Bunge, BP plc Partner in Brazil Biofuel

Mills Could Generate Renewable Electricity Fueled by Waste Biomass From Sugar Cane

OAKHURST, N.J. (DTN) -- White Plains, New York-based Bunge Limited announced on Monday an agreement with BP plc to form a 50-50 joint venture that will create a leading bioenergy company in Brazil, one of the world's fastest growing markets for biofuels.

The joint venture, to be called BP Bunge Bioenergia, will operate on a stand-alone basis with 11 mills located across the southeast, north and middle-west regions of Brazil. With 32 million metric tons (mmt) 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 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 Sao Paulo. The combined business will be ranked the second largest player in the industry in Brazil by effective crushing capacity.

Bunge will receive cash proceeds of $775 million in the transaction, comprising $700 million in respect of non-recourse Bunge debt to be assumed by the joint venture at closing, and $75 million from BP, subject to customary closing adjustments. The proceeds will be used to reduce outstanding indebtedness under the company's credit facilities, resulting in a stronger balance sheet and greater financial flexibility.

"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 CEO. "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."

The new business is expected to be headquartered in Sao Paulo. Mario Lindenhayn from BP will be executive chairman, Geovane Consul from Bunge, will be CEO. BP and Bunge will have equal representation on the board of directors.

Dev Sanyal, chief executive of BP Alternative Energy, said, "Biofuels have a key role to play in the energy transition and Brazil is leading the way by developing this industry at scale. 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. With our shared commitment to safety and sustainability, the combination of BP and Bunge's assets and expertise will allow us to improved performance, develop options for growth and generate real value. BP and Bunge Bioenergia will be well-placed to play a significant part in meeting Brazil's growing demand for both biofuels and biopower."