its position in the country's unregulated power market through contacts among current customers in its sugar and ethanol business.

In an interview with Reuters, Samuel Custodio, who heads the power commercialisation unit of Tereos in Brazil, said the growth will be fuelled by a cross-selling strategy targeting existing sugar and ethanol clients, their suppliers, and other business partners.

It's also exploring acquisitions to fast-track the expansion of its customer base.

A shift to the free market

Sugarcane biomass is used by Tereos to generate power at six of its plants in the state of São Paulo.

Until recently, the majority of this power has been sold via Brazil's regulated power system, which functions as a government-led concession.

However, with the expiration of those contracts, Tereos is shifting its focus to Brazil’s non-regulated market, which allows corporate clients to choose their energy suppliers freely.

According to Custodio, the transition also allows the organisation to better capture value by appealing to a wider spectrum of corporate purchasers.

Although the power business represents only a fraction of Tereos' overall operations in Brazil, it provides a stable and reliable source of revenue.

A consistent revenue stream despite market volatility

The Brazilian electricity sector has undergone considerable changes in recent years, with deregulation allowing companies like as Tereos to sell directly to enterprises.

This change is consistent with Tereos' overall aim of stabilising income streams and diversifying revenue beyond sugar and ethanol sales, which are sometimes vulnerable to market instability.

The power business, although a smaller contributor to revenue, provides a more consistent income stream, Custodio said in the report.

The capacity to generate electricity internally lowers operational energy costs and improves supply consistency, which benefits the company's primary agribusiness.

Sustainable energy from sugarcane biomass

Tereos' six facilities in São Paulo generate around 1,500 GWh of power yearly.

This volume not only meets the company's energy requirements, but also provides a large surplus for commercial sale.

The utilisation of sugarcane biomass, the leftover after extracting juice from the cane, positions the company as a sustainable energy producer in a country with a growing demand for clean and renewable energy sources.

The extra energy sold into the market helps Brazil's move to cleaner electricity and aligns with corporate purchasers who are increasingly looking for renewable power sources.

A strong pipeline of internal generation capacity, the company's existing commercial relationships in the sugar and ethanol sectors, and a growing base of corporate buyers could position the company to be a larger player in the country's energy landscape.

By pursuing this strategy, Tereos aims to turn what has been a marginal line of business into a key pillar of its Brazilian business, attaching fresh resilience to its Brazilian business in a volatile commodity environment.