Total takes $1.4 billion stake in renewable energy firm

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, May 2 -- Total SA has agreed to take a majority stake in San Jose, Calif.-based SunPower for about $1.38 billion, an investment described as one of the largest ever by an oil company in renewable energy.

“We evaluated multiple solar investments for more than 2 years and concluded that SunPower is the right partner based on its people, world-leading technology and cost roadmap, vertical integration strategy, and downstream footprint," said Philippe Boisseau, president, gas and power division.

"The world future energy balance will be the result of a long-term transition in which renewable energies will take their place alongside conventional resources," said Boisseau.

Analyst John Hardy of Gleacher & Co. in New York said the agreement makes a lot of sense for Total, given the global shift to renewable energy, increasing concerns about nuclear power and high natural gas prices in Europe.

Hardy said the takeover also may trigger similar acquisitions by oil companies that consider renewable energy manufacturers a way to improve their clean-energy credentials and may profit when surging crude prices reduce demand for fossil fuels.

SunPower Chief Executive Officer Tom Werner said, “Total’s commitment and global presence will help accelerate our growth and solidify our position in the increasingly competitive solar sector.”

Under the agreement, Total will launch a friendly tender offer through a wholly owned subsidiary for up to 60% of SunPower's outstanding Class A Common shares and 60% of SunPower's outstanding Class B Common shares at a price of $23.25/share for each class.

In addition, Total will provide SunPower with up to $1 billion of credit support over the next 5 years. According to Werner, Total’s agreement to provide the $1 billion credit support was a “key element” of the deal.

"With Total's $1 billion credit support agreement, solar research and development investments and the other resources available through its global network, we have taken the next step in positioning our business for continued growth and long-term success,” Werner said.

The announcement coincided with reports that Total, which reported a first-quarter drop in oil and natural gas production, will meet output growth targets in the coming years as new projects start and “bolder” exploration bears fruit.

“We are very confident with our forecast of about 2% growth of production for the next five years,” said Chief Financial Officer Patrick de la Chevardiere said in an interview with Bloomberg television in Paris.

De la Chevardiere said that Total plans to start production at the Pazflor field in Angola in the fourth quarter and add about 120,000 b/d of production from a stake in OAO Novatek bought for about $4 billion this month.

He also said that drilling in “riskier” exploration areas in Azerbaijan, Brunei, and French Guiana could be completed this year and that joint venture partner Cobalt International Energy Inc. could receive permission to resume work on a well in the Gulf of Mexico this summer.

Total’s first-quarter production fell 2% to 2.37 million boe/d from a year earlier, according to a company statement.

Contact Eric Watkins at hippalus@yahoo.com.

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