BP has announced its agreement to purchase Bunge's (BG.N) 50% stake in BP Bunge Bioenergia, a joint venture based in Brazil. The acquisition, valued at $1.4 billion, signifies BP's commitment to meeting the rising global demand for low-carbon energy solutions.
Upon completion of the transaction, expected by the end of 2024, BP will gain full ownership of Bioenergia, which currently boasts a production capacity equivalent to approximately 50,000 barrels of ethanol per day from sugarcane. The deal will also involve BP assuming Bioenergia's debt and lease obligations totaling $1.2 billion.
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“This acquisition aligns with BP's strategy to achieve robust returns in the bioenergy sector, surpassing our threshold of 15%,” stated BP's spokesperson in response to the deal.
The acquisition comes amidst scrutiny of BP's financial strategy, following a recent downgrade in its credit outlook by S&P Global due to slower-than-anticipated debt reduction efforts. However, BP reassures stakeholders that the purchase of Bunge's stake will remain within its annual spending framework of approximately $16 billion.
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In conjunction with expanding its bioenergy portfolio, BP has announced a revision of its biofuels development plans. Specifically, the company has decided to halt progress on biofuel projects at its Lingen refinery in Germany and Cherry Point refinery in Washington state, USA. Three other projects are currently under evaluation.
BP's Head of Customers and Products, Emma Delaney, emphasized the company's commitment to refining its business focus while driving growth and enhancing shareholder returns. “These adjustments will enable us to achieve our growth targets in biofuels in a streamlined and effective manner,” Delaney remarked.
