BP will form a 50:50 biofuels joint venture with Bunge—a leader in agriculture, food and ingredients. BP will combine its Brazilian biofuels and biopower businesses with that of Bunge to create a world-scale, highly-efficient producer of sugarcane ethanol in Brazil: BP Bunge Bioenergia. BP’s interest in the new venture will grow its existing biofuels business by more than 50%.
Ethanol produced from sugarcane is one of the most carbon-efficient biofuels available globally, with lifecycle greenhouse gas emissions around 70% lower than conventional hydrocarbon transport fuels. Brazil is the world’s second-largest and most integrated market for ethanol as a transportation fuel with demand forecast to grow rapidly.
Around 70% of the vehicles in the country are already able to run on ethanol and the country’s demand for ethanol is estimated to increase by around 70% by 2030.
This is another large-scale example of BP’s commitment to play a leading role in a rapid transition to a low carbon future. Biofuels will be an essential part of delivering the energy transition and Brazil is leading the way in showing how they can be used at scale, reducing emissions from transport. This combination will unlock new possibilities for improved efficiency and future growth in this key market.—Bob Dudley, BP group chief executive
BP Bunge Bioenergia will have 11 biofuels sites in Brazil. With 32 million metric tonnes of combined crushing capacity per year, the joint venture will have the flexibility to produce a mix of ethanol and sugar. It will also generate renewable electricity—fueled 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. BP and Bunge’s assets are largely complementary, with sites in five Brazilian states including three in the key region of São Paulo.
In 2018, the two businesses produced a total of around 2.2 billion liters (580 million gallons US) of ethanol equivalent and, after powering the sites, exported 1,200 gigawatt hours of low-carbon biopower to the national grid.
Together the two businesses currently employ more than 10,000 people in Brazil. The combined business will be ranked the second largest player in the sugar cane ethanol biofuel industry in Brazil by effective crushing capacity.
Under their agreement, BP and Bunge will each contribute their existing Brazilian biofuel, biopower and sugar businesses into the new, equally-owned, standalone joint venture. On completion, BP will pay Bunge $75 million, subject to customary closing adjustments, and the joint venture will assume $700 million of non-recourse debt associated with Bunge’s assets.
Subject to satisfaction of conditions precedent, including obtaining the necessary regulatory clearances and approval, the deal is expected to complete in the fourth quarter of 2019.
Following completion, the aim is for BP Bunge Bioenergia to generate significant operational and financial synergies, through scale efficiencies and by applying best practices, optimized technologies and operational capabilities across all the assets of the new business.
The new business is expected to be headquartered in São Paulo. Mario Lindenhayn from BP will be executive chairman, Geovane Consul from Bunge, chief executive, and Marcus Schlosser from BP, chief financial officer. BP and Bunge will have equal representation on the board of directors.
In 2018 the Brazilian production of ethanol was some 26 billion liters (6.9 billion gallons US), produced almost entirely from sugarcane grown in-country. The Brazilian government is introducing a new low-carbon transport policy, known as RenovaBio, to establish the first regulated carbon credits market in the country. RenovaBio is expected to encourage continued growth in the market and support development of the sugarcane ethanol industry.
The JV agreement includes only the Brazilian ethanol, sugar and biopower businesses of BP and Bunge. It excludes, for example, BP’s interests in its Butamax joint venture or Bunge’s interests in corn ethanol assets outside Brazil.