Total's Renewables Bet Disappoints in Third Quarter -- Update
27 Octobre 2017 - 4:47PM
Dow Jones News
By Sarah Kent
French oil giant Total SA has laid out a vision to expand in
renewables and power. The challenge is to turn this business into a
consistent profit machine.
The company's new gas, renewables and power segment earnings
were down 49% in the third quarter compared with a year earlier,
the company said Friday. Tough times in the solar-power sector,
where Total is a big player in the U.S., made the division the
company's worst-performing business unit in the period. The
quarterly comparison was made more stark because results last year
were boosted by the sale of a solar farm stake.
Total's power section remains a relatively small part of its
business, generating $97 million in operating income in the third
quarter compared with over $1.4 billion from its oil-and-gas
exploration and production business. Overall, Total reported a
sharp increase in net profit in the period to $2.7 billion, up 39%
from a year earlier.
Earnings were boosted by higher oil and gas production, higher
crude prices, a strong refinery business, and cost cuts. Total
executives said the company remains an oil-and-gas business
first.
However, Total has moved more aggressively than many of its
peers into the renewables and power sectors, making many
acquisitions. In 2016, it paid $1 billion for a French maker of
industrial batteries and it owns a majority stake in
California-based solar panel maker SunPower Corp.
Total Chief Executive Patrick Pouyanné has said 20% of Total's
energy output will be from low-carbon sources such as wind and
solar by 2035.
"In energy, if you want to make a cash machine you invest for 10
or 15 years," Mr. Pouyanne said. "This segment is will bring value,
but let's be patient."
Despite its results this quarter, Total's gas, renewables and
power division remains profitable and delivered a return on capital
of nearly 7% in the third quarter, more than the exploration and
production unit.
Some of Total's rivals have been more cautious about new energy
technologies, after getting burned in the past. This month, Bob
Dudley, the CEO of BP PLC, said that while uncertainty remains over
which technologies will become most successful, his company is
avoiding "large speculative investments" in renewables.
Total remains committed to its bigger ambitions for producing
electricity and is seeking to build a presence across the supply
chain, but the lackluster performance of that segment this year
highlights the challenge big oil companies face in developing new
energy businesses.
The company acknowledges the difficulties the division has
faced, largely because of the depressed market for solar panels.
The value of Total's stake in SunPower has fallen since it acquired
a majority holding in 2011, amid a sharp decline in the price of
panels.
But Total's bet on power doesn't just depend on solar and
storage. The same unit includes its liquefied natural gas business.
LNG is a superchilled fuel that can be shipped around the world.
Rivals such as Exxon Mobil Corp. and Royal Dutch Shell PLC have
made similar bets on LNG.
Write to Sarah Kent at sarah.kent@wsj.com
(END) Dow Jones Newswires
October 27, 2017 10:32 ET (14:32 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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