Sumitomo has agreed to acquire a 20% stake in Cosan Biomassa, a Brazilian producer of sugarcane pellets for power generation.

The company has initiated a strategic collaboration with Cosan Biomassa’s parent company Cosan Industria e Comercio for development of the sugarcane pellet business through Cosan Biomassa.

The investment from Sumitomo will help Cosan Biomassa increase its exports to Japan and Europe, along with increased domestic sales.

"Pelletised biomass is a new commodity being created to serve the low-carbon economy."

Cosan Biomassa has developed a fuel pellet made from sugarcane residues such as bagasse from sugar mill and straw leftover in sugarcane fields.

In September 2015, it built a large-scale production plant with an annual capacity of around 175,000t and started commercial production in December.

The partnership aims to produce two million tonnes of sugarcane pellets by 2025 and up to eight million tonnes longer term.

Cosan Biomassa CEO Mark Lyra said: "Brazil is already among the largest producers and exporters of agricultural commodities in the world. Pelletised biomass is a new commodity being created to serve the low-carbon economy.

"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."

According to Sumitomo, Japan is anticipated to use nearly ten million tonnes of pelletised biomass in power generation by 2030.