Oil major BP Plc (BP) plans to scale back its wind power business in India. The company is in the process of divesting its entire portfolio of wind-power assets in the country.
India’s largest infrastructure-focused private equity fund – IDFC Private Equity – is buying out the assets for about $134 million. BP owns 100 megawatts (MW) of wind energy generating facility in two states in India.
Wind is an important part of BP’s energy portfolio. It brings a steadily growing stream of revenue to the company. As energy is sold under long-term purchase agreements, it offers a low-risk return on investment. Yet, the company is divesting assets in India to focus on more dynamic US wind market.
With oil majors cutting capital spending across the board in response to the global recession, BP has scaled back a total of 225 MW wind installation projects this year. The wind assets in China and Turkey are also in this array, apart from the assets in India.
The wind business is surprisingly similar to oil exploration and production. With the economy showing early signs of improvement and the US wind market expected to bounce back in 2010, the company is focusing on the United States.
BP has a total installed capacity of 12,200 MW in wind power. The company saw 30% growth in wind-energy generation capacity globally in 2008 with 50% growth in the U.S.
BP is enjoying a competitive position in terms of its size, reputation, credit-worthiness, access to capital and knowledge of the energy business. It is also one of the few US wind companies that can directly benefit from tax changes introduced by the US stimulus package, which can in turn boost the company’s competitive advantage.
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