BP made its first move into the UK’s offshore wind sector in only February this year. Its joint venture with a German partner will invest less than £1bn in an option to develop 3GW of capacity in the Irish sea. A final investment decision is years away.
By comparison, SSE’s plans put it on track to deliver more than a quarter of Britain’s 40GW “Saudi Arabia of wind” target by 2030. True, BP has grand ambitions in renewables – 50GW globally by 2030 – but with only 3.6GW currently it has a long way to go. Even its pipeline of 23GW suggests some transformative dealmaking is required.
While wind farms may not be in BP’s DNA, dealmaking certainly is, and with SSE spearheading the construction of what will be the world’s largest wind farm at Dogger Bank off the east coast of Yorkshire, a takeover would transform its renewables capabilities in one fell swoop.
Rather than casting the division adrift to fend for itself, SSE would be placing it in the hands of a wealthier backer. Its boss Allistair Phillips-Davies has argued that spinning off SSE Renewables as an independent listing would weaken its ability to finance large scale projects such as Dogger Bank because its cost of borrowing would shoot up. BP would not have that problem.
With Shell facing the same challenge of how to make the shift to clean energy without alienating shareholders, perhaps SSE will be able to generate a bidding war between two sides with deep pockets.
The politics of a break-up can’t be ignored. With its headquarters in Perth, Scotland and thousands of people employed elsewhere north of the border, Nicola Sturgeon is unlikely to look favourably on any plan that jeopardises jobs, investment, and taxes.
But she might be able to get behind the idea of BP as an owner with the financial firepower to ramp up investment. It is already a big employer in Scotland.
Likewise you can imagine Westminster liking the idea of Britain’s former state-owned oil company making a massive bet on the UK’s most promising wind farm operator as the government attempts to build the energy system of tomorrow. SSE is in play.
