Bunge and BP Close agreement to create bioenergy company in Brazil

The commodity dealer Bunge said on Monday that it has closed agreement with the British oil tanker BP for the creation of a bioenergy company in Brazil that will produce ethanol and sugar, in addition to renewable electricity with sugarcane biomass. The joint venture, BP Bunge Bioenergia, in which each of the companies will have 50%, will operate autonomously, with a total of 11 plants in the southeast, North and Midwest regions of Brazil, added Bunge. BP Bunge Bioenergia will have a grinding capacity of 32 million tonnes per year, with production capacity of 1.5 billion liters of ethanol and 1.1 million tons of sugar, in an estimate based on results of 2018. " This partnership with BP represents an important milestone in portfolio optimization for Bunge, which allows us to reduce our current exposure to the sugar and bioenergy business, strengthen our balance sheet and focus on our main opportunities, "said The CEO of Bunge, Gregory Heckman, in a statement. " We have in BP a strong and committed partner, as well as flexibility in the medium and long term for future monetization, with potential for total output via initial public offering (IPO) or other strategic route, "he added. Bunge said it will receive 775 million dollars in cash as part of the agreement, resources it expects to use to reduce debts. The new business is expected to be headquartered in São Paulo, with about 10000 employees, and the agreement is closed in the fourth quarter of 2019. The joint venture will also produce energy from sugarcane bagasse to sustain its units, selling surplus to the Brazilian electric Network. " The assets of BP and Bunge are widely 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, "the companies said. BP Alternative Energy CEO Dev Sanyal stressed that biofuels are an important part of the oil strategy for the energy transition, with the world betting more on clean energy sources. " This important step will allow BP to significantly increase the scale, efficiency and flexibility of our business in one of the world's fastest growing biofuel markets... Unite our assets and experience will enable us to improve performance, develop growth options and generate real value, "he said in a statement. The companies also said they would expect the joint venture to "generate significant operational and financial synergies" for all business assets. With the closing of the operation, Bunge also said that it will no longer consolidate its sugar and bioenergy operations in Brazil in its balance sheet--the participation in the joint venture will be accounted for by the equity method. (By Luciano Costa, in São Paulo; Shradha Singh's additional report in Bangalore)