bp’s $1.4bn move: How full control of Bunge’s biofuels venture will change the game

British energy giant bp has announced its intention to acquire the remaining 50% stake in its Brazilian joint venture, bp Bunge Bioenergia S.A., from Bunge Limited. This strategic move will grant bp full ownership of the prominent biofuels producer, a key player in Brazil’s sugarcane and ethanol sector. The deal, valued at approximately $1.4 billion, marks a significant step in bp’s strategy to enhance its bioenergy capabilities and streamline its operations.

Significance of the Acquisition

With this acquisition, bp will integrate the operations of bp Bunge Bioenergia into its portfolio, allowing the company to leverage its trading and technological expertise to drive value creation. The transaction will also involve the consolidation of the joint venture’s financial results, including net debt estimated at $0.5 billion and lease obligations of around $0.7 billion. The move is expected to align with bp’s disciplined financial framework and capex targets, which are set at $16 billion annually for 2024 and 2025.

bp to acquire full ownership of bp Bunge Bioenergia for $1.4 billion, enhancing biofuels production and refocusing on new bioenergy projects.

The acquisition will elevate bp’s production capacity to approximately 50,000 barrels per day of ethanol equivalent. The company will now fully control the operations of 11 agro-industrial units across five Brazilian states. This control extends across the entire production chain, from sugarcane processing to the sale of ethanol and sugar. bp anticipates that this enhanced ownership will unlock additional growth opportunities in the region, particularly in next-generation biofuels such as sustainable aviation fuel (SAF) and biogas.

Refocusing Biofuels Development

In tandem with this acquisition, bp is recalibrating its biofuels strategy by scaling back plans for new SAF and renewable diesel projects at its existing facilities. The company is pausing the development of two potential projects while continuing to evaluate three others. This shift is part of bp’s broader effort to simplify its portfolio and focus on high-value opportunities.

Emma Delaney, bp’s Executive Vice President of Customers and Products, highlighted the strategic significance of the acquisition. She emphasized that the full ownership of bp Bunge Bioenergia would allow bp to fully utilise its trading and technology capabilities to add further value. Delaney also noted that these changes are in line with bp’s priorities to streamline operations and enhance shareholder returns, aiming to deliver growth and returns in a more focused manner.

Future Outlook

The acquisition and the adjusted focus on biofuels projects are expected to support bp’s strategic objectives for its bioenergy business. The company continues to target $2 billion in EBITDA from bioenergy by 2025, with a broader goal of generating $3-4 billion across all transition growth engines. This move aligns with bp’s commitment to expanding its biofuels production and biogas supply. By 2025, bp aims to produce approximately 50,000 barrels per day of biofuels and supply around 40,000 barrels of oil equivalent per day of biogas. The long-term goal is to increase these figures to 100,000 barrels per day of biofuels and 70,000 barrels of oil equivalent per day of biogas by 2030.

For the year-end 2023, bp Bunge Bioenergia reported an unaudited adjusted EBITDA of approximately $0.8 billion. Subject to regulatory approvals, the acquisition is anticipated to be completed by the end of 2024.