BP's reinvention with renewables is still a long, long way off

Figcaption BPs Reinvention With Renewables Is Still A Long Long Way Off
Posted at: Author: Rain TV UK

B P is “performing while transforming”, according to chief executive Bernard Looney’s new slogan. Well, up to a point. The main transformation in 2020 was in the dividend. It was halved, which was also – roughly – the fate of the share price.

In terms of performance, the headline numbers were inevitably awful in the year of lockdown. There was a loss of $5.7bn even on the measure that excluded the big mid-year writedown in the value of the oilfields. But BP’s gas traders also managed to make a mess of the fourth quarter by getting caught out by the weather. In mitigation, it doesn’t snow often in Madrid, but the share price still shed a further 4.5% on Tuesday.

The “transforming” mantra really refers, of course, to BP’s ambitions in renewables, one of the key planks of Looney’s plan to make the company a net zero business by 2050. How is the renewable programme going?

Well, from a financial reporting point of view, there’s little to say. The renewables assets are currently housed within “other businesses and corporate”, an indication that it’s extremely early days for the greening of BP. The aim is to have 50GW of installed renewable capacity by 2030. Current tally: just 3GW, mostly onshore wind in the US plus solar.

The scale of the required reinvention perhaps explains why Looney’s plans have been greeted so far with a shrug by the stock market. At one level, the response is understandable. It’ll be half a decade – minimum – before Looney can provide hard evidence that a relative latecomer in renewables can keep up with nimbler specialists and generate the promised returns on capital of 8-10% from new projects.

BP's greener vision has failed to excite shareholders Read more

But the market’s inertia becomes a concern if it lasts too long. A greener strategy is surely the only credible one for a London-listed oil major in the 2020s. But there will inevitably be upsets along the way, which is why visible buy-in by investors matters. Looney has work to do.

GameStop bites back on way down

It was fun while it lasted, but the Reddit revolutionaries are discovering that share price movements can also be brutal on the way down. Shares in GameStop, which had travelled from $9 to $450 in the month in January, dipped below $100 during New York trading on Tuesday. AMC and other stocks in the day traders’ universe also fell.

“It’s not a loss until it’s realised,” said one poster on WallStreetBets, imploring others to keep the faith. Sadly, paper profits don’t count either. The goal was wide open last week to secure once-in-a-lifetime returns. The smart money probably did exactly that. The inevitable tragedy of this drama is that the latecomers get hurt.

An open question is whether go-it-alone traders, acting in loose coordination, will become a permanent force to be reckoned with.

Well, hedge funds will surely think twice about entering overcrowded short positions; they made themselves ripe for plucking at GameStop. But the Redditors will also have learned the dangers of being in a crowd that is charging unthinkingly in the other direction. The Reddit army for the next expedition may be smaller.

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Swann, Pigeon and Moonpig

Kate Swann departed WH Smith in 2013 as the shareholders’ saviour – the stock performed wonders in her time as chief executive – but she got one thing wrong. She should have thrown more investment at Funky Pigeon, which was bought in 2010 as an early-stage business, presumably with the idea of catching and overtaking Moonpig, the dominant player in the online greetings cards game.

Look at Moonpig now. It’s still got 64% of its market and, after a storming first day as a public company, it is valued at £1.4bn. WH Smith could do with a slice of that action. It is the bigger company by far in terms of group-wide revenues but its market capitalisation is just £2bn as the previously lucrative global “travel” operation awaits the return of passengers to airports and railway stations. Funky Pigeon has grown, but is still only a fraction of Moonpig’s size.

Still, at least Swann’s successors will know what to do: funk up the Pigeon and try to make it a close, rather than distant, second. Indeed, since Swann these days chairs Moonpig, they should see the task as a matter of professional pride.

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