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18 December 2017

BP invests in the largest solar development company in Europe

British Petroleum is set to invest $200 million to acquire 43 percent of Lightsource, the largest solar power project developer in Europe, as a way to diversify its business portfolio away from fossil fuels.

As a result of the newly announced strategic partnership, which will cost BP $200 million over 3 years, Lightsource will be renamed Lightsource BP.

The majority of this investment will be dedicated to Lightsource’s pipeline of projects, which aims to add approximately 8 gigawatts (GW) of large-scale solar projects in Europe, India, Middle East and the US. To date, the project developer has mainly focused on solar projects in the UK and sees the new partnership as a way to expand into overseas markets.

But the partnership will be equally beneficial for BP since major oil companies are forced to diversify their business portfolios as stringent emission regulations and financial climate risks endanger the prospects of exclusively fossil fuel-focused companies.

Valentina Kretzschmar, an analyst at energy consultants Wood Mackenzie, commented: "The European majors feel under pressure to diversify, to get exposure to different technologies so they are not left out. It is what a lot of their peer group is doing”.

BP was initially considered a first-mover in this field, having embarked on diversifying away from oil with the “Beyond Petroleum” slogan before 2000. However, the 2010 Gulf of Mexico oil spill acted as a major factor in stalling progress.

The company still counts significant losses- allegedly more than $64 billion in damages and fines and was forced to step back from investment in alternative energy technologies.

Under John Browne, Chief Executive of BP from 1995 to 2007, the company invested approximately $8 billion in renewable energy during the early 2000s. At the time, the amount of investment was considered extraordinary considering the reduced return on investment and the fact that solar energy was at a very niche stage.

However, the new announcement is seen as a comeback on the company’s journey to reducing its economic dependency on fossil fuels.

Bob Dudley, BP Group’s current Chief Executive explained that although in the past it had focused on the manufacturing side of the solar business, the company will now look for value in developing and managing large-scale solar projects around the world.

He said: “I am confident that the combination of Lightsource’s expertise and experience with BP’s relationships and resources will propel this innovative business to even more rapid growth”.

Even though the amount of $200million seems significant, BP’s capital expenditure for 2016 amounted to $16 billion, meaning that increased commitment is yet to be seen. 

Image credits: Reuters 

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