Bp plc (London) has agreed to acquire Bunge’s 50% holding interest in its bp Bunge Bioenergia S.A. joint venture (JV), one of Brazil’s leading biofuels-producing companies.
Upon completion, bp will become sole owner of the industrial scale sugarcane and ethanol business, enabling bp to accelerate value creation through integration with bp’s trading and technology capabilities.
The enterprise value of the stake to be acquired is approximately $1.4 billion. The acquisition will result in consolidation of 100% of the venture’s financial results, including net debt of approximately $0.5 billion and lease obligations of approximately $0.7 billion.
The acquisition meets bp’s expected returns threshold for bioenergy of more than 15% and is fully accommodated within bp’s disciplined financial framework, including capex targets of around $16 billion in each of 2024 and 2025.
Following completion, bp will have the capacity to produce around 50,000 barrels a day of ethanol equivalent from sugarcane through bp Bunge Bioenergia’s 11 agro-industrial units across five Brazilian states. The company operates with an integrated business model that covers the entire production chain through to sales of ethanol and sugar.
bp believes ownership will also offer the potential to unlock further growth opportunities in the region, and to develop new platforms for bioenergy such as next generation ethanol, sustainable aviation fuel (SAF) and biogas.
In parallel to this acquisition, bp is scaling back plans for development of new SAF and renewable diesel biofuels projects at its existing sites, pausing planning for two potential projects while continuing to assess three for progression. This is aligned with bp’s drive to simplify its portfolio, focusing on value and returns.
Emma Delaney, bp’s executive vice president, customers and products said: “bp Bunge Bioenergia is widely recognised as a leader in the industry. I am excited by the opportunity for bp to now add further value from our trading and technology capabilities. bp was an early entrant into the bioenergy business in Brazil and we look forward to continuing to grow and develop here.
“Focusing our plans to develop new biofuels projects is also driven by value. Taken together, these changes can enable us to deliver the growth and returns we expect from biofuels, but in a simpler, more focused way. This is fully in line with bp’s priorities of driving focus into the business and growing shareholder returns.“
This acquisition and focusing on key biofuels production projects are expected to support the continuing growth of bp’s strategic bioenergy business which includes both biofuels and biogas. They contribute to bp’s unchanged 2025 targets of delivering around $2bn EBITDA from bioenergy and $3-4bn across all its transition growth engines.
Subject to regulatory approvals, the transaction is currently anticipated to close by end 2024.