Total acquires Scatec's African hydropower assets

From the newsletter

Norway-based renewable energy company Scatec ASA has sold its 51% stake in African hydropower projects to TotalEnergies for $167 million. This adds 822 MW of capacity to TotalEnergies' renewables portfolio. The sale comes as Scatec is shifting its strategy to focus on solar, onshore wind and battery storage closer to home.

• TotalEnergies has been actively diversifying its energy portfolio and venturing into renewable energy sources, particularly solar and hydropower. The company has set an ambitious target of achieving 400 GW of renewable energy capacity globally by 2050.

• Last month, it formed a partnership with UAE’s clean energy leader Masdar and renewable energy investment platform EPointZero to fund clean energy projects in Africa and Asia. Their renewables focus comes at a time when other leading oil and gas companies like BP, Shell and Equinor are divesting from renewables.

More details

• Under the sales agreement, TotalEnergies acquired the 255 MW Bujagali hydropower plant in Uganda, which is operational. It also acquired a development portfolio consisting of the 361 MW Mpatamanga in Malawi and the 206 MW Ruzizi III at the border of Rwanda, DRC and Burundi. The staff in the projects will also be transferred to TotalEnergies as part of the deal.

• Scatec was operating the projects as a joint venture with Norfund and British International Investment (BII). Scatec develops, builds, owns and operates renewable energy plants, and currently has 4.8 GW of renewable energy projects in operation and under construction across five continents.

• TotalEnergies has several renewables projects in the pipeline. Globally, it has hydropower projects with a gross capacity of 3.7 GW. In Africa, specifically Mozambique, TotalEnergies is part of a consortium with EDF and Sumitomo Corporation to develop the massive 1,500 MW Mphanda Nkuwa hydropower project located on the Zambezi River. 

• In the solar sector, TotalEnergies is making significant strides in Uganda. It is developing 120 MW of solar power and plans to achieve 1 GW of installed renewable energy capacity by 2030. In January, it launched a tender inviting bids for the construction of 40 MW solar plants. In the same month, it announced plans to commission a 500 MW solar plant in Libya by the end of 2025.

• In a recent interview with McKinsey, the TotalEnergies CEO, Patrick Pouyanné, said that he plans to shift a fifth of the business to renewable-led integrated power by 2030. 

• The strategic shift allows TotalEnergies to diversify its investment portfolio. While oil and gas profits are substantial, they are also prone to market disruptions, such as those experienced during the COVID-19 pandemic, which can severely impact profitability. On the other hand, renewables offer more stable prices, providing a hedge against fluctuations.   

• The focus on solar and hydropower indicates an intention to provide cheap and reliable power. Hydropower is one of the most mature technologies and cheapest in the market. Solar panel prices have also declined to compete effectively. While solar power is intermittent, hydropower provides a reliable baseload providing the much needed balance for grid stability.

Our take

• TotalEnergies' focus on diversifying its business portfolio is attractive. While some may view the continued involvement in fossil fuels as contradictory to renewable energy goals, this approach allows the company to channel their from oil and gas into renewables and fund big projects in Africa.

• The strategy is not just to invest in renewables but also potentially to benefit from carbon credits they generate. The company could offset emissions from fossil fuel operations, diversify revenue streams and avoid carbon taxes in the future.

• The cost of electricity is a key factor in the energy transition. Solar and hydropower are among the most mature renewable energy technologies. While both are cost-competitive, hydropower generally offers the lowest levelised cost of electricity generation, with a long lifespan exceeding 100 years. TotalEnergies knows the cost-competitiveness of these technologies will make them attractive for grid connection and allow them to compete effectively in the future.