Oil majors in transition: Shell to bid for Dutch Utility Eneco

Oil & Gas Major Royal Dutch Shell and Dutch pension fund PGGM formed a consortium to take over Dutch utility Eneco.

Eneco

Eneco is owned by 53 Dutch municipalities. In a turbulent political process they have decided to sell the company a few months ago. The company value is estimated in the region of €3bn. 

Total turnover in 2017 was €3.4bn. Although more known for its renewable investments, Eneco still generates half of its power (10.3 TWh p.a. in 2017) by fossil fuels, mainly gas. 

Eneco also has a large trading division focused on gas trading (45.3 TWh) and power trading (21.5 TWh).

Shell

The Dutch/British gas and oil giant recently declared to invest $1-2bn per year in its New Energies division, established in 2016. This corresponds to 4-8% of its total investment of around $25bn. 

Its European peers (in contrast to its US peers) pursue similar strategies: BP, Total, ENI and Equinor have pledged around $0.5 bn per year for renewables. ENI plans to increase renewable investments from 0.5 to 1.2bn over the next years. And Equinor even announced a 15-20 per cent share of renewables in its investment portfolio by 2030.

Eneco and Shell have partnered in several wind projects over the past years. The Dutch would fit into Shell´s strategy to invest in the power supply chain, similar to its First Utility akquisition in the UK. 

This would, if on a much smaller scale, mirror its oil and supply chain which starts at the oil field and ends at the gas station or at the industrial client. 

Direct access to power plants, networks or power markets would create: 

(1) an outlet for its large gas upstream division and (2) its increasing portfolio of wind and solar projects. This, in turn, may develop into a 

(3) “Plan B” strategy if stricter climate policies or faster electrification of transport require a quick downscaling of its oil business.

Shell is not a newcomer to the power sector. They are the second-largest power trader in the US and are heavily investing in downstream gas/power activities in Asia.

Shell´s and PGGM´s planned bid may not be the last word. Counter offers by other European oil or gas companies are quite possible. Total or Engie would be candidates, also given Eneco´s activities in France (ex ENI assets).

Read more on oil company strategies in the fossil and renewable world  in the next edition of our Global Energy Briefing (German and English version available for subscribers)

Image shows ENECO headquarters (courtesy Eneco)