Bunge announced an agreement with BP to form a 50:50 joint venture that will create a leading bioenergy company in Brazil, one of the world's largest fast-growing markets for biofuels.
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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.
The deal progresses Bunge's strategy to optimize its portfolio.
The joint venture, to be called BP Bunge Bioenergia, will operate on a stand-alone basis, with a total of 11 mills located across the Southeast, North and Midwest regions of 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 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.
BP and Bunge's assets are largely complementary, with sites in five Brazilian states including three in the key region of São Paulo.
The combined business will be ranked the second largest player in the industry in Brazil by effective crushing capacity.
Following completion, the aim is for BP Bunge Bioenergia to generate significant operational and financial synergies, including through scale efficiencies and by applying best practices, optimised technologies and operational capabilities across all the assets of the new business.
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 Chief Executive Officer (CEO).
BP and Bunge will have equal representation on the Board of Directors. ■