Raizen Energia S.A. Update following change in outlook to stable. CREDIT OPINION 16 April Update. Summary. Credit Strengths.

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1 CREDIT OPINION Raizen Energia S.A. Update following change in outlook to stable Update Summary RATINGS Raizen Energia S.A. Domicile Sao Paulo, Brazil Long Term Rating 1 Type Senior Unsecured Dom Curr Outlook Stable Please see the ratings section at the end of this report for more information. The ratings and outlook shown reflect information as of the publication date. Contacts Erick Rodrigues VP-Senior Analyst erick.rodrigues@moodys.com Marianna Waltz, CFA MD-Corporate Finance marianna.waltz@moodys.com CLIENT SERVICES Americas Asia Pacific Japan EMEA Raízen's 1 ratings reflect its credit metrics and solid position in both the upstream and downstream businesses in Brazil. In our view, while the sugar-ethanol operations provide the potential for higher margins and growth over the next several years, the fuel distribution segment is a source of stable operating performance and cash generation. The ratings also consider the existence of cross guarantees between Raízen Energia and Raízen Combustíveis in all debt instruments issued and the companies' affiliation with and implicit support of Shell, given the benefit derived from Shell's brand and managerial expertise, as well as the explicit support provided by both shareholders in the form of a USD 700 million backstop facility. Conversely, the ratings are constrained by Brazil's sovereign ratings. The volatile nature of its upstream business, which represented 46% YTD ended in December 2017 of the company's EBITDA in the harvest year, is an additional negative rating consideration. Although Raízen's relatively lower percentage of owned sugarcane when compared to peers could allow for less margin volatility in lower production years, the sugar-ethanol industry is highly dependent on external factors, such as weather conditions and government's incentives and policies, which can significantly affect prices and Raízen's financial performance. Credit Strengths Strong downstream business, which benefits from Shell's brand name, product portfolio and large geographic footprint Favorable competitive position in the sugar and ethanol industry Expected implicit and explicit support from shareholders Cosan and Shell Provision of cross guarantees for debt instruments between Raízen Energia and Raízen Combustiveis Credit Challenges Ratings are constrained by Brazil's sovereign ratings Higher cash generation reliance on the more volatile upstream business Rating Outlook The stable outlook incorporates our expectations that maintain its strong credit metrics and adequate liquidity and that its dividend policy will be conducted in a prudent and conservative manner.

2 Factors that Could Lead to an Upgrade An upward rating movement would be dependent on the maintenance by Raizen of strong credit metrics and liquidity profile. Quantitatively, the ratings could be upgraded if: Total Adjusted Debt to EBITDA remains below 2.5x. Positive free cash flow generation on a sustainable basis or a stronger demonstration of support by Shell could also translate into considerations for positive rating momentum. Factors that Could Lead to a Downgrade A downgrade could result from a marked deterioration in operating performance or credit metrics. Quantitatively, negative pressure on the ratings could arise in case: Debt/EBITDA above 3.5x on a sustained basis; CFO/Net Debt below 25% on a sustained basis. Key Indicators Exhibit 1 Key Indicators [1] Raizen Consolidated US Millions Revenue CFO / Net Debt LTM Moody's Month Forward (Dec-17) View Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 25, , , , , , % 32.3% 40.1% 27.6% 44.5% 32.8% 25,000-26,500 30%-35% Debt / EBITDA 2.2x 2.6x 2.8x 2.6x 2.1x 2.7x 2.7x-3.0x EBITA / Interest Expense 4.9x 4.2x 3.9x 4.5x 5.3x 4.3x 3.9x-4.9x Debt / Book Capitalization 47.2% 55.3% 57.5% 61.7% 56.8% 60.4% 59%-64% [1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations. Source: Moody's Financial Metrics Profile Headquartered in São Paulo and created in 2012, Raízen represents the 50-50% joint-venture formed by Cosan S.A. Industria e Comércio (rated 2/stable) and Shell Brazil Holdings BV (a 100% subsidiary of Royal Dutch Shell Plc, rated Aa2/Stable). The JV operates under two main legal entities, Raízen Energia S.A. and Raízen Combustíveis S.A., and Moody's analyzes the companies as a combined entity, given the existence of cross-guarantees in each other's debt issuances. With crushing capacity of 73 million tons and 26 sugar-ethanol mills, Raízen Energia is the largest player in the fragmented sugar and ethanol business in Brazil. Raízen Combustíveis operates in the fuel distribution segment under the Shell brand, being one of the largest player in the country. During the last twelve months ended in December 2017, the entities generated revenues of BRL 83.4 billion (approximately USD 26 billion converted by the average exchange rate for the period) and reported EBITDA of BRL 4.5 billion (approximately USD 1.4 billion). This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on for the most updated credit rating action information and rating history. 2

