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BP has put bp Wind Energy, its onshore wind business in the US, estimated to be worth $2bn, up for sale as it trims its renewables business and sells off underperforming assets.
The UK-listed oil major said it would sell the nine wind farms it owns outright and its share in a tenth in Hawaii in order to focus on Lightsource bp, the solar energy business it is in the process of buying.
BP also wrote down the value of its offshore US wind business by $1.1bn last year after struggling to make progress on three projects on the east coast.
“Ultimately, offshore wind in the US is fundamentally broken,” said the company’s former renewables chief Anja-Isabel Dotzenrath last November. She left BP in April.
The new head of the gas and low carbon division William Lin said on Monday that BP’s onshore wind business was “not aligned with our plans for growth in Lightsource bp” and that the company would continue “to simplify our portfolio and focus on value”.
The oil major has refocused on its core oil and gas business since Murray Auchincloss was appointed chief executive in January. Analysts expect BP to drop a commitment to reduce its oil and gas output to 2mn barrels a day (b/d) by 2030.
BP’s share price has fallen more than 20 per cent in the past 12 months on fears that it will cut its earnings guidance and have to reduce its distributions to shareholders.
“BP’s $7bn annual buyback does not appear to be covered from 2025 onwards,” said Kim Fustier at HSBC in a note last month as the bank downgraded the company.
The wind farms, spread across seven states, are all operational and have a combined capacity of 1.7GW, of which BP owns 1.3GW. Analysts at RBC Capital Markets said they could be worth upwards of $2bn.
“This is another signal that BP is rationalising its energy transition strategy, and there are likely willing buyers for these assets that would be worth more than what is implied in the shares, which is likely close to zero,” said Biraj Borkhataria, an analyst at RBC.
BP has a pipeline of another 12.7GW of onshore wind globally, but did not comment on what would happen to any of the prospective projects in the US. One person close to the company said the sale was for BP’s “entire onshore wind business”.
The oil company does not split out the earnings from its onshore wind business, but its gas and renewables arm made a replacement cost profit of $8.7bn last year.
Solar is now challenging wind as the largest source of renewable electricity generation on the US grid. BloombergNEF expects nearly three times more solar capacity than wind to be installed in the US from 2024 to 2035, totalling 737GW of new solar and 199GW of new wind projects.
Solar is the cheapest form of generation and faces fewer obstacles in permitting, grid connection and supply chain constraints.
The US is widely expected to miss its 30GW offshore wind target for 2030 after high interest rates and supply chain snarl-ups forced developers to cancel roughly a third of previously planned projects.
President Joe Biden’s landmark Inflation Reduction Act offers lucrative 10-year tax credits to lower the cost of wind deployment and attract local manufacturing.
Nevertheless, wind installations on land have slowed, falling 26 per in 2023 compared with the previous year and wind turbine manufacturers including Siemens Gamesa, Vestas, and GE Vernova have continued to report losses in their wind segments.
Wind made up 10 per cent of US power generation last year compared with 4 per cent from solar, according to the US Energy Information Administration.
Meanwhile, BP also did a $1bn deal with Apollo Global Management for a stake in the Trans Adriatic gas pipeline on Monday. The size of the stake was undisclosed, but BP owned 20 per cent of the pipeline and Apollo said it would not have a controlling share. The pipeline runs from the Greek border with Turkey to Southern Italy and is part of a network that brings gas from Azerbaijan to Europe.