Total is not planning any more big investments in renewables for the time being, having just agreed to buy a 20pc stake in Indian solar power firm Adani Green Energy. But it will be ready to move fast if the market offers good opportunities, according to Philippe Sauquet, president of the company’s gas, renewables and power division.
At its September strategy presentation, Total pledged to raise investment on renewables and electricity from $1.5bn/yr in 2015-20 to over $2bn/yr in 2021-25 and more than $3bn/yr in 2026-30. The company has already announced a string of low-carbon investments this year, ranging from biogas to hydrogen production. And the Adani deal alone amounts to some $2bn.
“For the time being, we have no intent to make such a big deal in the coming days and weeks. But you are not always in control of your opportunities,” Sauquet said. “When you have some big opportunities, we will be flexible enough in order to ensure that on average we meet what we have announced [in terms of the annual renewables budget] … You have to take these figures on average, but yes, it has been a quick start to 2021.”
Total has issued €3bn ($3.6bn) worth of hybrid bonds to finance its development strategy in renewables, mainly for acquisitions, including the 20pc interest in Adani Green Energy. “These hybrid bonds provide a cost of capital comparable to that of pure players in renewables and is therefore suited to finance acquisitions in this business,” Total chief financial officer Jean-Pierre Sbraire said.
Adani’s projects “clearly” meet Total’s target for 10pc returns on its renewable projects, Sauquet said. And while only a small portion of Adani’s assets are in operation, Sauquet points out that the firm has a long pipeline of development opportunities.
“The price to pay to acquire already producing renewable assets is usually very high. It is much more economical to develop if you can of course, but [also] to buy a pipeline of projects… [as] not all the value is reflected in the price,” he said. “You will see us making more acquisitions, always trying to buy some pipeline of projects more than operating assets.”
In terms of overall investment, Sauquet said Total is committed to the budget guidance it has given for this year. “You will see the guidance confirmed in the coming weeks,” he said. The company has said its total 2021 capital expenditure (capex) “should be limited to less than $12bn”.
Total will present its fourth-quarter financial results on 9 February.