3 Exhibit 2 Exhibit 3 Raizen Consolidated - EBITDA Breakdown by Entity Raizen Consolidated - Revenue Breakdown by Entity YTD December 2017 YTD December 2017 Raizen Energia 16% Raizen Combustiveis 54% Raizen Energia 46% Raizen Combustiveis 84% Source: Moody's Investor Services, Raizen Energia S.A, Raizen Combustiveis S.A Source: Moody's Investor Services, Raizen Energia S.A, Raizen Combustiveis S.A Detailed Rating Considerations STRONG DOWNSTREAM BUSINESS, WHICH BENEFITS FROM SHELL'S BRAND NAME, PRODUCT PORTFOLIO AND LARGE GEOGRAPHIC FOOTPRINT In the downstream business, Raízen Combustíveis ranks among the top 3 players in the consolidated fuel distribution sector in Brazil along with Petrobras and Ipiranga. Together those companies represent about 75% of the market. For the last twelve months ended in December, 2017, Raízen Combustíveis posted net revenues of BRL 72.9 billion and reported EBITDA margin of 4.3%. With 6,272 gas stations, mainly located in the most developed South and Southeast regions of the country, Raízen Combustíveis has a unique distribution network that was inherited from Cosan and Shell, which allows it to efficiently manage freight and depot costs. It also benefits from the right to commercialize Shell branded retail products, with higher added value and margins, and from its jet fuel business, that tends to generate higher unit margins than the remaining downstream segments. In addition, the high penetration of own brand gas stations in the overall sales mix also supports profitability. Expansion going forward will come mostly from organic growth, through new service stations, conversion of white flag stations, and small acquisitions. For 2018, Raízen Combustiveis' capex should be around BRL 800 million to BRL 1 billion. 3

4 Exhibit 4 Exhibit 5 Raizen Combustiveis: Fuel sales breakdown by volume Raizen Combustiveis: Net operating revenues As of December 2017 As of December 2017 Other Products 1% Other Products, 1% Aviation 5% Aviation, 8% Ethanol 7% Ethanol, 11% Gasoline, 35% Diesel, 45% Source: Moody's Investor Services, Raizen Combustiveis S.A Diesel 43% Gasoline 44% Source: Moody's Investor Services, Raizen Combustiveis S.A Although the fuel distribution segment presents tight margins, the business has proven resilience to economic downturns, especially in the last two years. The consumption of gasoline and ethanol, which represented 46% of Raízen Combustíveis' sales volumes in the LTM ended December 2017, is tied to the country's auto fleet that continues to increase despite the lower volume of sales of new vehicles last year. The lack of a well-developed public transportation system in Brazil, the still low penetration of light vehicles in the country, the increase in the population standards of living, and low scrapping rates offer further long-term growth opportunities for companies in this sector. Although the pace of growth in sales of new vehicles dropped sharply, a sizeable fleet of light vehicles still supports the retail fuel distribution segment. Diesel consumption (45% of sales volumes), on the other hand, is linked to the level of economic activity, following GDP growth. The last year was challenging for Brazil in terms of industrial activity and economic growth, but Raízen was able to manage efficiency gains and preserve profitability during adverse market scenario. Volumes in 2017 increased 3% when compared to 2016 and revenues in 2017 advanced 6.5% compared to FAVORABLE COMPETITIVE POSITION IN THE SUGAR AND ETHANOL INDUSTRY The commodity related businesses that Raizen operates are extremely volatile. In such environment, larger and adequately capitalized players are better suited to maintain investments in plantations and present a superior competitive position to ride through the downturns. Raízen's ratings take into account its competitive advantages such as: (i) scale as Brazil's largest player in terms of sugarcane crushed, with a crushing capacity of 73 million tons, nearly twice as big as that of the second largest competitor; (ii) cluster organization in the state of São Paulo, which provides the potential for economies of scale, higher agricultural yields and lower freight costs - despite geographical concentration; and (iii) highly developed logistics and distribution infrastructure. 4

