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Total continues renewable energy charge with Saft battery deal
May 9, 2016 2:57 pm
Total continues renewable energy charge with Saft battery deal

Michael Stothard in Paris


Total is making a deeper push into renewable energy, signing a deal to buy battery manufacturer Saft.

The French oil company, which is suffering from the chronic low oil price, said that the acquisition would “accelerate its development in the fields of renewable energy and electricity”.
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Last month, Total announced the creation of a gas, renewables and power division, saying it wanted to become a “leader” in renewables and electricity storage within 20 years.

On Monday both Total and Saft said they had signed a joint agreement for Total to launch a tender offer at €36.5 per Saft share, a 38 per cent premium on the close last Friday giving the group a valuation of €950m.

Patrick Pouyanné, chairman and chief executive of Total, said the deal would “allow us to complement our portfolio with electricity storage solutions, a key component of the future growth of renewable energy”.

Ghislain Lescuyer, chief executive of Saft, which is based just outside Paris, said: “I am convinced that Total will provide Saft with the required expertise and resources needed for its future development.”

In 2011, Total made its first significant foray into renewable energy with the $1.4bn acquisition of SunPower, one of the largest solar companies in the US.

Mr Pouyanné said last month that “electricity will be the energy of the 21st century” and that he wanted Total to make money from the “entire electricity value chain”, including solar, biogas, batteries as well as oil and gas.

Total last year announced that it would invest €200m to transform its unprofitable La Mede oil refinery into a biofuel plant and separately that it would start to invest $500m a year in renewables.

Despite the Saft acquisition, spending in renewable energy will still be a fraction of the company’s overall investments, which amounted to $28bn last year.
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Total is not alone in taking steps towards renewables, which comes partly in response to shareholder concerns about climate change. Royal Dutch Shell and BP have made similar moves.

The acquisition comes as the entire sector is also suffering from a low oil price. The average price of a barrel of Brent crude was $34 in the first quarter of 2016. In the previous quarter it was $44, and a year ago it was $54.

This has prompted oil companies to drastically cut their capital expenditure on new projects. In the first quarter of 2016 Total’s exploration and production business made $498m, a 63 per cent drop from the previous year.