May 18, 2020 / 6:29 AM / 11 days ago

Total muscles into Spanish energy market with EDP asset buy

PARIS (Reuters) - French energy group Total (TOTF.PA) said on Monday it had agreed to buy up a large customer portfolio from Energías de Portugal (EDP.LS) and two of EDP’s gas-fired combined cycle power plants in Spain, making it a leading player in the Iberian market.

The logo of Total is pictured at the company's headquarters in Rueil-Malmaison near Paris, France, April 22, 2020. REUTERS/Charles Platiau

The deal is in line with the company’s strategy to expand into the electricity market as energy majors face growing pressure to reduce their exposure to fossil fuels while increasing low-carbon businesses in their portfolio.

It is Total’s third major acquisition in the European residential electricity market since 2016, after deals in Belgium and France, making it a leading challenger to former dominant monopolies.

Total's shares on the Paris bourse .FCHI rose as much as 6% after the deal, and a separate announcement that it was calling off a deal to acquire Occidental Petroleum's asset in Ghana. [L8N2D018U]

Total said it was buying EDP’s portfolio of 2.5 million business-to-customers (B2C) base, along with the two power plants, which represented an electricity generation capacity of nearly 850 megawatts.

It added that the transaction with EDP, which was advised by Santander Bank (SAN.MC) was based on an enterprise value of 515 million euros ($557.4 million).

“This is a major new step in Total’s ambition to become a broad energy company,” Total’s Chairman and CEO Patrick Pouyanne, said in a statement.

“This transaction enables Total to become one of the key players in the energy market in Spain, covering a wide spectrum from LNG imports to power generation from renewables and gas, as well as gas and electricity supply,” Pouyanne said.

CHALLENGER

The deal makes Total the fourth largest supplier of gas and power in Spain with residential market shares of 12% and 6% respectively, it said.

Philippe Sauquet, Total’s President for Gas, Renewables and Power, told Reuters that the firm will become the new challenger in the Spanish market, reflecting its position in France where it is challenging state-controlled utility EDF (EDF.PA), and in Belgium.

Total will take on Endesa (ELE.MC), Iberdrola (IBE.MC), Naturgy (NTGY.MC) and Repsol (REP.MC) in the Spanish retail gas and electricity market.

“We try to avoid buying into historical positions that are condemned to decline over the years,” Sauquet said.

“When you are a former monopoly with 100% of the market share, the only direction is down. We feel much more comfortable buying the challenger,” he said.

He added that despite the current turmoil in the oil market and cost savings announced by energy companies, Total will maintain its targeted investments in low-carbon energies of up to $2 billion annually.

“We are protecting the low carbon investments that are the basis for our future,” Sauquet said, adding that Total planned to develop a significant wind and solar power generation capacity in Spain with around 2 gigawatts of projects in the pipeline.

Additioanl reporting by Sudip Kar-Gupta in Paris and Isla Binnie in Madrid, editing by Louise Heavens, Kirsten Donovan

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