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Santander begins offering CBios bonds

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Santander starts Wednesday placing bonds connected to federal program RenovaBio, which aims to "decarbonize" the country's transportation mix.

The bank is signing up on Wednesday 15 biofuel producers to register and act as custodian of Decarbonization Credits (CBios), which will be used by distributors to ensure greenhouse-gas emission reduction targets are achieved.

Among the companies that Santander is signing up is CerradinhoBio, a sugar-and-ethanol mill of Clealco - currently under judicial restructuring - along with a unit of Jalles Machado and another of FS Bioenergia, which makes corn-based ethanol. Sources say that large sugar-and-ethanol groups and at least one biodiesel producer are also among those working with Santander.

In its first year in effect, RenovaBio may generate $287 million in extra revenue to biofuel producers. This estimate, the market's most widely accepted, is based on government projections for the average cost of each CBio security, of $10, and also the transportation decarbonization target for this year, which is different for each distributor.

In 2020, distributors will have to purchase a total of 28.7 million CBios securities - each CBio corresponds to 1 tonne of carbon emission avoided by using biofuels instead of fossil fuels. In 2021, the target is 41 million CBios - biofuels used to remove 41 million tonnes of carbon from the transportation mix. Distributors unable to fulfill targets are subject to a fine or even suspension of activities.

CBios will be traded over the counter and registered on B3, which also will make its Trader platform available for trading. B3 will open its CBios registration platform in the second half of April. Initially, distributors should dominate CBios issuance, but the government wants other agents seeking to lower carbon emissions to use RenovaBio.

Santander will officially sign the contracts this Wednesday in Ribeirão Preto, São Paulo, at an event opening the 2020/21 sugar-and-ethanol crop, sponsored by consultancy Datagro. The contracts are being signed two years after then-President Michel Temer signed the decree regulating RenovaBio.

Banks register CBios through biofuel sales data that certified producers of...

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