BP Solar Business Exit Counters Trend by Google, Buffett, Total

BP Plc is exiting the solar business after 40 years, countering a trend led by Google Inc. (GOOG), Warren Buffett and Total SA (FP) of investing in the industry just as competition drives down the cost of sun-based power.

Europe’s second-largest oil company will wind down the unit over several months because it has become unprofitable, BP Solar Chief Executive Officer Mike Petrucci told staff in an internal letter last week. About 100 employees will be affected.

BP Solar is withdrawing from an industry that’s facing oversupply and price pressures after Chinese competitors increased production. Total, Europe’s third-biggest oil company, Buffett and Google have entered the industry with investments over the last six months to take advantage of attractive tax breaks, declining costs and a source of power hedged against high fossil-fuel prices.

BP’s move is an anomaly with more companies trying to get involved than are getting out, said Paul Leming, an analyst with Ticonderoga Securities LLC analyst in New York.

“Two of the biggest oil companies have taken the opposite approaches,” Leming said in a phone interview. “The move toward alternative energy continues to be a well-recognized megatrend.”

BP’s solar equipment venture in India with Tata Power Co. (TPWR) is conducting “business as usual,” K. Subramanya, chief executive of Tata BP Solar India Ltd., said today by phone. BP owns 51 percent of India’s third-biggest cell and panel maker. Tata Power, the utility arm of the industrial company that owns Corus Group and Jaguar Land Rover, declined to comment.

‘Pretty Dire’

“I can’t speak on behalf of my shareholders,” Subramanya said from Bangalore. “All I can say is we continue to conduct our business capably and actively.”

BP, an early entrant into the business, found it difficult compete against newer rivals, Bloomberg New Energy Finance said in a note to clients today.

“Manufacturing is looking pretty dire for everyone, and BP was outpaced by faster moving pure-plays years ago,” the London-based researcher said. While its move to diversify from manufacturing into building plants was more successful, “BP had no obvious competitive advantage apart from access to finance,” it said.

Panel prices plunged 48 percent this year, helping tip three U.S. makers including Solyndra LLC into bankruptcy. Solon SE (SOO1), Germany’s first listed solar company, filed for insolvency last week.

‘Making It Difficult’

“The continuing global economic challenges have significantly impacted the solar industry, making it difficult to sustain long-term returns for the company,” Petrucci said in the letter to staff.

BP Solar stopped most of its manufacturing in early 2009, closing several factories in Spain and shedding 480 jobs after the Spanish market froze, triggering the solar industry’s first period of strong oversupply. Tata BP’s Subramanya declined to say at what capacity the India plants are producing equipment.

In July, BP Solar decided to quit manufacturing entirely and focus on developing large projects. It no longer has manufacturing plants, Robert Wine, a spokesman for the London- based parent, said today by phone.

BP Solar plans to sell its stakes in the more than 158 megawatts of projects it’s developed with local partners in countries including Italy, Spain, Germany, Britain and the U.S. The decision will not affect BP’s other renewable energy units, which include wind power and biofuels, Wine said.

SunPower, Buffett

Paris-based Total bought a 60 percent stake in SunPower Corp., which makes panels, in April as high natural-gas prices in Europe and increasing concerns about nuclear power sparked interest in clean energy.

Buffett’s MidAmerican Energy Holdings agreed this month to buy a $2 billion solar project under development in California and a 49 percent stake in a $1.8 billion plant in Arizona. Generous solar tax credits valid to 2015 may have lured the billionaire investor, who already owns wind farms, into his first solar foray, Gerard Reid, an analyst at Jefferies International Ltd., said on Dec. 7.

Google announced an agreement yesterday with the private equity firm KKR & Co. to invest in four California solar plants, bringing the owner of the most popular Internet search engine’s total investment in clean-energy projects to $915 million, according to a statement.

Global investment in renewable energy was $195 billion in 2010 and is expected to more than double to $395 billion in 2020, according to BNEF.

To contact the reporters on this story: Marc Roca in London at mroca6@bloomberg.net; Ehren Goossens in New York at egoossens1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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