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bp to acquire full ownership of bp Bunge Bioenergia JV

bp to acquire full ownership of bp Bunge Bioenergia JV
bp Bunge Bioenergia bioenergy and sugarcane ethanol businesses operate 11 mills located across the Southeast, North, and Midwest regions of Brazil (photo courtesy bp).

UK-headed global oil, gas, and energy major bp plc has announced that it and Bunge Global SA have entered into definitive agreements to acquire Bunge’s 50 percent holding interest in the bp Bunge Bioenergia S.A. joint venture, one of Brazil’s leading biofuels-producing companies. Upon completion, which is subject to to customary conditions and required regulatory approvals, 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."

Formed in 2019, the BP Bunge Bioenergia joint venture combined both companies’ Brazilian bioenergy and sugarcane ethanol businesses with eleven agro-industrial units across five Brazilian states in the Southeast, North, and Midwest regions of Brazil.

Following completion, bp will have the capacity to produce around 50,000 barrels a day of ethanol equivalent from sugarcane. The company operates with an integrated business model that covers the entire production chain through to sales of ethanol and sugar.

At closing, which is expected to happen in the fourth quarter of 2024, bp will own 100 percent of the business.

We are pleased with the way the business is operating and the great work the team has done to become a leader in sugar and bioenergy since we created this joint venture with bp. However, this business is not core to Bunge’s long-term strategy and this transaction will allow us to focus and invest in our core businesses while also further strengthening our balance sheet. bp has been a valued partner to Bunge, and we wish them and the team continued success, commented Greg Heckman, CEO at Bunge.

This second and final monetization event of Bunge’s ownership in the business is expected to yield net proceeds close to US$800 million, depending on the timing of closing and customary closing adjustments.

Closing of the transaction is subject to customary conditions, including receipt of required regulatory approvals.

J.P. Morgan is acting as exclusive financial advisor to Bunge, and Tauil & Chequer Advogados associated with Mayer Brown, is acting as legal counsel.

Grow bioenergy in Brazil

According to bp, the enterprise value of the stake to be acquired is approximately US$1.4 billion.

The acquisition will result in the consolidation of 100 percent of the venture’s financial results, including net debt of approximately US$0.5 billion and lease obligations of approximately US$0.7 billion.

The acquisition meets bp’s expected returns threshold for bioenergy of more than 15 percent and is fully accommodated within bp’s disciplined financial framework, including CAPEX targets of around US$16 billion in each of 2024 and 2025.

bp says that it 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.”

bp Bunge Bioenergia is widely recognized 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, said Emma Delaney, EVP of Customers and Products at bp.

Focusing biofuel development plans

In parallel to this acquisition, bp is scaling back plans for the development of new SAF and renewable diesel 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.

The bp Bunge Bioenergia acquisition and focus on key biofuel 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 US$2 billion EBITDA from bioenergy and US$3-4 billion across all its transition growth engines.

Focusing our plans to develop new biofuel 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, ended Emma Delaney.

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