BP denies renewables sell-off rumours

BP has categorically denied reports that is has any intention of selling or spinning-off its renewables business and instead claims that it is continuing to invest in areas such as wind energy, solar and biofuels.

A spokesman for the company confirmed today that comments made by BP's group chief executive Tony Hayward this week in support of renewables were further proof that earlier reports the company was considering selling its alternative energy business were unfounded.

"We are investing about $1.5bn dollars in alternative energy businesses this year," he said. "We have been fairly clear, we don't have any plans at the moment to spin-off or IPO it."

The comments follow a statement made by Hayward on Tuesday to accompany the release of BP's first half results for 2008, in which he claimed the company sees growth potential in its renewables business. "We have a significant and unique growth option in our alternative energy business," he said. "These businesses are increasingly economic without subsidy and we will continue to provide visibility on our investments and the value that's being created."

The idea that BP may be considering a sell-off of its renewables business began following a meeting between Hayward and analysts this February, when the oil company boss attached an equity value to the alternative energy group. "Our view is that the equity value of Alternative Energy is between $5bn and $7bn at current market conditions," he said at the time. "As we go forward, we will be looking at how best we can realise that growing value for our shareholders."

The company denied at the time that it was considering off loading the unit, but speculation continued that it could seek to realise the unrecognised value in its renewables activities through an IPO or sale of the division.

However, rather than being a precursor to a sell-off, putting a value on the business was more about reassuring investors of the potential of renewables in the long term given the current tough economic conditions, the BP spokesman claimed.

"People were saying that 'they are getting the estate agent around to value their property because they want to sell it'. In fact, we were getting the estate agent around so that we could know how much we could say our house is worth," the representative said. "We have been working out how to show the value of these businesses to our investors, because they don't generate the returns on capital employed that our more traditional businesses do, and the money they do generate doesn't reflect the value that is seen for these sorts of businesses in the market."

But the commitment from BP in support of renewables has not stopped the FT reporting this week that some commentators believe the recent move of the company's alternative energy business into a new building in London’s County Hall could be a sign it is still considering spinning-off the division into a separate business.

The newspaper also quoted Vivienne Cox, BP's executive vice-president for alternative energy, as saying "never say never", at the prospect of an IPO for the unit within two or five years.

BP claims that in terms of operating businesses its alternative energy division is investing in wind and solar, and it was also investing in biofuels and longer term carbon capture projects. In his statement on Tuesday, Hayward announced that the company had also "formed a major joint venture" to develop bio-ethanol production in Brazil, giving BP a strong presence in "arguably the world’s most efficient biofuels industry".