Shell Plc is exploring options for its global renewable energy operations, including a possible stake sale to outside investors, people with knowledge of the matter said.
The U.K. energy giant is working with advisers to explore a range of possibilities that could also include spinning off the business into a more independent unit, the people said. Several international investors have been approached to gauge their interest in buying a stake, according to the people, who asked not to be identified because the information is private.
The deliberations come as Chief Executive Wael Sawan focuses the company’s fossil fuel investments in a bid to boost shareholder returns and narrow the valuation gap with Shell’s US peers.
The discussions are still at an early stage and there is no certainty they will lead to a transaction, the people said. Shell may also consider bringing in outside investors in some other operations, such as its downstream assets, one of the people said.
A Shell representative declined to comment beyond a capital markets day presentation in June, when the company announced plans to divest certain power assets by 2025 but also make selective investments in the business.
If a deal goes through, it could be a significant shift in Shell’s green strategy. The oil major has spent more than two decades trying to figure out how big a player it wants to be in renewables. Over the years, some CEOs have set goals for low-carbon alternatives to oil and gas, only for their successors to focus more directly on the fuels that generate most of the company’s profits but also cause the climate change.
It could also be seen as a concession to activist investor Dan Loeb, whose Third Point LLC fund built up a significant stake in Shell in 2021 and urged former CEO Ben van Beurden to break up its natural gas operations and renewables in an independent business. There is precedent for this move: Italian oil giant Eni SpA has spun off its renewable energy assets into a separate entity called Plenitude.
Shell’s approach in recent years has been emblematic of efforts by Europe’s oil majors to position their businesses for a world that lowers carbon emissions and relies less on fossil fuels in the coming years. It has been a stark contrast to its American peers Exxon Mobil Corp. and Chevron Corp., which have become more aligned with their core oil and gas activities.
Under van Beurden, Shell rapidly grew its green energy business and briefly attempted to become the world’s largest electricity producer. The company’s portfolio, which had 6.4 gigawatts in operation or development at the end of last year, includes offshore and onshore wind farms in Europe and the US. It has recently acquired Indian solar developer Sprng Energy, Danish biofuel producer Nature Energy and US renewable energy company Savion.
So far, investors have rewarded the US oil majors’ strategy, driving their valuations well above their European competitors.
Shell’s renewable energy business has come under pressure as Sawan pursues what it calls a “ruthless” approach to prioritizing returns, meaning the unit must generate profits as well as reduce its carbon footprint. company carbon. While Sawan said it will continue to invest in renewable energy, it has pledged to be more selective and only pursue projects that create sufficient value.
As Shell’s focus on green energy has shifted at the top, some executives in the business have left. Renewable energy chief Thomas Brostrom resigned to look for another job. Melissa Read, Shell’s UK director of offshore wind, also left the company.
