UNITED KINGDOM: British Petroleum hints at $7bn sale of alternative energy arm

BP is considering floating or selling all or part of its renewable power operations, which it believes are worth up to $7bn (£3.5bn) - a value not reflected in the oil group's share price.

In a strategy update to the City that will be seen by green critics as a further move back to petroleum, Tony Hayward, the chief executive, said he planned to review the position of BP Alternative Energy, the brainchild of his predecessor, John Browne.

"What we will be doing over the course of the year will be looking at ways of realising that value for shareholders because none of us believe that there is very much of that, if anything, in our share price today," he said.

"Taking stockmarket valuations for similar companies, we estimate it [renewable energy] is already worth between $5bn and $7bn," he said. BP would be investing $1.5bn in the operations this year, compared with more than $20bn being ploughed into oil and gas.

Despite moves into the carbon-heavy oil sands and this latest possible sell-off, BP insisted it was as committed as ever to renewables. It highlighted the acceleration of $8bn of spending originally earmarked for new technologies.

Sources close to the group said Hayward's drive to realise value from alternative energy was more likely to mean disposing of a stake in the business than an all-out sale. They said both options were "some time off".

Vivienne Cox, chief executive of an alternative energy operation recently downgraded from a full division to a business unit, estimated that the wind business could be worth as much as $3.9bn and solar $2.1bn. Other operations, such as biomass, clean coal and hydrogen, could bring the total value up to $7bn.

BP had assembled a land bank big enough to build 15 gigawatts of wind generation in the US, including Cedar Creek in Colorado, one of the biggest wind farms in the US. There is more capacity planned for Europe, India and China, while the company was aiming at raising solar sales to 800 megawatts by 2010.

The company gave details of progress since a fall in annual profits and a slump in the share price.

Fadel Gheit, an oil analyst with Oppenheimer, said he was impressed with the steady progress to rehabilitate BP. "It makes sense to spin off the alternative energy business at some stage rather than having it hidden inside a much larger group," he said.

Source: The Guardian|by Terry Macalister