The private equity firm where the former BP chief Lord Browne of Maddingley is a senior partner is the biggest beneficiary of a $680 million acquisition of a green fuel facility by the oil giant.
Having spent much of the past year reeling from the catastrophic Gulf of Mexico blowout, BP yesterday trumpeted its green credentials with the sort of deal envisaged by the controversial “Beyond Petroleum” marketing tag dreamt up by Lord Browne.
It is spending almost £425 million to acquire 83 per cent control of CNAA, one of Brazil’s most advanced ethanol plants producing the motor fuel alternative to petrol and diesel from sugar cane.
Bob Dudley, BP’s chief executive, said that it was the biggest acquisition by BP Alternative Energy since the business was set up by Lord Browne with an $8 billion dowry in 2005. The CNAA deal means that BP Alternative Energy has taken its spending on green power and fuel projects to $5.7 billion.
While BP said that it was a sweet deal for its green energy division, it appears to be even sweeter for the investment funds that bought into CNAA three years ago. Funds controlled by the private equity firms Riverstone and Carlyle spent $187 million becoming CNAA’s largest shareholder with a 62.5 per cent stake in the company. Riverstone and Carlyle have sold their entire interest in CNAA to BP in yesterday’s deal.
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Lord Browne is one of six senior partners at Riverstone and is a managing director of what is his most significant ongoing business interest. He joined Riverstone in 2007, weeks after quitting BP following his admission of lying in the High Court.
Riverstone refused to comment on how Lord Browne or its other senior personnel would benefit from yesterday’s deal. He was hired to play a key role in drumming up business for Riverstone, which at the time referred to him as a legend in the industry whose “unique talents” would open up “investment opportunities” for the firm.
Riverstone declined to comment on his role in the deal and a spokesman for BP insisted: “Lord Browne was not involved in the negotiations.”
It is not clear how substantial are Riverstone’s profits from the deal. BP, CNAA and Riverstone have refused to divulge how much of BP’s $680 million cheque covers CNAA debts.
Phil New, BP’s biofuels chief, said that the company had chosen Brazil for the investment as the country was known in the industry as the “Saudi Arabia of biofuels”. It has the capacity and the right sort of climate and geology to grow huge amounts of sugar cane.
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“Once we have expanded the facility, this is a business that will be producing the equivalent of 8,000 barrels of oil at a price that competes with $40 to $50 a barrel oil,” Mr New said. “If the plant was to have, say, a life of 30 years, it is the equivalent of having 80 million barrels of reserves. If it remains online, it is effectively a non-depleting well. That is the lens through which we are looking at this acquisition: it is BP accessing new energy reserves.”
Last month, BP hung its hat on the future of ethanol and other biofuels when Oliver Mace, its head of strategy, said: “There is no other alternative that I can really subscribe to in terms of decarbonising road transport.”
BP is also building Britain’s biggest biofuels plant in Hull, in league with Associated British Foods.