BP makes investment in Brazil's ethanol production industry
Date added: 14th March, 2011 at 14:00
(view all articles from March, 2011)
Categories: Natural Resources
Oil firm BP is to make a $680 million (£423.18 million) investment in Brazil to become the majority stakeholder in ethanol production company Companhia Nacional de Acucar e Alcool (CNAA).
The deal was announced on Friday (March 11th) and vice-president of BP Biofuels Philip New described it as a "key milestone" in the business' increasing involvement in sustainable energy.
Following the acquisition, BP will own 83 per cent of CNAA, taking charge of two ethanol production plants and one that is currently under construction in Minas Gerais and Goias states.
The annual output of the three mills is expected to reach 480 million litres of fuel and 340GWh of electricity, with as many as 2,500 jobs created.
"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," chief executive of BP Group Bob Dudley said.
Another part of the deal is that BP will refinance the entirety of CNAA's long-term debt, while the agreement sees the company further its involvement in ethanol production in Brazil, following its 2008 acquisition of a 50 per cent stake in Tropical BioEnergia, which has a mill in Goias state.
This existing venture has the capacity to output 435 million litres of fuel each year and the new deal is expected to raise the annual amount of ethanol equivalent created by BP in Brazil to 1.4 billion litres, or nine million barrels.
BP Alternative Energy, established in 2005, is the branch of the company operating within the sustainable fuel sector and this is its largest investment to date.
"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," Mr New commented.
Alternative energy is predicted to grow faster than any other fuel source in the next two decades, according to the BP Energy Outlook 2030, with chairman of the firm Carl-Henric Svanberg saying low-carbon power generation is to "play an increasingly significant role in meeting world … demand".
The report projected that the production of biofuels will increase by more than three times its current size over the next 20 years.
BP may not be the only Western company making an investment in Brazil, as chemical firm BASF has stated it is currently looking for opportunities to benefit from ploughing money into the Latin American country.
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