An oil and gas major is placing a big bet on the future of battery technologies and renewable power.
French energy company Total SA yesterday said it would move to fully acquire Saft Groupe SA, an advanced battery manufacturer. The move is the latest sign that Total's leadership intends to realign the company's priorities away from a focus on oil and gas and toward greater holdings throughout the diverse energy sector.
It may be a sign that parts of the oil industry could be nudging back toward a fuller embrace of renewable energy, as well. Many major oil and gas companies had moved away from or attempted to pull back from renewable power investments in recent years (EnergyWire, Oct. 3, 2014).
Saft and Total announced the proposed deal in a joint release. The estimated value of the transaction was put at 950 million, or slightly more than $1 billion.
The offer appears generous. The companies said the sale price values Saft shares at nearly 40 percent above what the battery maker's stock was selling for before the offering, and more than nine times Saft's 2015 earnings, "which represents a significant control premium compared to recent valuation multiples in the battery industry."
Saft's board will recommend that its shareholders accept the acquisition by Total. The deal also has to clear French regulatory scrutiny but is unlikely to raise antitrust concerns, as the two companies' core business models are so different.
Among the top five of the world's largest publicly traded, vertically integrated oil and gas companies, Total has a global presence and over 100,000 employees. Its hydrocarbons production stands at about 2.15 million barrels of oil equivalent per day, 20 percent of that represented by liquefied natural gas. Total's LNG presence is about to greatly expand with the forthcoming Yamal LNG project in Russia.
Saft describes itself as "the world's leading designer and manufacturer of advanced technology batteries for industry." It sells solutions to a variety of industries, including oil and gas, but also renewable energy, the marine industry and for motor vehicles.
In a recent call with analysts, CEO Patrick Pouyanné said Total's restructuring drive is on track. The company recently announced a separate natural gas and renewables business unit and a separate services unit to drive business gains throughout all segments "that has an objective to improve the global efficiency of the group and position the company as a global energy leader."
Looking for storage solutions
In purchasing Saft, Pouyanné said, his firm has one particular future business opportunity in mind: grid electricity storage, especially for utility-scale renewable energy projects.
"Saft's renowned technological know-how and unique expertise have allowed it to develop innovative and competitive solutions for its clients," he said. "It will notably allow us to complement our portfolio with electricity storage solutions, a key component of the future growth of renewable energy."
This isn't Total's first foray into renewable energy. In 2011, the company bought a solar power company. Meanwhile, Total has come out recently with announcements that suggest that, although oil and gas will remain a central part of its business, changes are afoot that will see Total extending its reach into renewables and even the future lightweight and electric vehicle market.
The restructuring and addition of the natural gas and renewables department was announced in late April (EnergyWire, April 20).
One year ago, Total announced an investment in future advanced plastics manufacturing for German automakers (EnergyWire, March 6, 2015).
Its acquisition of Saft will see the battery maker accessing a huge new pool of financial resources that can be used to scale up research and development in grid storage for renewables, Saft CEO Ghislain Lescuyer said in a release. "I am convinced that Total will provide Saft with the required expertise and resources needed for its future development, particularly in terms of technological and commercial capabilities."
In an interview, Jérôme Pécresse, CEO for renewable energy at General Electric, identified grid storage technologies for counteracting the variability of wind and solar power as one of the most promising new frontiers in energy to watch in the coming years.
"It's going to be about storage, it's going to be about digital," Pécresse said. "It will take a bit of time, but it will get to scale and to cost solutions. We are not there today."
Pécresse said big hurdles to overcome before wider distribution of grid battery storage can be accomplished are "technology, and also the big unknown is what kind of cost solution do we get when we scale it." He said GE is actively investing in finding the answers.
Some players in battery technology are predicting a forthcoming breakthrough that will enable wider deployment on the grid via expanding renewable energy projects. Throop Wilder, CEO of 24M Technologies Inc., said that the breakthrough will come with the simplification of the design and manufacturing of lithium-ion batteries, and that a cost-effective solution will be key if battery makers ever hope to make it big with renewable energy generators. Quality and reliability also matter greatly.
"When you get to things like the grid, you need a different level of quality, especially you need much longer life, and you need these ultra-safe batteries that are built into large systems," he said. "In a gird application where you have storage, storage is the application. If it's expensive, the whole solution is going to be expensive."
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