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BP is in advanced talks to sell its solar power arm Lightsource to a consortium backed by Kuwait’s sovereign wealth fund as the oil major retreats from renewables after abandoning a years-long green energy push.
Qualitas Energy, a private equity firm focused on green energy, and Wren House, the infrastructure arm of Kuwait Investment Authority, have teamed up to bid for Lightsource, according to several people familiar with the matter.
Analysts said the main attraction of the deal for BP was offloading the unit’s billions of dollars in debt, and that the sale price was unlikely to be significant for the group.
The sale of Lightsource, which was the largest solar developer in Europe when BP first invested in it in 2017, is part of a drive by BP to sell assets as it seeks to reduce debt and refocus on oil and gas after an ill-fated shift towards green energy, which it abandoned last year.
While the consortium has emerged as the final bidder in the Lightsource sale process and a deal is expected soon, the people familiar with the matter cautioned the transaction was not yet confirmed and could fall through.
The deal would add to the portfolio of Wren House, which has invested in assets including Associated British Ports and London City Airport since it was set up by Kuwait in 2013 as a Europe-focused infrastructure investor.
The sale would be a boost for BP’s new chief executive Meg O’Neill, who has endured a tumultuous beginning to her reign, including the sacking of chair Albert Manifold over “serious concerns” about his behaviour.
The dismissal sparked a public backlash from the Irish executive, who denied misconduct, and caused further upheaval at BP as O’Neill attempts to stabilise the business after a series of strategy and leadership changes this decade.
Lightsource has 4 gigawatts of solar, wind and battery capacity in operation across 15 countries, roughly enough to be able to power up to 4mn homes. BP was previously seeking a new partner for the business before eventually deciding to put it all up for sale.
The deal is likely to involve a buyer agreeing to take on several billion dollars of Lightsource’s debt. Two years ago, BP paid more than $500mn to buy out its previous partner’s 50 per cent stake in a deal that saw it take on $2.8bn of debt. Analysts questioned executives on the sale in February, with one asking if there was any “equity value” in the unit.
BP said last year it would write off more than $4bn of value attributed to Lightsource and its biogas company Archaea and has flagged another renewables-linked impairment of $1bn to come in its second-quarter results next month.
BP’s decision to put Lightsource up for sale comes as O’Neill attempts to shore up the UK oil major’s balance sheet and slim down the business to focus on oil and gas production, refining and trading.
BP has net debt of about $23bn and is aiming to reduce this to no more than $18bn by the end of next year. The company has suspended share buybacks and said the proceeds of its divestment programme would go to reducing its borrowing. The rise in oil prices because of the Iran war has also helped its debt position.
Qualitas currently operates 11GW of solar, wind, battery and hydroelectric power assets across Spain, Germany, the UK, Poland, Chile and the US.
BP, Qualitas and Wren House declined to comment.
