TOTAL to Buy Stake in Seagreen 1, Boost Renewable Portfolio
TOTAL S.A. TOT has decided to acquire a 51% interest in the Seagreen 1 offshore wind farm project from SSE Renewables. This will further expand its renewable assets portfolio. TOTAL will make an upfront payment at closing of $88 million (£70 million) and earn-outs up to $75.5 million (£60 million), subject to fulfillment of performance conditions. TOTAL has secured nearly 70% external financing to fund the stake purchase in this offshore project.
The Seagreen 1 project is located 16.8 miles (27 kms) from the coastline in Scottish waters of U.K. North and has secured all necessary major permits. Onshore construction of the project began in the first quarter. Initially, the project will produce 1,140 megawatts (MW) of clean energy and has further extension opportunity of up to 360 MW.
The Seagreen 1 project will have the capacity of providing clean power to more than 1 million homes when it starts commercial operation from 2022-end.
Acquisition In Sync With Long-Term Goal
TOTAL is gradually building the clean electricity generation portfolio. The acquisition of SunPower Corporation SPWR is an initial step in that direction. TOTAL has also made strategic acquisitions, tie-ups and entered into JVs to expand the renewable portfolio. The company now plans to scale up the renewable generation capacity to 25 gigawatts (GW) by 2025. TOTAL also targets to generate 40% of sales in 2050 from low-carbon electricity sales.
TOTAL also strives to be a net-zero carbon emission company by 2050 and has taken steps to achieve the target. The company has maintained its planned investment in the range of $1.5-$2 billion annually in low-carbon electricity generation.
Higher Usage of Renewable Energy
Per the National Infrastructure Commission report, the U.K. should be running on 50% renewable energy by 2030 and is set to achieve net zero emissions by 2050. Projects like Seagreen 1 will allow U.K. to achieve the long-term emission free electricity goal.
The Seagreen 1 project has been awarded a 15-year CfD (Contract for Difference) from the U.K. Government for 454 MW, representing 42% of the total project capacity. TOTAL, being the majority stakeholder of this offshore project, will benefit from this long-term deal.
The renewable energy space will offer enough growth opportunities to investors. In addition to TOTAL, oil and gas companies like Chevron Corporation CVX and Royal Dutch Shell Plc RDS.A, among others, are also investing heavily in the renewable energy space. Both Chevron and Royal Dutch Shell currently carry a Zacks Rank #3 (Hold).
Price Performance
In the past month, TOTAL’s shares have outperformed the industry.
Zacks Rank
TOTAL currently has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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