BP Plc (BP/), attempting to recover from an oil spill that may cost it $42 billion, said it will sell shares in wind assets worth as much as $3.1 billion in the U.S. in another step to focus on its main oil and gas business.
BP plans to dispose of interests in 16 operating wind farms in nine states with a total capacity of about 2,600 megawatts, Mark Salt, a London-based spokesman for BP, said in an e-mailed statement. The company will also sell projects in various stages of development including 2,000 megawatts of wind poised to start construction, he said.
Chief Executive Officer Bob Dudley has sold $38 billion in oil fields, pipelines and refineries to concentrate BP on its most profitable assets after the 2010 spill in the Gulf of Mexico. It withdrew from solar power in December 2011 and also scrapped investment in a carbon-capture project in Scotland.
“BP has decided to market for sale our U.S. wind energy business as part of a continuing effort to become a more focused oil and gas company and re-position the company for sustainable growth into the future,” Salt said. “For BP, this effort represents another example of prudent and active management of our global portfolio, consistent with our pledge to unlock more value for shareholders.”
The sale would leave BP’s renewable energy business limited to biofuels research and ethanol refining in Brazil. Former CEO John Browne pushed the effort to move BP “beyond petroleum” starting in 1997, when the company became the first major oil company to encourage precautionary measures to combat global warming.
BP owns about 1,600 megawatts of the 2,600 megawatts in operation, according to BP. Operating wind farms are worth $1.5 million to $2 million a megawatt, according to Bloomberg New Energy Finance data.
The 2,000 megawatts of yet-to-be-built projects may be worth $15,000 to $200,000 a megawatt, depending on how far they’ve gotten in the planning process. That would value BP’s U.S. assets in operation and under development at $2.2 billion to $3.1 billion, taking into account the shares of the assets BP owns, the research group said.
“BP’s move will make some people nervous but I’m sure others will be thrilled to see a competitor exit,” Amy Grace, a New York-based analyst at New Energy Finance, said by e-mail. “There’s too much development competition within the U.S.”
Investors are seeking long-term investments in commissioned wind assets with off-take agreements, and less than 300 megawatts of BP’s assets are without such agreements, she said.
For wind farm owners, there’s limited visibility beyond 2014 about what the assets will be worth as a tax credit supporting turbines is set to expire at the end of this year, Grace said. BP is the eighth-biggest owner of commissioned wind in the U.S., data from the London-based researcher show.
The sale presents an opportunity for international investors including Chinese and Korean to enter the U.S. wind market, said Bruce Hamilton, a Portland, Oregon-based director for energy at Navigant Consulting Inc (NCI).
Buyers may be concerned about maintenance on the turbines, many of which were bought from Clipper Windpower Ltd. (CWP), he said. Clipper was a manufacturer that sold shares in 2005, then was acuqired by United Technologies Corp (UTX). and subsequently sold to Platinum Equity LLC, a private equity firm.
“A large portion of the wind turbines were manufactured by Clipper Windpower, which is being reorganized and has reduced its level of operations and maintenance support for the assets,” Hamilton said.
BP has invested more than $55 billion in U.S. energy development the last five years, according to the company. Any sale of the wind assets will be the subject to “attractive offers” being received, Salt said.
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