5 Exhibit 6 Exhibit 7 Raizen Energia: Volume Sales breakdown - Sugar Raizen Energia: Volume Sales breakdown - Ethanol YTD December 2017 YTD December 2017 Domestic Market 24% External Market 32% Domestic Market 68% External Market 76% Source: Moody's Investor Services, Raizen Energia S.A Source: Moody's Investor Services, Raizen Energia S.A In terms of the sector fundamentals we expect global sugar demand will continue to grow steadily, based on population growth, urbanization, higher income in emerging markets. In the other hand, supply of the commodity is less reliable and highly prone to event risks, as other agricultural activities. The main global exporter is Brazil responsible for 50% of traded volume, while other relevant exporters include India and Thailand. Sugar prices have been declining since 2017 following the perspective of a production surplus which will create an inventory build-up. Future prices have reduced to USD/lb in April 2018 from as high as 0.20 USD/lb in February Brazilian producers have a relevant buffer to sugar prices swings because of the widespread capacity of the industry to produce ethanol and a large national fleet of 26 million vehicles which use ethanol as fuel (72% of the light auto fleet is flex-fuel, which means it can use gasoline, ethanol or a combination of the fuels) and supports demand. Producers usually have a flexibility to switch production between sugar and ethanol, whichever is more profitable at a given point. As recently as 2015 gasoline price controls interfered in this balancing mechanism because gasoline prices were capped and ethanol prices naturally remained low, since ethanol on average 70% less efficient than gasoline, its price is usually 70% that of gasoline. Recently Petrobras has demonstrated that it will be more active in adjusting domestic gasoline prices to translate fundamentals of market trends, such as international gasoline and oil prices, this increased flexibility is beneficial for ethanol prices. Exhibit 8 Exhibit 9 Raizen Energia: Revenue breakdown - Sugar Raizen Energia: Revenue breakdown - Ethanol YTD December 2017 YTD December 2017 Domestic Market 20% External Market 34% Domestic Market 66% External Market 80% Source: Moody's Investor Services, Raizen Energia S.A 5 Source: Moody's Investor Services, Raizen Energia S.A

6 In the LTM ended December 2017, Raízen Energia reported BRL 13.1 billion of revenues (approximately USD 3.8 billion) and a 26% reported EBITDA margin. Raízen Energia's capex for the 2018/2019 harvest is estimated at BRL 2.4 to BRL 2.7 billion, consisting mainly of sustaining investments towards the renewal of close to 15% of sugarcane fields and others including safety and environmental. As the largest player in the fragmented Brazilian sugar and ethanol industry, Raízen may pursue M&A activity during industry downturns. EXPECTED IMPLICIT AND EXPLICIT SUPPORT FROM SHAREHOLDERS COSAN AND SHELL The ratings are supported by Cosan's and Shell's explicit and implicit support to Raízen, as the company is a strategic long-term asset for Shell's global downstream portfolio. The company is the second largest downstream market for Shell globally and it is a key vehicle for Shell's growth in the renewable energy sector. Accordingly, Raízen should benefit from Shell's operational experience and technology, as well as from a committed credit facility amounting to USD 700 million structured by both Shell and Cosan that should provide emergency funding if and when needed. In November of 2016, Cosan and Shell agreed to remove the mutual time-bound options of the initial JV agreement. This new shareholder arrangement between Cosan and Shell intends to strengthen the long term partnership in Raízen. The Parties have also agreed to renew the existing lock up period, for 5 years. HIGH CASH GENERATION RELIANCE ON THE MORE VOLATILE UPSTREAM BUSINESS The combination of Raízen's upstream and downstream businesses help to offset cash flow and margin volatility derived from the sugarethanol segment. The fuel distribution segment has low but stable margins and consistent cash flow generation influenced by the low demand elasticity of light vehicle fuel. These characteristics create a positive rating element when combined with Raízen Energia's elevated margins but vulnerability to external factors, such as weather conditions and other vagaries. Nevertheless, we still see Raízen's large exposure to the volatile upstream business as a credit constraint. Despite generating 14% of revenues, EBITDA contribution from the upstream business is on average 50%. CROSS GUARANTEES IN DEBT INSTRUMENTS Despite the different nature of the two businesses, the ratings of Raízen Energia and Raízen Combustíveis have been equalized at the same level due to the cross-guarantees provided by the entities for each other's debt issuances. We analyze both entities' credit profile on a combined manner given the centralized debt and cash management, and the perceived support both companies provide to each other. RATING STANDS ABOVE BRAZIL'S BOND RATINGS Raizen's 1 rating is currently one notch above Brazil's government bond rating of 2. Granted only on an exceptional basis, the notching represents a fundamental corporate profile that is stronger than the sovereign's government bond rating. This is evidenced by the company's strong financial profile and resilient business model relative to the domestic environment, which limits the impact of weak domestic economic fundamentals in the company's credit profile, despite the revenue and asset concentration in Brazil. Furthermore, the upstream business has a strong export element (approximately 30% of Raízen's total EBITDA is in USD) and the company benefits from the ownership of Shell. Finally, although maintenance capex is high and could pressure future free cash flow generation, the company has the flexibility to reduce dividend payments to preserve its liquidity profile. Liquidity Analysis At the end of December 2017, Raízen had an adequate liquidity position, with a cash balance of BRL 3.3 billion, sufficient to cover its reported short term debt by 2.3x. Furthermore, Raízen has USD 285 million in revolving credit facilities with banks, in addition to the USD 700 million revolving committed back-up facility provided by its shareholders. 6

