Shell Explores Selling Stake in Renewable Power Unit
William Mathis and Dinesh Nair
(Bloomberg) -- Shell Plc is exploring options for its global renewable power operations, including a potential stake sale to outside investors, people with knowledge of the matter said.
The UK energy giant is working with advisers to study a range of possibilities that could also include separating the business into a more independent unit, the people said. It’s approached a number of international investors to gauge their interest in buying a stake, according to the people, who asked not to be identified because the information is private.
The deliberations come as Chief Executive Officer Wael Sawan focuses the company’s investments on fossil fuels in a bid to increase shareholder returns and narrow the valuation gap with Shell’s US peers.
Discussions are still at an early stage, and there’s no certainty they will lead to a transaction, the people said. Shell may also consider introducing outside investors into some other operations such as its downstream assets, one of the people said.
A representative for Shell declined to comment beyond a capital markets day presentation in June, when the company flagged plans to divest certain power assets through 2025, but also make selective investments in the business.
If a deal does happen, it could be a significant shift in Shell’s green strategy. The oil major has spent more than two decades trying to figure out just how big of a player it wants to be in renewables. Over the years, some CEOs have set targets for low-carbon alternatives to oil and gas, only for their successors to focus more squarely on the fuels that drive most of the company’s profits, but also cause climate change.
It could also be seen as a concession to activist investor Dan Loeb, whose Third Point LLC fund built up a significant stake in Shell in 2021 and urged previous CEO Ben van Beurden to break off its natural gas and renewables operations into a standalone business. There is a precedent for such a move — Italian oil giant Eni SpA has separated its renewable-energy assets into a separate entity called Plenitude.
Shell’s approach in recent years was emblematic of the European oil majors’ efforts to position their businesses for a world that cuts carbon emissions and relies less on fossil fuels in the coming years. It’s been a stark contrast to their US peers Exxon Mobil Corp. and Chevron Corp., which have stuck more closely to their core businesses of oil and gas.
Under van Beurden, Shell rapidly grew its green power business and briefly sought to become the world’s biggest electricity producer. The company’s portfolio, which had 6.4 gigawatts in operation or development at the end of last year, includes offshore and onshore wind farms in Europe and the US. It recently acquired Indian solar developer Sprng Energy, Danish biofuels producer Nature Energy and American renewable power company Savion.
So far investors have rewarded the US oil majors’ strategy, pushing their valuations far above their European competitors.
Shell’s renewable-power business has come under pressure as Sawan pursues what he’s called a “ruthless” approach to prioritizing returns, meaning the unit has to generate profits in addition to cutting the company’s carbon footprint. While Sawan said he will continue to invest in renewable power, he’s vowed to be more selective and only pursue projects that create sufficient value.
As Shell’s approach to green power has shifted at the top, some executives in the business have departed. Renewable-power boss Thomas Brostrom quit to pursue another job. Shell’s UK head of offshore wind, Melissa Read, also left the company.
William Mathis and Dinesh Nair
BLOOMBERG
Thu, July 13, 2023
Thu, July 13, 2023
(Bloomberg) -- Shell Plc is exploring options for its global renewable power operations, including a potential stake sale to outside investors, people with knowledge of the matter said.
The UK energy giant is working with advisers to study a range of possibilities that could also include separating the business into a more independent unit, the people said. It’s approached a number of international investors to gauge their interest in buying a stake, according to the people, who asked not to be identified because the information is private.
The deliberations come as Chief Executive Officer Wael Sawan focuses the company’s investments on fossil fuels in a bid to increase shareholder returns and narrow the valuation gap with Shell’s US peers.
Discussions are still at an early stage, and there’s no certainty they will lead to a transaction, the people said. Shell may also consider introducing outside investors into some other operations such as its downstream assets, one of the people said.
A representative for Shell declined to comment beyond a capital markets day presentation in June, when the company flagged plans to divest certain power assets through 2025, but also make selective investments in the business.
If a deal does happen, it could be a significant shift in Shell’s green strategy. The oil major has spent more than two decades trying to figure out just how big of a player it wants to be in renewables. Over the years, some CEOs have set targets for low-carbon alternatives to oil and gas, only for their successors to focus more squarely on the fuels that drive most of the company’s profits, but also cause climate change.
