TotalEnergies CEO won’t consider spinning off renewables business

TotalEnergies SE Chief Executive Officer Patrick Pouyanne said it’s “too early” for the French oil major to consider spinning off its renewable-energy business because that segment may triple in value by 2025.

That segment should surge in value because the company plans to almost quadruple its gross installed capacity to 35 gigawatts by then, he said. The energy giant changed its name this year to epitomize a diversification into solar, wind, batteries and clean gases.

“If we changed from Total to TotalEnergies, it’s not to spin off energies,” Pouyanne said at the AJEF association in Paris. “It’s not at all the model that we have in mind.”

“Doing it today is too early” in any case, he said. The company may review its position if share fail to reflect the valuation of its renewables business in the medium-to-long term, Pouyanne said.

Oil and gas giants are split over what to do with their renewables businesses since they’re commanding higher valuations amid expectations of increasing demand as nations move away from fossil fuels to tame global warming.

Italy’s Eni SpA is considering listing its retail and renewables unit, whilst Shell Plc is fighting an activist investor push to break off its liquefied natural gas, renewables and marketing businesses into a standalone entity.

Pouyanne defended his strategy of investing about half of the group’s capital expenditure in LNG, renewables and electricity, saying he expects oil demand to peak this decade.

TotalEnergies shares, which outperformed peers during the coronavirus pandemic last year, are lagging behind in this year’s upturn. Shares have risen 23% this year -- trailing Shell, BP Plc and Equinor ASA -- giving the French company a market capitalization of about $133.2 billion.

The company will spend 65% of its research-and-development budget on new energies and batteries next year. That’s a significant change from several years ago, when it used 75% of its R&D on hydrocarbons, Pouyanne said.