French oil major bets on EV boom, with electricity retailer buyout

If there was any lingering doubt that the world was shifting from fossil-fuelled internal combustion engine cars to electric vehicles, then the latest acquisition by French oil major Total SA should help put that to bed.

Total – one of the seven “Supermajor” oil companies in the world – said on Thursday that its €1.4 billion bid to acquire three-quarters of French energy retailer Direct Engie had been approved.

The company reportedly plans to make a tender offer for the rest of Direct Energie at the same price.

Total chief executive and chairman Patrick Pouyanné described the “friendly” deal as part of the group’s strategy “to expand along the entire gas-electricity value chain and to develop low-carbon energies, in line with our ambition to become the responsible energy major.”

As the Financial Times reports, the €42 a share Direct Énergie deal also continues Total’s expansion into the residential power market, “throwing down the gauntlet to incumbents like EDF.”

“It will be a game changer in the French market as they become the third player after EDF and Engie,” said Jean Trzcinski, an energy and utilities expert at Sia Partners.

A company spokesperson has reportedly said the deal would give Total slightly more than 3 million customers in France – it is targeting more than 6 million in France and more than 1 million in Belgium by 2022.

And while this is partly about securing an outlet for the company’s expanding gas portfolio, it is also about accelerating the company’s growth in the production of power from renewable sources.

Total – which last September bought French solar and wind outfit, EREN RE – aims to establish a renewable energy generation portfolio of 5GW in five years.

Direct Énergie has a portfolio of 1.35GW of combined gas and renewable generating capacity.

Finally, and perhaps most interestingly for an oil major, the FT notes that this latest in a string of power sector acquisitions by Total is also part of its “long-term hedge against the threat posed to oil demand by the rise of electric vehicles.”

As we reported here, recent German data has put the world on track to add 25 million new electric vehicles to roads a year by 2025, after a massive 55 per cent growth in EV registrations was recorded in 2017.

Even in Australia, where EV uptake has been thrown into reverse, the Australian Energy Market Operator has now doubled its forecast uptake for electric vehicles, suggesting that within two decades they could account of more than half of the nation’s car fleet – as Giles Parkinson reports today here.

Total, doubtless, still has a great deal invested in the continued use of oil for petrol-fuelled cars, but it is not blind to the shift to electric vehicles, that is closely mirroring – and deeply connected to – the global shift to renewables.

And to top it all off, Total CEO Pouyanné drives one – a fact he chose to disclose at last month’s CERAWeek oil-fest in Texas.

“I’m convinced that, in a big city, we’ll have plenty of electric cars in 10 to 15 years,” he was quoted as saying in a Bloomberg report.