Solar projects already meet BP's profit goals, Lightsource BP says


© Reuters. FILE PHOTO: Photograph shows a sign outside BP’s North Sea Headquarters in Aberdeen

By Ron Bousso and Shadia Nasralla

LONDON (Reuters) – Solar power developer Lightsource BP has generated returns of 10% and more on projects, its chief executive told Reuters as investors fret over joint owner BP’s (L:) plan to switch away from oil and gas to renewables.

London-based Lightsource BP, which is half-owned by oil major BP and will mark its 10th anniversary later this year, has rapidly grown around the world in recent years and aims to reach 10 gigawatt (GW) of solar capacity by 2023 from a current 2 GW .

It is a key element in BP CEO Bernard Looney’s plan to grow BP’s renewable power generation capacity 20-fold by 2030 to 50 GW from solar and wind power.

But many BP investors have cast doubts over BP’s vow that the renewables business could generate returns of 8% to 10%, higher than the sector’s average of 5% to 6% in order to maintain and even grow shareholder payouts.

BP’s shares linger near 25-year lows after it halved its dividend in August.

Nick Boyle, the Lightsource BP chief executive, said that his business already sees returns targeted by BP.

“We’re looking at assets in some parts of Europe that definitely offer double digit returns and we are also looking at assets in other parts of the world that are lower than that,” he told Reuters in an interview this month.

“But as an average we are absolutely confident that a return of 8% to 10% is achievable because that’s where we are today.”

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BP’S TRANSITION

Oil and gas will remain BP’s largest source of income over the coming decade which will help pay for the shift to low-carbon energy.

“Investors are looking at BP’s transition and thinking that it’s ambitious but value destroying,” one top 10 investor said, speaking on condition of anonymity.

Privately-owned Lightsource BP, which develops solar projects from their earliest stages, reported a turnover of 55.3 million pounds last year, compared with 40.7 million pounds a year earlier, according to the company’s annual report filed this week.

It, however, recorded an operating loss of 24.5 million pounds in 2019 compared with a 15 million pound loss a year earlier, as a result of higher investments in new projects.

It paid no dividend last year.

Lightsource BP, like rivals including France’s Total (PA:), sees further opportunities for profits from selling solar and wind power projects it had developed from early stages.

Such a strategy, known as a farm down, “helps bring up the overall returns on a project,” Boyle said.

It sees further profit opportunities from BP’s large power trading business, which can offer customers power from various sources such as solar, wind or .

“Customers today don’t want an as-generated solution from solar… The ability to bring base load is something that a trading operation like BP’s can deliver,” Lightsource BP chief operating officer and co-founder Kareen Boutonnat said.

“BP are able to deliver more than just solar. They have a combination of technologies that effectively allows them to deliver for customers in different jurisdictions.”

 





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