BP, Bunge create biofuels joint venture in Brazil
image credit: Originally published at Biofuels International
- Jul 24, 2019 12:26 pm GMTJul 23, 2019 2:51 pm GMT
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UK energy major BP has agreed to form a 50/50 joint venture (JV) with US agricultural trader Bunge, creating a bioenergy company in Brazil.
The JV, which will be known as BP Bunge Bioenergia, will operate 11 mills across the southeast, north and Midwest regions of Brazil, one of the largest fast-growing markets for biofuels in the world.
The new company will have an annual combined crushing capacity of 32 million metric tonnes and will produce a mix of ethanol and sugar.
It will also generate renewable electricity from waste biomass from sugar cane, which will power all sites, with surplus electricity being sold to the Brazilian power grid.
According to Bunge, the combined business will be ranked as the second largest player in the Brazilian industry by effective crushing capacity.
"This partnership with BP represents a major portfolio optimisation milestone for Bunge which allows us to reduce our current exposure to sugar milling, strengthen our balance sheet and focus on our core businesses,” said Gregory Heckman, CEO of Bunge. “We have a strong, committed partner in BP, as well as flexibility in the medium and long term for further monetisation, with full exit potential via an IPO or other strategic route."
Bunge will receive cash proceeds of $775 million (€690.7 million) in the transaction, which the company will use to reduce outstanding indebtedness under its credit facilities.
"Biofuels have a key role to play in the energy transition and Brazil is leading the way by developing this industry at scale,” added Dev Sanyal, CEO of BP Alternative Energy. “In one step, this agreement will allow BP to significantly grow the size, efficiency and flexibility of our biofuels business in one of the world's major growth markets.
“With our shared commitment to safety and sustainability, the combination of BP and Bunge's assets and expertise will allow us to improve performance, develop options for growth and generate real value. BP Bunge Bioenergia will be well-placed to play a significant part in meeting Brazil's growing demand for both biofuels and biopower."
The JV will be headquartered in Sao Paulo, Brazil, with BP’s Mario Lindenhayn to become executive chairman and Bunge’s Geovane Consul to take on the role of CEO.