BP sees the Lightsource

December 4, 2023 Miheka Patel

Key updates

BP announced it will acquire the remaining 50.03% share in Lightsource BP for £254m (US$322m) plus debt, taking its stake to 100%. The transaction is expected to close mid 2024.
BP stated it will look to scale up Lightsource BP and apply its capabilities to help secure low carbon power for its renewables, biofuels, hydrogen, and EV charging targets.
Lightsource BP has a renewable pipeline of 61GW (8.4GW developed to date).
In comparison, BP has a renewables pipeline of 43.9 GW, of which 28.5 GW are solar projects, attained primarily through its joint venture (JV) with Lightsource. In 3Q23, BP had 6.1 GW of renewables developed to FID.
In 2022 Lightsource BP delivered £287m EBITDA (£17.6m profit) and in 3Q23, BP stated that Lightsource’s “develop and flip” model saw returns average 16%. Upon acquisition, BP has said it will continue to target double-digit equity returns from the business.

Our view

We see this acquisition as an incremental positive for BP’s transition as it demonstrates its commitment to building renewables to support its low carbon strategy.

While BP may seek to benefit from the attractive returns of the develop and sell down model, we still see this as a valid decarbonisation lever as long as it is providing additional renewable energy to the grid.

As of 1Q23, BP had 3.2GW of solar to FID from its 50:50 JV with Lightsource. With a total 6.1 GW of renewables to FID disclosed in 3Q23, we estimate the acquisition will raise BP’s total renewables to FID to 9-10GW (an additional 3.2GW upon acquiring the 50% share).

This will bring BP closer to its near-term goal of 20 GW of renewables to FID by 2025.

The conversion of the remainder of the renewable pipeline to FID will be dependent on how BP manages Lightsource now that it has a controlling stake in the company.

It remains to be seen whether BP will limit its pursuit of projects to those that can be integrated with BP’s assets or continue to invest in projects that demonstrate the highest returns independent of BP’s own needs.