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Brazilian steelmaker partners with fund manager on renewables

Aerial view of solar panels in factory using clean and renewable energy. Drone shot in the state of Mato Grosso, Brazil. Environment concept, zero car

A Brazilian steel manufacturer is partnering with an investment manager on a renewables platform to develop projects in the country.

Gerdau, through its subsidiary Gerdau Next, will invest R$1.5 billion ($279 million) into Newave Energia in exchange for 33.33% of the platform’s shares.

Under the agreement, the steelmaker will also contract 30% of the energy generated by the platform’s assets, allowing Gerdau to power its activities with renewable energy and meet the company's carbon emission reduction targets.

The platform’s ownership will be distributed between Gerdau Next and Newave Capital which will hold the remaining 66.67% of shares in the platform. The investment manager, together with funds managed by XP Investimentos, will provide R$1 billion ($186 million), with an additional R$2 billion to follow depending on the market.

The equity boost will allow the development of about 2.5GW of solar and wind greenfield projects expected to start operating in 2025 and 2026, enable the acquisition of brownfield projects and support the platform’s energy trading activities.

Gerdau’s investment will be divided in two phases with the first R$500 million to be deployed over the course of 2023. The remaining portion will be subject to the achievement of certain targets.

The transaction is subject to approvals from regulatory agencies.

Earlier this year, Gerdau formed a joint venture with Shell to develop a 260MW solar project in Brazil (PFR, 2/9). The pair had previously worked together on a 190 MW solar asset (PFR, 7/19/21).