PARIS - TotalEnergies (EPA:TTEF) (Paris:TTE) (LSE:TTE) (NYSE:TTE) has finalized an agreement to purchase West Burton Energy from EIG, an investor in the energy sector, for an enterprise value of £450 million.
West Burton Energy operates the West Burton B gas-fired power plant in Nottinghamshire, England, which has a capacity of 1.3 GW and supplies electricity to approximately 1.8 million homes. The plant, operational since 2013, also includes a 49 MW battery storage system added in 2018.
The acquisition is part of TotalEnergies’ strategy to balance its renewable energy portfolio in the UK with flexible generation assets. The company has a significant renewable energy footprint in the UK, with 1.1 GW of installed capacity and 4.5 GW under development. TotalEnergies plans to divest 50% of the acquired assets to align with its internal assessment of needing 700 MW of gas-based power generation capacity.
This transaction will also enhance TotalEnergies' electricity and gas trading capabilities in the UK market and support its goal to provide affordable and sustainable energy. The company intends to supply the plant leveraging its natural gas production operations in the UK, where it is responsible for 30% of the projects.
Following the deal, TotalEnergies’ global flexible power generation portfolio will reach approximately 7 GW, complementing its 23 GW of renewable energy capacity.
Stéphane Michel, President of Gas, Renewables, and Power at TotalEnergies, expressed his enthusiasm for the acquisition, stating that it supports the company's integrated approach in the UK, combining renewable and flexible generation capacity. Michel highlighted that the deal aligns with TotalEnergies' 2028 return on average capital employed (ROACE) target of around 12% for this business sector.
The transaction is currently pending approval from the relevant authorities.
TotalEnergies has been a key player in the UK energy market for over 60 years, with a workforce of more than 1,800 across various sectors of the energy value chain. The company is a major offshore wind operator in the UK, a substantial supplier of gas and electricity to businesses and the public sector, and is involved in electric vehicle charging infrastructure, petroleum product distribution, and carbon capture and storage (CCS) through its stake in the Northern Endurance Partnership.
This report is based on a press release statement.
In other recent news, TotalEnergies reported robust financial results for the first quarter of 2024, with a Q1 cash flow reaching $1.3 billion and an adjusted net operating income for the integrated power segment growing by 16% to over $600 million. The company is also considering a potential U.S. listing to better connect with American shareholders.
Furthermore, TotalEnergies has been part of a debate with airlines at the International Air Transport Association (IATA) summit about the limited supply of Sustainable Aviation Fuels (SAF). Despite the airlines' commitment to achieving net-zero emissions by 2050, the current SAF supply only meets 0.5% of their fuel needs.
TotalEnergies' Senior Vice President, Louise Tricoire, defended the company's efforts, noting that the majority of its profits are reinvested in renewable energy research.
HSBC has also updated its financial outlook on TotalEnergies, raising the price target and maintaining a Buy rating on the stock. This was justified by a 2% upgrade in the 2024-26 operating cash flow forecasts for TotalEnergies.
Additionally, TotalEnergies' CEO, Patrick Pouyanne, retained his role amid some climate dissent at the Annual General Meeting, despite a noticeable drop in approval for the company's climate strategy.
InvestingPro Insights
In light of TotalEnergies' strategic acquisition of West Burton Energy, examining the company's financial health and market performance offers valuable insights. TotalEnergies (NYSE:TTE) is currently trading at a low P/E ratio of 7.83, which is noteworthy considering the near-term earnings growth potential highlighted by analysts. This low valuation metric, paired with a PEG ratio of just under 1 at 0.97, suggests that the stock may be undervalued relative to its earnings growth trajectory. Furthermore, with a market capitalization of $163.41 billion and a dividend yield of 3.6%, TotalEnergies stands out as a substantial and stable presence in the Oil, Gas & Consumable Fuels industry.
An InvestingPro Tip worth mentioning is that TotalEnergies has maintained dividend payments for an impressive 48 consecutive years, underlining its commitment to shareholder returns. Additionally, the company has been profitable over the last twelve months, with a robust gross profit margin of 34.87% as of Q1 2024. These factors, combined with the company's moderate level of debt, may offer reassurance to investors looking for stable investment opportunities in the energy sector.
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