BP shifts to solar with $2bn US onshore wind sale

Windfarms in seven US states no longer fit into the broader growth strategy as investor concerns grow

The Fowler Ridge Wind Farm in Indiana, where bp Wind Energy operates three wind farms. EPA-EFE

The global energy company BP is planning to sell its onshore wind energy business in the US, saying the assets no longer fit into its broader growth strategy.

London-headquartered BP said it will begin the sale process for the wind assets shortly. That business, called bp Wind Energy, which is thought to be valued at about $2 billion, operates nine onshore wind assets across seven states – Colorado, Idaho, Indiana, Kansas, Pennsylvania, South Dakota and Hawaii.

Bp Wind Energy has generating power of 1.7 gigawatts, of which 1.3 gigawatts is net to its parent. The wind assets are on the grid and controlled through a remote operating centre in Houston. BP will now bring together the development of onshore renewable power projects through its global solar operation Lightsource bp.

“We believe the business is likely to be of greater value for another owner,” William Lin, BP's executive vice president for gas and low carbon energy, said. “Bp Wind Energy’s assets are high-quality and grid-connected but are not aligned with our plans for growth in Lightsource bp. This planned divestment is part of our strategy of continuing to simplify our portfolio and focus on value.”

A representative for BP told The National the sale of bp Wind Energy makes sense given that the assets are developed. “This is portfolio management – looking to realise the value of mature assets,” he said.

'Narrative shift'

The US move comes just months after BP's new chief executive, Murray Auchincloss, imposed a hiring freeze and paused new offshore wind projects. Sources at the company told Reuters that a renewed emphasis had been placed on oil and gas, owing to investor discontent over its energy transition strategy.

This would be a marked difference to the approach adopted by former boss, Bernard Looney, who steered BP away from fossil fuels and towards renewables at such a rapid rate that some investors took flight and the shares fell. In addition, revenue from oil and gas dropped during the Covid pandemic.

BP is “preparing for the narrative shift”, said Biraj Borkhataria, head of European energy research at RBC Europe, and is “shifting capital away from transition themes and back to the core business”. He added that BP's rival Shell is making similar moves.

Strategist and author Mark Brolin agrees that the decision to sell the wind assets is strictly financial and not influenced by political events, not least because corporations tend to ignore the political noise in the run-up to elections in the US.

He told The National he viewed the sale as “part of a more long-term assessment of the profitability of those assets closely linked to expected downwards energy price pressures in the US, regardless of who secures the White House”.

“I do not think corporates manoeuvre so much towards the election date since all significant changes will have to pass Congress and even when a proposal is pushed through, the process tends to be lengthy,” Mr Brolin said. “So, I also think adaptations and manoeuvrings will follow after, rather than before the election.”

Meanwhile, Russ Mould, investment director at AJ Bell, told The National that BP’s US onshore wind business has been a “source of difficulty for some time”, even though the renewables sector got a boost from the Biden administration's Inflation Reduction Act.

“BP wrote down the value of these assets by more than $1 billion in 2023 and management now seems to have decided that enough is enough, as wind installations slow in the US and solar power takes a more prominent role in America’s energy generation needs,” he added.

It is less than a year since BP was upgrading wind turbines in Indiana and commenting that onshore wind was “critical to BP’s renewables and power business, one of the company’s five transition growth engines”.

On Monday, in a further attempt to boost share value and simplify strategy, BP announced it was offloading part of its stake in a key natural gas pipeline in southern Europe to New York-based investment firm Apollo Global Management in a deal valued at $1 billion.

It is all part of BP's drive for financial efficiency and to glean about $3 billion from divestments. The company is facing a fall in the price of crude, which is down 20 per cent this year, while still being committed to returning cash to shareholders through a $3.5 billion share buyback scheme.

Overall though, it has been tough for wind companies recently. They face soaring prices for raw materials, high interest rates and disruptions to supply chains. Danish renewable energy group Orsted recently took a $581.59 million hit to its accounts, partly because of delays to a major offshore wind project in the US.

A Bloomberg report in June cut its projections for new onshore wind projects in the US by 22 per cent until 2030, because in many cases lower power prices mean the economic case for building new wind farms cannot be made.