BP and Bunge create bioenergy joint venture

Bunge, an American company and one of the largest in agribusiness, food, and ingredients in the world, has announced an agreement with BP (British Petroleum) to create a joint venture with a 50% stake in each company. BP Bunge Bioenergia, the name of the new company, will operate with the production of sugar, ethanol, and renewable energy in Brazil.

BP and Bunge to form major bioenergy player in Brazil – one of the world’s largest and fastest growing carbon-efficient #biofuels markets – in another step towards a low carbon future

— BP (@BP_plc) July 22, 2019

Bunge will receive US$775m for the operation, consisting of US$700m related to Bunge’s non-recourse debt to be assumed by the joint venture at the operation’s completion, and US$75m from BP, subject to customary closure conditions. The amount will be used to reduce existing indebtedness under the company’s credit lines, resulting in a stronger balance sheet and greater financial flexibility.

BP Bunge Bioenergia will operate independently, with a total of 11 plants located in the Southeast, North, and Midwest of Brazil.

With 32m tons of combined milling capacity per year, the joint venture will have the flexibility to produce a mix of ethanol and sugar. It will also generate renewable electricity from sugarcane bagasse, through its cogeneration units, to support all of its units and sell surplus electricity to the Brazilian grid.

BP and Bunge’s assets are largely complementary, with units in five Brazilian states, including three in the key region of São Paulo. The combined business will become the second-largest player in the industry in Brazil in effective grinding capacity.

Upon completion, the goal is for BP Bunge Bioenergia to generate significant operational and financial synergies, including through scale efficiencies and best practice application, technology optimization, and operational capabilities across all business assets.

The new company should be headquartered in São Paulo. BP’s Mario Lindenhayn will be the Executive Chairman and Bunge’s Geovane Consul will be the Chief Executive Officer (CEO).

BP and Bunge will have equal representation on the Board of Directors.

The transaction was unanimously approved by Bunge’s Board of Directors. The transaction is expected to be completed in the fourth quarter of 2019, subject to approval by the competent authorities.

For Bunge, Itaú BBA acted as financial advisor and Lefosse Advogados acted as legal counsel for the operation.

The following graph (based on Unica data ) shows Brazil’s sugar and ethanol production patterns in the last six seasons:

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