BP expands Brazilian biofuels operations

BP will acquire majority control of the Brazilian ethanol and sugar producer Companhia Nacional de Açúcar e Álcool (CNAA). This is expected to increase BP's overall Brazilian production capacity to around 1.4 billion litres of ethanol equivalent per year.

BP will pay approximately $680 million (€493.58 million) to acquire 83% of the shares of CNAA and has agreed to refinance 100% of CNAA's existing long-term debt.

After the acquisition, which is subject to regulatory approval and agreed closing conditions, BP will become the operator of two producing ethanol mills, located in Goiás and Minas Gerais states. A third CNAA mill is currently under development in Minas Gerais state.

'Low carbon energy will play an increasingly significant role in meeting world energy demand. BP is committed to producing biofuels to help meet this demand. The transaction also fits BP's strategy of increasing our exposure to growing energy markets,' says Carl-Henric Svanberg, Chairman of BP.

'This strategic acquisition underlines BP's commitment to building material businesses in growing economies and continued expansion in Brazil through exploration and production, as well as biofuels investments', says Bob Dudley, BP Group chief executive. 'This is the biggest acquisition to date for BP Alternative Energy as we continue to build a leading low carbon fuels business.'

Commenting on the deal, Philip New, Vice President of BP Biofuels, adds, 'This acquisition is a key milestone in our strategy of building a leading position in sustainable and scalable biofuels. It will provide a solid growth platform for our business.'

He states: 'As operators, we are focused on safe, reliable, sustainable and profitable activities. We will bring investment, technologies and capabilities which complement the existing knowledge and expertise.'

Around 2,500 people are employed across the three mills, which will be able to supply both Brazilian and international markets with ethanol. The total planned combined crushing capacity of all three mills, when fully developed, is expected to be 15 million tonnes of about 480 million litres of ethanol equivalent a year. Each mill will also have the capacity to supply approximately 340GWh of electricity a year to the grid.

Since 2008, BP has held a 50% share in Tropical BioEnergia S.A., which operates an ethanol mill in Goiás state with a production capacity of 435 million litres of ethanol a year. The acquisition will not impact the ownership and operation of the mill.