7 Exhibit 10 Raizen Combined - Cash Position and Debt Amortization Schedule BRL Million, as of December ,000 3,405 3,291 3,500 3,000 BRL Million 2,500 2,100 2,000 1,405 1,500 1,505 1,700 1,538 1,471 1, Cash & Equivalents ST 13 to 24 Months 25 to 36 Months 37 to 48 Months 49 to 60 Months Axis Title 61 to 72 Months 73 to 84 Months 85 to 96 Months 97 Months+ Source: Moody's Investor Services, Raizen Energia S.A, Raizen Combustiveis S.A The company's capital structure is also adequate, with 90% of its total debt in the long term and combined adjusted leverage measured by total debt to EBITDA of 2.7x (LTM ended December 2017). Although 45% of Raízen's total debt is denominated in foreign currency, the company uses financial instruments to hedge the totality of its foreign currency exposure and its sugar and ethanol exports provide a natural hedge to the company, accounting for approximately 51% of Raízen Energia's revenues. Its noteworthy that the remaining of Raízen Energia's revenues - sugar and ethanol in the domestic market - are also correlated to the foreign exchange level, as the currency fluctuations tend to influence international sugar prices. Exhibit 11 Raizen Consolidated: Leverage (Debt/EBITDA) Evolution As of December x 2.8x 2.7x 2.6x 2.6x 2.5x 2.2x 2.0x 79,209 74, x 1.0x 0.5x 0.0x LTM 12/2017 Source: Moody's Investor Services, Raizen Energia S.A, Raizen Combustiveis S.A The sugar-ethanol business requires high maintenance capex related to plantation renewal and other agricultural costs, which are not discretionary due to its impact on future harvest output. In 2018 the combined capex of both Energia and Combustives could reach up to BRL 3.7 billion. Accordingly, the inability to fund investments or a liquidity deterioration arising from the execution of such investments would be negative from a credit perspective. The assigned ratings incorporates our expectations that Raízen will prudently manage its leverage ratios by adjusting dividend payouts and capex as needed during weaker operating environments, and complying with its financial policies. 7

8 Corporate Governance Being a 50-50% joint-venture, Raízen may face governance issues deriving from potential disparate interests of the shareholders. In our view, the existence of well-defined financial policies and formal decision-making processes mitigates this risk, Raízen currently has formal financial policies regarding a minimum operational liquidity of BRL 1 billion and maximum reported net leverage. When the JV was formed the shareholders were locked up until the year 6; at year 10 Shell would have a call option on 50% or all of Cosan s stake; and, at year 15, Shell again would have the option to acquire all or the remaining interest of Cosan in the joint venture. But, in November of 2016, Cosan and Shell agreed to remove the mutual time-bound buyout options of the initial agreement. This new shareholder arrangement between Cosan and Shell intends to strengthen the long term partnership in Raízen. The Parties have also agreed to renew the existing lock up period, for 5 years. Exhibit 12 Raizen is a 50/50 joint-venture of Cosan (2 stable) and Shell (Aa3 stable) As of December, 2017 Royal Dutch Shell 50% COSAN 50% Source: Moody's Investor Services, Raizen 8

