BP Plc (BP) remains resolute in dominating the Brazilian ethanol sector. Accordingly, it recently acquired additional stakes in Tropical BioEnergia S.A. and a 3% share of the country’s sugar and ethanol producer Companhia Nacional de Acucar e Alcool (“CNAA”).
The U.K. major spent $71 million to buy the remaining 50% share in Tropical BioEnergia, which is currently owned by Maeda Agroindustrial and LDC Bioenergia. BP entered the Brazilian ethanol sector in 2008 with its initial purchase of Tropical. Upon completion of the latest deal, BP will have full control over Tropical BioEnergia, which owns a mill in Edeia, Goias state. It also intends to double Tropical BioEnergia capacity to 5 million tones of crushed cane or 450 million liters of ethanol equivalent a year.
The deal also makes BP the owner of three Brazilian ethanol producing mills, all of which are located in Goias and Minas Gerais states in the centre-south of the country. Biofuel produced at the facility will serve the Brazilian as well as international markets.
Separately, BP also clinched a purchase deal for an added 3% stake in Brazilian sugar and ethanol producer CNAA from LPC Bioenergia. It will cost BP around $25 million to buy the additional interest that takes it total holdings in the company to 99.97%, while the remaining shares will be in hands of minority private shareholders. This deal with CNAA follows the buyout agreement earlier this year of an 83% stake in the company and the subsequent conversion of CNAA's long-term debt to equity.
Notably, BP highlighted its plan to quadruple its cane crushing capacity in Brazil within five years, thereby reflecting its optimism in the sector that witnessed a dearth of new investments in the recent past. This venture involves the expansion of its current units as well as the construction of new facilities.
London, England-based BP is one of the world's largest energy companies, providing fuel for transportation, energy for heat and light, retail services and petrochemical products. We believe the company's new strategy of active portfolio management, higher exploration activity, and refining and marketing repositioning will create value for shareholders.
BP holds a Zacks #3 Rank, which is equivalent to a short-term Hold rating. For the long term, we maintain a Neutral rating on the stock and expect it to perform in line with peers like Royal Dutch Shell-A (RDS.A).
BP PLC (BP): Free Stock Analysis Report
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment