Renewable energy assets are in a bubble that has led to a string of deals with “crazy” valuations, according to the chief executive of Total, one of the world’s biggest oil and gas companies. The warning from Patrick Pouyanné comes as the industry’s heavyweights are caught between sustaining fossil fuel-based businesses that generate the bulk of both their profits and the cash for dividends, while facing louder calls to increase investment in clean energy.
Total is no exception. In a wide-ranging interview, Pouyanné said he wants the group to be recognised not “as an oil and gas company, but as an energy company”. The Paris-based multinational has pledged billions in renewables investment, targeted net-zero emissions by 2050 and proposed renaming the company TotalEnergies, which its shareholders will vote on in May.
However, “there is a bubble” in the renewables sector, Pouyanné cautioned. Valuations that are often up to 25 times earnings are “just crazy today” , the Total chief added, putting that down to the short supply of assets of a significant scale. They are “too scarce”. Total was one of several major oil companies, BP among them, that earlier this month paid what one analyst described as “staggering” prices for the leases to UK offshore wind projects.
In a thinly veiled swipe at BP, which was part of the highest-bidding consortium, he said: “When we come, we don’t pay too much.” With European oil and gas companies under particular pressure to steer their portfolios towards cleaner forms of energy, Pouyanné is not shocked at the frenzy over renewables as sellers seek out the deepest pockets.