Total Takes Direct Energie in $1.66 Billion 'Friendly Takeover'

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--French oil and gas major Total S.A. (NYSE:TOT) (Paris, France) has agreed to pay 1.4 billion euro ($1.66 billion) to increase its share of the domestic power sector with the purchase of power retailer Direct Energie (Paris, France).

The deal is the latest in a growing trend of oil and gas companies expanding into the power and renewable energy sectors as they attempt to diversify. Total has agreed to purchase 74.33% of the controlling shares at a price of 42 euro ($50) per share--a 30% hike of the company's recent share value--in exchange for an additional 2.6 million French customers to add to its existing 1.5 million customers in France and Belgium. Direct Energie's board of directors has unanimously approved the transaction.

The company is aiming to take on state-owned energy giant EDF, which controls the nation's 58 nuclear power reactors, with more than 25 million customers--around 80% of the total market. Rival ENGIE has around 4 million French customers. As part of the deal, Total will get Direct Energie's installed power capacity of 1.35 gigawatts (GW), including 800 megawatts (MW) of gas-fired power plant and 550 MW of renewable electricity. This will add to Total's 900 MW of installed capacity. Direct Energie also has a 400 MW gas-fired power plant under construction and a 2-GW pipeline of renewable electricity projects in France. Adding this to its Total Eren business in emerging countries and SunPower Corporation (NASDAQ:SPWR) (San Jose, California) in the U.S., it aims to have a global capacity of at least 10 GW of installed capacity within five years, via renewables and gas-fired power plants.

"Through this transaction, Total is actively pursuing its development in electricity and gas generation and distribution in France and Belgium," commented Patrick Pouyanné, chairman and chief executive officer of Total. "This friendly takeover is part of the Group's strategy to expand along the entire gas-electricity value chain and to develop low-carbon energies, in line with our ambition to become the responsible energy major. We are delighted to welcome the Direct Energie teams into Total, who will contribute their skills in the field of electricity and who will be at the heart of the group's growth ambition in this field."

Xavier Caïtucoli, chairman and chief executive officer of Direct Energie, added: "We welcome this transaction with pride and enthusiasm, and we are convinced that combining with Total will be to the benefit of our customers."

Total's ambitious development program in the power supply sector will see it targeting more than 6 million customers in France and more than 1 million customers in Belgium by 2022. Last week, Italy's oil and gas major Eni SpA (NYSE:E) announced plans to spend 1 billion euro ($1.2 billion) on green energy projects over the next four years. For additional information, see May 8, 2018, article - Eni to Spend $8.4 Billion in Italy, $1.2 Billion on Renewables. Rival Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands) continued outlining its energy transition plans last month, committing to spending up to $2 billion per year to 2020 on low-carbon energy projects. For additional information, see April 25, 2018, article - Shell Outlines Energy Transition.

Last month, Industrial Info published Total's Top 10 projects by value, with roughly 90% of the total found in just three industries: Oil & Gas Production, Power Generation and Chemical Processing. For additional information, see April 12, 2018, article - Total's 10 Top-Valued Projects Indicate Growing Demand for LNG, Crude Oil.

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