9 Rating Methodology and Scorecard Factors Exhibit 13 Rating Factors Raizen Consolidated Current LTM 12/31/2017 Protein and Agriculture Industry Grid [1][2] Factor 1 : SCALE & DIVERSIFICATION (20%) Moody's Month Forward View As of 4/10/2018 [3] Measure Score Measure $26.1 A $ A b) Geographic Diversification c) Segment Diversification a a a a a) Total Sales (USD Billion) Score Factor 2 : BUSINESS POSITION (25%) a) Market Share b) Product Portfolio Profile c) Earnings Stability a a a a A A A A a) CFO / Net Debt 32.8% a 30-35% a b) Debt / EBITDA 2.7x a x a c) EBITA / Interest Expense 4.3x x d) Debt / Book Capitalization 60.4% B 59%-64% Factor 3 : FINANCIAL POLICY (15%) a) Financial Policy Factor 4 : LEVERAGE & COVERAGE (40%) Rating: a) Indicated Rating from Grid a3 a3 b) Actual Rating Assigned 1 [1]All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations. [2] As of 12/31/2017(L). [3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures. Source: Moody s Financial Metrics Appendix Exhibit 14 Moody's-adjusted debt breakdown Raízen Consolidated (in US Millions) Mar-13 As Reported Debt Operating Leases Non-Standard Adjustments Moody's-Adjusted Debt Mar-14 Mar-15 Mar-16 Mar-17 LTM Ending Dec-17 3, , , , , , , , , , , , , , , , ,704.2 All figures are calculated using Moody s estimates and standard adjustments Source: Moody's Financial Metrics 9

10 Exhibit 15 Moody's-adjusted EBITDA breakdown Raízen Consolidated (in US Millions) Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 LTM Ending Dec-17 As Reported EBITDA 1, , , , , , Operating Leases Unusual Non-Standard Adjustments Moody's-Adjusted EBITDA , , , , , ,202.2 All figures are calculated using Moody s estimates and standard adjustments Source: Moody's Financial Metrics Exhibit 16 Peer comparison table Raizen Consolidated Raizen Consolidated Alimentation Couche-Tard, In Suedzucker AG Cosan S.A. Industria e Comer 1 Stable a2 Stable a2 Negative 2 Stable Sunoco LP 3 Stable Mar-16 Mar-17 LTM Dec-17 Apr-15 Apr-16 LTM Oct-17 Feb-15 Feb-16 Feb-17 Dec-15 Dec-16 Dec-17 Dec-15 Dec-16 Dec-17 Revenue $20,875 $24,039 $26,133 $34,530 $34,145 $43,026 $8,771 $7,036 $7,131 $2,547 $2,174 $2,403 $18,460 $9,986 $11,723 EBITDA $1,973 $2,379 $2,202 $2,193 $2,621 $3,045 $593 $563 $793 $649 $713 $923 $778 $639 $594 Total Debt $5,179 $5,292 $5,704 $5,565 $5,336 $9,863 $2,486 $2,201 $2,241 $3,133 $3,540 $3,593 $2,676 $5,230 $4,898 Cash & Cash Equiv. $1,204 $1,008 $791 $576 $599 $995 $742 $636 $751 $791 $1,226 $950 $73 $103 $28 9.4% 9.9% 8.4% 6.4% 7.7% 7.1% 6.8% 8.0% 11.1% 25.5% 32.8% 38.4% 4.2% 6.4% 5.1% (in US millions) EBITDA Margin EBITA / Int. Exp. CFO / Net Debt Debt / EBITDA Total Debt/Capital 4.5x 5.3x 4.3x 9.5x 9.7x 8.0x 3.0x 3.8x 7.3x 1.8x 1.6x 2.2x 3.1x 2.1x 1.6x 27.6% 44.5% 32.8% 2.5x 2.0x 3.2x 32.6% 41.4% 39.5% 21.9% 39.0% 29.5% 343.9% 818.8% 824.6% 2.6x 2.1x 2.7x 30.5% 42.0% 25.5% 4.8x 4.0x 2.9x 5.8x 4.7x 4.0x 0.1x 0.0x 0.0x 61.7% 56.8% 60.4% 17.8% 16.5% 7.4% 33.2% 31.0% 30.1% 47.4% 49.2% 50.0% -16.4% -2.7% -5.5% All figures and ratios calculated using Moody's estimates and standard adjustments. Source: Moody's Financial Metrics Ratings Exhibit 17 Category RAIZEN ENERGIA S.A. Outlook Bkd Senior Unsecured -Dom Curr NSR Bkd Senior Unsecured Moody's Rating Stable 1 Aaa.br RAIZEN COMBUSTIVEIS S.A. Outlook Corporate Family Rating NSR Corporate Family Rating Stable 1 Aaa.br Source: Moody's Investors Service 10

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12 Contacts Bruna M Borges Associate Analyst bruna.borges@moodys.com 12 CLIENT SERVICES Americas Asia Pacific Japan EMEA