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TOTAL Invests In United Wind, Expands Renewable Portfolio

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TOTAL S.A. (TOT - Free Report) , an integrated oil & gas company, announced a buying of interest by its venture capital unit, Total Energy Ventures (“TEV”),  in United Wind. United Wind is in the business of leasing small wind turbines (10 to 100 kW) to rural businesses and homes in the United States.

The power generated by the wind turbines is either used by the customers of United Wind or sold to the grid. As a result, customers leasing these turbines have to pay much less for their energy use than if they were to buy it from the utility companies. This makes United Wind an attractive option. Now with TOTAL acquiring an interest in United Wind, there will be further expansion of its business.

TOTAL’s Renewable Goal

TOTAL is focused on expanding its renewable energy business. But, TOTAL also has a flourishing global oil and gas operation which is well poised to benefit from the rebound in crude oil prices in the second quarter of 2016.

Per an International Energy Agency (‘IEA’) report, the contribution of renewable energy to the entire electricity generation mix will go up to 22% in 2035 from 8% in 2015. TOTAL is also focused on expanding its renewable assets, in line with the IEA’s projection.

TOTAL aims to add “20% low-carbon businesses in 20 years' time.” In other words, renewable energy, along with energy storage and energy efficiency, should represent 20% of its entire portfolio in  the next couple of decades.

TOTAL’s Renewable Ventures

We note that TOTAL already has a strong presence in the renewable energy space through its subsidiary SunPower Corporation (SPWR - Free Report) .  In addition, its robust financial position allows it to make further acquisitions in renewables.

In May 2016, TOTAL decided to invest nearly $1.1 billion to acquire Saft Group, a maker of batteries for the industrial, transportation, and civil and military electronics markets. The acquisition is in sync with TOTAL’s energy storage business expansion.

Oil & Gas Majors Showing Interest

Apart from TOTAL, other oil & gas majors are also showing an interest in diversifying into the booming renewable energy space given the positive regulatory framework.

In May, 2016, Exxon Mobil Corporation (XOM - Free Report) entered into an agreement with FuelCell Energy Inc. (FCEL - Free Report) to jointly pursue power plant carbon dioxide capture using a novel technology involving a new application of carbonate fuel cells.

The new technology could substantially reduce costs compared to what commercial technology offers through a unique process that generates power while capturing carbon. The aim is to apply the technology globally, on a large scale.

Zacks Rank

TOTAL S.A. currently has a Zacks Rank #3 (Hold).

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