BP pays £254mn to take full control of solar joint venture Lightsource

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BP has agreed to take full control of the solar power developer Lightsource BP in a sign that the UK energy major is pressing ahead with the transition strategy conceived by former chief executive Bernard Looney.

The FTSE 100 oil and gas producer will pay an initial £254mn for the 50.03 per cent it does not already own of Lightsource BP, with the potential for further payments depending on the company’s performance and the sale of assets identified for divestment.

BP first bought into Lightsource in 2017, marking a return to the solar sector which it had first entered in the 1980s as a manufacturer of solar cells, before exiting in 2011 amid intensifying competition from China.

The joint venture has been a critical part of BP’s efforts to diversify away from oil and gas, with solar power’s relatively quick rollout times giving the group a rapid means of scaling up its renewables portfolio.

Solar accounted for 28.5GW of BP’s renewables pipeline as of September 2023, compared to 6.1GW for onshore wind and 9.3GW for offshore wind.

BP bought a 43 per cent stake in Lightsource in 2017 for $200mn, increasing that to almost 50 per cent in December 2019 when the venture rebranded to include BP’s name.

Founded in 2010 by chief executive Nick Boyle, Lightsource BP has grown into one of the world’s leading developers of solar power and battery storage, operating in 19 countries. It has developed 8.4GW of solar power capacity and has more than 55GW of projects in the pipeline. 

As a wholly-owned unit of BP, it will build solar plants to feed the group’s vehicle charging networks, green hydrogen facilities and biofuel operations. But it will also continue to develop and sell solar projects, generating revenue that will contribute to BP’s “low-carbon” earnings, said one person familiar with the deal, adding that the transaction had been under discussion for more than a year.

In 2022, Lightsource BP reported earnings before interest tax and depreciation of £287mn.

The decision to take full control of the joint venture sets BP apart from rival Shell, which, under chief executive Wael Sawan, has said it will work with partners to develop onshore renewable power or not invest at all.

Anja-Isabel Dotzenrath, BP’s executive vice-president for gas and low-carbon energy, described the acquisition as a “natural evolution” of the partnership. “We will continue to scale this successful business, and also apply its capabilities and expertise to help meet bp’s growing demand for low carbon power from our transition growth engines,” she said.

BP’s shares rose 3 per cent on Thursday morning. The deal is expected to complete in mid-2024.

The transaction comes at a difficult time for BP, which is still looking for a permanent replacement for Looney, who stepped down as chief executive in September after failing to disclose the extent of past personal relationships with colleagues.

Looney was the key architect of an ambitious strategy to pivot the FTSE 100 company towards greener energy, which has struggled to win the support of all investors.

After Looney’s departure the board said it remained committed to that plan and appointed former finance chief Murray Auchincloss to serve as interim chief executive.

Relatively low costs have helped solar power grow rapidly over the past few years, with almost 220GW installed in 2022, driven by the EU and China. It accounted for about 4.5 per cent of global electricity production in 2022.

The International Energy Agency predicted this year that the installed capacity of solar power will overtake that of coal-fired power stations by 2027.