It could also be seen as a concession to activist investor Dan Loeb, whose Third Point LLC fund built up a significant stake in Shell in 2021 and urged previous CEO Ben van Beurden to break off its natural gas and renewables operations into a standalone business. There is a precedent for such a move — Italian oil giant Eni SpA has separated its renewable-energy assets into a separate entity called Plenitude.
Shell’s approach in recent years was emblematic of the European oil majors’ efforts to position their businesses for a world that cuts carbon emissions and relies less on fossil fuels in the coming years. It’s been a stark contrast to their US peers Exxon Mobil Corp. and Chevron Corp., which have stuck more closely to their core businesses of oil and gas.
Under van Beurden, Shell rapidly grew its green power business and briefly sought to become the world’s biggest electricity producer. The company’s portfolio, which had 6.4 gigawatts in operation or development at the end of last year, includes offshore and onshore wind farms in Europe and the US. It recently acquired Indian solar developer Sprng Energy, Danish biofuels producer Nature Energy and American renewable power company Savion.
So far investors have rewarded the US oil majors’ strategy, pushing their valuations far above their European competitors.
Shell’s renewable-power business has come under pressure as Sawan pursues what he’s called a “ruthless” approach to prioritizing returns, meaning the unit has to generate profits in addition to cutting the company’s carbon footprint. While Sawan said he will continue to invest in renewable power, he’s vowed to be more selective and only pursue projects that create sufficient value.
As Shell’s approach to green power has shifted at the top, some executives in the business have departed. Renewable-power boss Thomas Brostrom quit to pursue another job. Shell’s UK head of offshore wind, Melissa Read, also left the company.
Erin Feiger
Sat, July 15, 2023
Shell has backpedaled on its climate change pledges to provide bigger payouts to shareholders, in a move slammed by many as shady.
What’s happening?
After a surprising announcement last year, in which Shell set 2050 as its target to reach net-zero planet-overheating gas pollution, the company became the latest to join others like BP in scaling back their climate pledges, according to Euronews.green.
Shell said oil production levels will remain stable until 2030, justifying it by saying selling its interest in the Permian Basin oilfield in 2021 allowed it to reach production reduction goals until then.
Euronews.green further reported that the company will invest $40 billion in oil and gas production through the next 13 years, all of this amid record profits, leaving many questioning the dirty energy company’s alleged commitment to shift to clean energy.
Mark van Baal, founder of Follow This, which unites shareholders to push Big Oil to clean up its act, told the Washington Post, “We have to regain momentum, or these companies will keep on saying they can continue with oil and gas because the majority of shareholders want them to do that. The fact that they are making so much money right now is not helping.”
Carla Denyer, co-leader of the U.K. Green party, told Euronews.green that Shell’s actions are “pure climate vandalism,” with Friends of the Earth adding that “like other fossil fuel giants which have also scaled back their ambitions, Shell now admits that it has no plans to change its business model.”
Why is this climate pledge pivot concerning?
Dirty energy sources, like oil, gas, and coal, are the largest contributor to Earth’s rising temperatures, accounting for more than 75% of the world’s overall heat-trapping gas pollution and nearly 90% of harmful carbon pollution, according to the U.N.
Because they’re such a huge part of the problem, dirty energy companies like Shell need to be a big part of the solution.
Making pledges like the ones Shell is now scaling back on to convince us that the company is a friend to our planet is called greenwashing, which is when a company makes false or misleading statements about the environmental benefits of one of its products or practices.
Greenwashing is a particularly sinister problem because it prevents real and very necessary progress from being made, while duping customers into spending our money with companies that are lying to us and hurting our planet.
What can be done?
Many organizations are working to hold Big Oil companies accountable for enacting real change, but it’s a long road.
As individuals, we can work to mitigate the harm done by these big companies by moving away from using their dirty energy sources.
We can switch from gas-powered cars to electric vehicles, limit the amount of single-use plastics we use, and switch to alternative sources of power at home when possible.
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