On Wednesday 18 April, Total announced the acquisition of the leading alternative gas and electricity supplier on the French market, Direct Energie. Initially, the oil & gas company offered €1.4 billion to acquire 74% of the company. Ultimately, the deal will cost €1.9 billion, and will have them acquire the entire company.
"Total is actively pursuing its development in electricity and gas generation and distribution in France and Belgium. This friendly takeover is part of the Group's strategy to expand along the entire gas-electricity value chain and to develop low-carbon energies," explained Patrick Pouyanné, CEO of the multinational.
7 million new clients
This “friendly takeover” is welcomed by Direct Energie, which expressed regret that only half of the French population is aware that they can change energy suppliers. Today, EDF holds 85% of the electricity market and Engie holds 75% of that for gas. The company is counting on Total's influence to expand its reach. The new group currently has 4.1 million customers in France and Belgium. By 2022, Total is aiming for 6 million contracts in France and 1 million in Belgium.
For Total, which is already a gas and electricity producer and distributor, this acquisition allows for a significant increase in its production capacity. The oil & gas company already operates with a 900MW capacity of combined gas and renewable energy. With the edition of Direct Energie, the company will add 1.35 GW, including 800 MW from gas power and 550 MW from green electricity.
In recent years, Total has expanded its external growth operations to diversify its business. Already heavily repositioned in the extraction of gas rather than oil, the company has also invested heavily in new energies. For example, with the acquisition of the US solar panel manufacturer, Sunpower, in 2011 for €1 billion and the battery designer, Saft, in 2016 for €950 million.
Under shareholder pressure
More recently, Total acquired the Belgian electricity company, Lampiris, and picked up 23% of Eren Renewable Energy. The company has also acquired GreenFlex, the French specialist in energy transition for businesses. Since then, the company has launched an offer to sell electricity and gas to individuals under the entity, Total Spring. This entity offers the distribution of renewable electricity and gas at a rate 10% lower than regulated prices.
Today, Total is the top oil company to have invested the most in energy transition in recent years. Most notably, it is the top green energy investor in the petroleum world with $9 billion spent in the last 7 years. It is ahead of BP ($8.25 billion), Statoil ($3 billion), Shell ($1.7 billion), and Chevron ($1 billion). The group ensures that by 2025, up to 15% of the its employed capital will be targeted towards renewable energies.
Even if Total’s diversification is credited to former CEO Christophe de Margerie and current CEO Patrick Pouyanné, pressure from certain investors is not to be discarded. At the 2016 Annual Meeting, a coalition of shareholders, led by Phitrust, wanted to table a resolution entitled "Strengthening Total's Climate Change Reporting". It was abandoned after the oil company published a report on its climate risk management.
Ludovic Dupin, @LudovicDupin