U.S. grain trader Bunge Ltd (BG.N) said on Monday it has agreed to form a bioenergy company with oil major BP Plc (BP.N) that will produce ethanol and sugar, and generate renewable electricity.

The joint venture, BP Bunge Bioenergia, will operate on a standalone basis, with a total of 11 mills across the Southeast, North and Midwest regions of Brazil, Bunge said.

“This partnership with BP represents a major portfolio optimization milestone for Bunge which allows us to reduce our current exposure to sugar milling…,” Bunge Chief Executive Officer Gregory Heckman said in a statement.

Bunge said it will receive cash proceeds of $775 million (£621.7 million) as part of the agreement, which expects to use to cut debt.

The company will have 32 million metric tonnes of combined crushing capacity per year and will generate renewable electricity fuelled by waste biomass from sugarcane to power its sites and sell the surplus to the Brazilian power grid.

The new business is expected to be based in Sao Paulo and the deal is expected to close in the fourth quarter of 2019.