BRAZIL – Agribusiness giant, Bunge Limited and BP Plc have agreed to create a new biofuels joint venture in Brazil, one of the world’s largest fast-growing markets for biofuels.

The 50:50 JV will create a leading bioenergy company called BP Bunge Bioenergia, which will operate as a stand-alone business with a total of 11 mills located across the Southeast, North and Midwest regions of Brazil.

It will have 32 million metric tonnes of combined crushing capacity per year and flexibility to produce a mix of ethanol and sugar.

It will also generate renewable electricity fuelled by waste biomass from the sugar cane, through its cogeneration facilities to power all its sites and sell surplus electricity to the Brazilian power grid.

The combined business will be ranked the second largest player in the industry in Brazil by effective crushing capacity.

“This partnership with BP represents a major portfolio optimization 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 A. Heckman, Bunge’s Chief Executive Officer.

“We have a strong, committed partner in BP, as well as flexibility in the medium and long term for further monetization, with full exit potential via an IPO or other strategic route.”

Headquartered in Sao Paulo, the new business is expected to generate significant operational and financial synergies through scale efficiencies, optimized technologies and operational capabilities.

Mario Lindenhayn from BP will be Executive Chairman while Geovane Consul from Bunge will be Chief Executive Officer (CEO) of the new company.

The transaction involves US$775 million of total cash proceeds to Bunge and US$75 million from BP and is expected to reduce the company’s outstanding debt.

“Biofuels have a key role to play in the energy transition and Brazil is leading the way by developing this industry at scale,” said Dev Sanyal, chief executive 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.

“BP Bunge Bioenergia will be well-placed to play a significant part in meeting Brazil’s growing demand for both biofuels and biopower.”

The transaction is expected to close in the fourth quarter of 2019, subject to customary conditions.