BP forms offshore wind joint venture in renewables retreat
LONDON, Dec 9 (Reuters) - BP and Japanese power generator JERA have agreed to form a standalone joint venture combining their offshore wind operations, a major step in CEO Murray Auchincloss' efforts to reduce BP's focus on renewables.
BP's retreat from offshore wind reflects a similar trend by rivals Shell and Equinor which are trying to boost near-terms profits by spending more on higher-return oil and gas operations.
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The 50-50 venture, called JERA Nex bp, will include operating assets and development projects with a potential generation capacity of 13 gigawatts, the two companies said in a statement.
The partners have agreed to provide up to $5.8 billion in funding for projects approved by the joint venture by 2030, with BP contributing up to $3.25 billion and JERA paying up to $2.55 billion as BP's assets in the JV have yet to be developed.
BP's Auchincloss has been under pressure since taking over as CEO in January as the company's shares underperform rivals amid concerns over its energy transition strategy.
BP shares were up 2.5% at 1130 GMT, outperforming the sector .SXEP. BP shares have declined 17% so far this year, compared with a 2.5% drop for rival Shell.
Jefferies analyst Giacomo Romeo said the joint venture confirms his view that BP will be able to lower its annual capital spending below $16 billion and divest over $3 billion.
Offshore wind was a pillar of former CEO Bernard Looney's strategy to reduce BP's greenhouse emissions by rapidly building up renewables capacity and slowing investments in oil.
Surging development costs, supply chain issues and higher inflation have heavily weighed on the offshore wind sector in recent years.
Auchincloss has said he will take a pragmatic approach by focusing on the most profitable operations.
"This will be a very strong vehicle to grow into an electrifying world, while maintaining a capital-light model for our shareholders," Auchincloss said in Monday's statement.
BP also plans to sell its U.S. onshore wind business and a stake in its solar business Lightsource BP.
Reuters reported in October that BP was considering selling a minority stake in its offshore wind business, citing sources with knowledge of the matter. In June Reuters reported, citing sources, that the company had paused investments in new offshore wind projects.
BP and JERA will contribute interests comprising around 1GW of net generating capacity from operating wind farms and a pipeline of projects with around 7.5GW capacity, and further secured leases with around 4.5GW of potential capacity.
JERA, which is owned by Tokyo Electric Power Company (TEPCO) and Chubu Electric Power, first entered offshore wind in 2019. It later spun out its renewables assets into JERA Nex, which owns and operates wind farms in Europe, Asia and Australia.
BP entered the offshore wind market in 2019. It has a development pipeline with a generation capacity of 9.7 GW focused in the British North Sea, Germany and the U.S. East Coast. It currently does not have any offshore wind farms in operation.
JERA Nex bp will be based in London. Its CEO will be nominated by JERA and the chief financial officer by BP. The deal is expected to be completed by the end of the third quarter of 2025.
Bank of America is acting as financial adviser to BP and Rothschild for JERA.