Shell buying spree cranks up race for clean energy

[January 26, 2018]  By Ron Bousso and Clara Denina

LONDON (Reuters) - Royal Dutch Shell <RDSa.L> has spent over $400 million on a range of acquisitions in recent weeks, from solar power to electric car charging points, cranking up its drive to expand beyond its oil and gas business and reduce its carbon footprint.

A passenger plane flies over a Shell logo at a petrol station in west London, in this January 29, 2015 file photo. REUTERS/Toby Melville/Files

The scale of the buying spree pales in comparison to the Anglo-Dutch company's $25 billion annual spending budget. But its first forays into the solar and retail power sectors for many years shows a growing urgency to develop cleaner energy businesses.

The investments are not limited to renewables such as biofuels, solar and wind. Shell, as well as rivals such as BP <BP.L>, Exxon Mobil <XOM.N> and Chevron <CVX.N>, are betting on rising demand for gas, the least polluting fossil fuel, to power the expected surge in electric vehicles in the coming decades.

To that end, Shell agreed in December to acquire independent British power provider First Utility for around $200 million, according to several sources close to the deal. The value of the acquisition had not been previously disclosed.

Shell declined to comment.

With First Utility, the company hopes to find an outlet for its gas supplies via the retail power market, betting on rising demand as drivers charge electric vehicles at home.

Earlier this month, the company ventured back into solar after a 12-year hiatus when buying a 43.86 percent stake in Silicon Ranch Corporation for $217 million.

In the last three months of 2017, Shell also invested in two projects to develop charging stations for electric vehicles across Europe's highways. It has also signed agreements to buy solar power in Britain and develop renewables power grids in Asia and Africa.

According to analysts at Bernstein, Big Oil has invested over $3 billion on renewables acquisitions over the past five years, most of which went towards solar.

"Green" merger and acquisition (M&A) activity today averages 13 percent of total energy M&A activity, they said.

"However greater scale is needed for the majors to effectively operate and leverage their trading skills in this market, necessitating more M&A," they said in a note.

Other companies have also made investments.

BP got back into solar power with a $200 million investment in solar generator Lightsource late last year, six years after exiting the sector with a large writedown.

Total <TOTF.PA> bought battery maker Saft for $1 billion in 2016.

(Reporting by Ron Bousso)

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