Page 4 - AfrElec Week 39

AfrElec COMMENTARY AfrElec

BP shares tumble to 25-year low as

investors doubt clean strategy

BP chief Bernard Looney has struggled to convince investors
that the company’s clean energy goals are achievable

GLOBAL CEO Bernard Looney and other top managers McKinsey slides.”
at BP made a series of presentations earlier this “In this sector, intentions mean very little
WHAT: month, in which they fleshed out the UK major’s because companies have a poor track record of
BP’s share price has grand strategy for transforming itself into a clean capital allocation,” RBC Capital Markets’ Biraj
fallen to its lowest level energy giant. But investors are unconvinced, and Borkhataria said, stating that the major needed
since October 1995 the company’s share price slumped to a 25-year to do more to convince investors it can deliver
low last week. on its promises.
WHY: BP Week took place between September 15 Others have argued that investors may need
The slump indicates and 17, and saw the company’s management more time to decide on BP’s new strategy.
that investors are team devote over 10 hours to explaining how it “Investors need to digest the numbers, assess
unconvinced by BP’s can not only survive but thrive in a low-carbon BP’s assumptions and come up with a reasonable
strategy of becoming a future. The plan includes a 40% cut to BP’s oil and view on the feasibility of achieving some of the
clean energy giant gas production over the next decade, along with targets,” Bernstein’s Oswald Clint argued.
a tenfold increase in clean energy investments.
WHAT NEXT: BP’s share price closed in London at High targets
Oil majors face GBP2.324 ($2.95) on September 24, its lowest Looney took the helm of BP in February, replac-
difficulties trying to build level since October 1995. While weaker oil prices ing retiring head Bob Dudley. Since day one he
up their clean energy and fears of a second coronavirus (COVID-19) has been clear about his desire to put the com-
operations at a time when wave were contributing factors, the decline indi- pany on a much cleaner path.
low oil prices mean they cates that Looney’s pitch was unsuccessful. BP plans to grow its renewable energy capac-
are cash-strapped. But While BP’s change in direction has been ity from 2.5 GW to 20 GW by 2025, and 50 GW
failure to diversify into hailed as bold, “investors remain sceptical,” by 2030, primarily focusing on offshore wind.
renewables also carries Mirza Baig of Aviva Investors was quoted as say- These are considerable numbers, especially as
significant risks ing by Bloomberg, “particularly as this move is the world’s largest wind developer Iberdola only
being forced on the company by climate change.” has around 18 GW of capacity up and running
BP “didn’t detail how they planned on right now.
meeting their targets,” one major investor told However, wind energy is costly. BP
the Financial Times. “There were just a lot of announced on September 10 a $1.1bn

P4 www. NEWSBASE .com Week 39 01•October•2020