BP spins off wind farm business into joint venture with Japanese rival as it returns to fossil fuels

BP is spinning off its offshore wind farm business into a joint venture with a Japanese rival.

The deal comes as the energy giant’s boss, Murray Auchincloss, reduces focus on renewable energy to return to his traditional focus on oil and gas.

BP has previously said it “aims to be a global leader in offshore wind” and is developing sites in the UK, US, Germany, South Korea and Japan.

But investors have been concerned about low profit margins in the sector amid supply chain problems and growing competition.

And Auchincloss has been under pressure as the share price underperforms its rivals. It is down 16.6 percent this year, while Shell has fallen just 1.9 percent.

BP shares rose 4.3 per cent, or 16.1p, to 393.85p yesterday.

The joint venture with Jera, called Jera Nex BP, will include assets and projects under development with a combined potential to generate 13 GW of power, a spokesperson for the companies said.

BP will contribute up to £2.5bn and Jera, Japan’s largest power generation company, £2bn for investments until the end of 2030, although the companies said the sums may be lower.

Analysts at investment bank RBC noted that BP had previously planned to spend £7.8bn on renewables over the period 2022-2030, with offshore wind likely to have been the biggest chunk.

Even assuming £1.6bn has already been spent, the latest announcement “represents a significant reduction in spending in this area until 2030”.

Offshore wind was a key part of former boss Bernard Looney’s strategy to reduce BP’s greenhouse gas emissions by rapidly developing renewable energy capacity and slowing oil investments.

But that has receded since he resigned over a sex scandal last year.

In October, BP abandoned its plans to reduce fossil fuel production by 2030.

Auchincloss has said it will focus on the most profitable operations.

Yesterday he said the joint venture would create one of the world’s top five wind developers.

He added: “This will be a very powerful vehicle to grow into an electrifying world, while maintaining a capital-light model for our shareholders.”

The offshore wind farm sector has been hit by rising development costs, supply chain issues and higher inflation in recent years.

RBC analysts said yesterday’s announcement “provides further evidence of evolving strategies (on energy transition), particularly in the offshore wind sector, given recent industry headwinds and a very changed.”