BP Agrees to Sell US Onshore Wind Business to LS Power

Wind turbines. Photographer: Bing Guan/Bloomberg Photo by Bing Guan /Bloomberg

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(Bloomberg) — BP Plc agreed to sell its US onshore wind business to LS Power, as the company continues efforts to pivot back toward its core oil and gas business and reverse years of share underperformance.

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The deal completes the UK energy giant’s exit from wind power generation, transferring ownership of 10 assets across seven US states, according to a statement. The value wasn’t disclosed, but BP said will provide an update on divestment proceeds when it reports second-quarter results early next month.

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BP shares rose 1.8% to 404 pence at 9:08 a.m. in London. LS Power is a closely held New York-based energy developer, investor and operator.

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Chief Executive Officer Murray Auchincloss is seeking to demonstrate progress on a turnaround plan announced in February, which included a return to growing oil and gas production and divesting $20 billion of assets after abandoning a low carbon strategy. The company’s shares have continued to underperform most of its rivals this year, while the oil major faces pressure from activist Elliott Investment Management. 

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“We have been clear that while low carbon energy has a role to play in a simpler, more focused BP, we will continue to rationalize and optimize our portfolio to generate value,” Executive Vice President William Lin said in the statement. “The onshore US wind business has great assets and fantastic people, but we have concluded we are no longer the best owners to take it forward.”

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BP’s divestment program aims to reduce debt and improve the balance sheet. Lubricants business Castrol is the marquee asset BP is trying to sell, which could fetch $8 billion to $10 billion, analysts have said. The firm is also seeking to sell the Gelsenkirchen refinery in Germany and a stake in its solar and battery storage unit Lightsource BP.

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“Any progress BP makes on its targets, including smaller asset sales, is positive, but it might still not be enough for investors who were underwhelmed by the turnaround plan announced in February,” Morningstar analyst Allen Good said. “It may require additional cost cuts, capital reductions, and asset sales for the market to become excited.”

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UBS Group estimates the US onshore wind unit’s enterprise value is about $1.5 billion to $2 billion, “although a proportion is likely off balance sheet already.” The assets have a combined gross generating capacity of 1.7 gigawatts, BP said.

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BP’s retreat from the wind business follows a splashy entrance to offshore wind in 2020 under Auchincloss’ predecessor Bernard Looney. BP spun off its global offshore wind portfolio late last year.

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(Updates with shares, analyst reaction and context beginning in third paragraph.)

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