By Marc Roca and Ehren Goossens - Dec 20, 2011 2:18 PM MT
BP Plc , Europe’s second-largest oil company will shut its solar power unit and quit the business after 40 years because it’s become unprofitable. Photographer: Andrew Caballero-Reynolds/Bloomberg
The company will wind down the unit, BP Solar, over several months, Mike Petrucci, the unit’s chief executive officer, told staff in an internal letter last week. About 100 employees will be affected.
BP Solar is withdrawing from an industry that’s facing oversupply and price pressures after Asian competitors increased production. Panel prices plunged 48 percent this year, helping tip three U.S. makers including Solyndra LLC into bankruptcy, and Solon SE (SOO1),Germany’s first listed solar company, filed for insolvency last week.
“The continuing global economic challenges have significantly impacted the solar industry, making it difficult to sustain long-term returns for the company,” Petrucci said in the letter.
BP Solar stopped most of its manufacturing in early 2009, closing several factories in Spain and shedding 480 jobs after the Spanish market froze, triggering the solar industry’s first period of strong oversupply.
The company decided in July to quit manufacturing entirely and focus on developing large projects. It no longer has manufacturing plants, Robert Wine, a spokesman for the London- based parent, said today by telephone.
As the company pared back its operations, it “withered away to insignificance,” Paul Leming, an analyst with Ticonderoga Securities LLC analyst in New York, said today in a telephone interview.
BP Solar plans to sell its stakes in the more than 158 megawatts of projects it’s developed with local partners in countries including Italy, Spain, Germany, Britain and the U.S. The decision will not affect BP’s other renewable energy units, which include wind power and biofuels, Wine said.
BP is exiting the solar industry six months after Paris- based Total SA (FP), Europe’s third-largest oil company, jumped in by buying a 60 percent stake in SunPower Corp., the U.S. solar panel company.
“Two of the biggest oil companies have taken the opposite approaches to solar industry in this short period of time,” Leming said, and BP’s move is the anomaly.
“The move toward alternative energy continues to be a well-recognized mega-trend,” he said, with more companies trying to get involved than getting out. BP’s exit is “sort of a non-event,” he said.
Other companies are moving into the industry. Warren Buffett’s MidAmerican Energy Holdings agreed this month to buy a $2 billion solar project under development in California and a 49 percent stake in a $1.8 billion plant in Arizona. The billionaire already owns wind farms and these are his first forays into solar.
Google Inc. and KKR & Co. today announced an agreement to invest in four California solar power plants with total capacity of 88 megawatts.
Global investment in renewable energy was $195 billion in 2010 and is expected to more than double to $395 billion in 2020, according to Bloomberg New Energy Finance.
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