Big Oil's Renewable Shift May Drown Shareholders With Cash

[IsailedawayfromFR]

Shareholders of global oil giants will be “drowned” in cash from dividends and buybacks for the next 20 years as the firms shift their capital structure to finance renewable projects, according to Rystad Energy.

Majors such as Exxon Mobil Corp. and Chevron Corp. have traditionally had to hoard cash as they looked to their own balance sheets to fund billion-dollar megaprojects, founder Jarand Rystad said at his firm’s annual summit in Singapore. That will change as they gravitate to wind and solar projects, which tap debt markets backed by project financing for as much as 95% of their cost, he said.

The shift will create huge amounts of surplus cash that majors can return to investors as they increasingly tap pension funds and other lenders for lower-risk renewable projects, said Rystad. It underscores the massive changes oil and gas giants will need to undertake as they transition to wind and solar projects, the fastest-growing sources of energy.

“Shareholders will be drowned in capital paid back by energy majors in the next 20 years,” Rystad said. “Basically the whole energy sector needs to decapitalize and to increase leverage.”

Guaranteed Returns
Investment in upstream oil and gas projects tends to be high-return but risky as the results aren’t always apparent at the outset. In contrast, renewable projects follow a model more closely aligned with utilities, in which power-purchase agreements with grids or end-users offer relatively low but guaranteed returns sought by banks and pension funds.
https://www.rigzone.com/news/wire/big_oils_renewable_shift_may_drown_shareholders_with_cash-08-oct-2019-160012-article/

Low risk renewable projects?  Guaranteed returns? 

Excuse me while I laugh. 

[Smokin Joe]

Low risk renewable projects?  Guaranteed returns? 

Excuse me while I laugh. 

It only works while this can be subsidized, and the research keeps getting funded. If government money dries up and these projects start depreciating, there may be long term tax advantages to offset other profits.

[Joe Wooten]

Low risk renewable projects?  Guaranteed returns? 

Excuse me while I laugh. 

Lawdy, Lawdy we are drowning in morons, even at high corporate executive levels

[Bigun]

Lawdy, Lawdy we are drowning in morons, even at high corporate executive levels

    

[Free Vulcan]

As long as the Gubmints is dumping truckloads of cash their way, they'll make out great.

[Smokin Joe]

As long as the Gubmints is dumping truckloads of cash their way, they'll make out great.

Exactly! There are few losses to be had when there are subsidies, deductions, depreciation allowances, etc. I am sure the accountants have figured out how to make money on outrageously expensive systems that do not work well enough to reliably power a small town.

Remember, the objective here is to make money, not to produce energy per se.