BP solar profits slump

BP's renewables unit suffers as overall profits crash by two-thirds

Tim Webb and Graeme Wearden
guardian.co.uk, Tuesday 28 April 2009 17.12 BST

BP has reported a slump in sales of solar panels and falling profits at its alternative energy division. Overall, BP group profits fell by almost two-thirds in the first three months of the year compared with the same period last year. The company mainly blamed lower oil prices and higher taxes at its Russian subsidiary TNK-BP.
Earlier this month the oil group said it was axing 620 jobs at its solar energy division in the US and Spain because of an oversupply of solar equipment in the market and the recession. The job cuts are equivalent to more than a quarter of the workforce.
BP said today its solar sales during the quarter would generate 15MW of power, down from 34MW in the same period in 2008. BP said this reflected "ongoing weak demand in the market".
Losses from the unit, which covers its alternative energy operations – also including wind farms and biofuels – totalled $800m (£547m). That compares with $193m of losses in the same period last year, although the unit now includes more overhead costs than it did before.
Overall, BP reported profits today of $2.39bn (£1.64bn) in the first three months of this year, down from $6.23bn a year ago. It blamed the fall in the price of oil, which fluctuated between $35 and $50 a barrel during the quarter; a year ago a barrel cost more than $100.
With profits also lower than in the last three months of 2008, when BP made $2.59bn, the company is now planning to spend less on finding and developing new oil and gas reserves. It warned it would spare less than $20bn for capital expenditure this year, down from an earlier target of $20bn-$22bn.
The cut in spending could have long-term consequences for BP's growth. It is not clear which projects will be affected by the cutbacks, but environmentalists are likely to welcome them, given the controversy over projects such as BP's recent investment in oil sands in Canada.
Shareholders will receive a dividend of 14 cents a share, the same as in the last quarter and nearly half a cent more than a year ago.
Earlier this year, Shell angered environmentalists when it said it was scrapping investment in solar and wind power to focus on developing biofuels and carbon capture and storage.
The former chief executive Lord Browne rebranded BP as "Beyond Petroleum" signalling that the group would seek to expand beyond fossil fuels. But the current chief executive Tony Hayward is thought not to share his predecessor's enthusiasm for renewables.
BP's total wind capacity stands at 678MW, almost four times the amount it had built this time last year. A spokesman declined to comment on plans to build any more wind farms.