BP has agreed to buy grain trader Bunge's 50% stake in Brazilian sugar and ethanol joint venture BP Bunge Bioenergia for $1.4 billion in a bet on growing demand for low-carbon biofuels.

Following the completion of the deal, expected by end-2024, BP will take full ownership of Bioenergia which has production capacity of around 50,000 barrels a day of ethanol equivalent from sugarcane.

BP will consolidate Bioenergia's debt and lease obligations of $1.2 billion, it said, meaning that it will pay out a total of $800 million to Bunge, according to Reuters calculations.

The acquisition comes amid growing investor concern over BP's strategy after ratings agency S&P Global earlier this month revised down BP's credit outlook, citing slower than expected debt reduction.

BP said the acquisition is expected to meet its returns threshold for bioenergy of more than 15% and will be within its existing annual spending framework of around $16 billion.

BP is also scaling back plans for the development of new biofuels projects, it said.

The company is pausing two biofuel projects at its Lingen refinery in Germany and its Cherry Point refinery in the U.S. state of Washington. It is assessing three other projects.

"Taken together, these changes can enable us to deliver the growth and returns we expect from biofuels, but in a simpler, more focused way. This is fully in line with BP’s priorities of driving focus into the business and growing shareholder returns," BP's head of customers and products Emma Delaney said.

(Reporting by Sourasis Bose in Bengaluru; Editing by Maju Samuel and Christina Fincher)