Oil Giant Total Inks $2.5B Deal For 20% Stake In India’s Adani; Shares Gain

Total SA has inked an agreement to buy a 20% stake in the world’s largest solar developer, for $2.5 billion as the French energy giant shifts to renewable energy production. Shares rose 2% in Tuesday’s pre-market trading.

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Total (TOT) said that the investment in India’s infrastructure platform, Adani Green Energy, includes investments in LNG terminals, gas utility business, and renewable assets across the region. As part of the agreement, the French energy company will get a 50% stake in Adina’s portfolio of operating solar assets.

Going forward, Total and Adani seek to position themselves at the forefront of India’s shift to renewable energy. For Total, the partnership with Adani will be a key contributor to the company’s target of reaching 35 gigawatts of renewable power capacity by 2025 and adding 10 GW per year afterwards.

“This agreement is an important step in our alliance with the Adani Group in India and our common vision and goals with respect to the importance of access to low carbon energy in India,” Total CEO Patrick Pouyanné commented. “Given the size of the market, India is the right place to put into action our energy transition strategy based on two pillars: renewables and natural gas.”

In a separate statement, Total announced that it has issued €3 billion in perpetual subordinated bonds, out of which, €1.7 billion will be allocated for the acquisition of the Adani stake. The remainder of the proceeds from the bonds will be used to finance its development strategy in general, and acquisitions in renewables, in particular.

“With a weighted average coupon of 1.875%, this issuance that was very well received by investors will allow the Group to finance its development in renewables at a reduced capital cost,” Total said.

As part of its goal to get to net zero by 2050, Total is building a portfolio of renewables and electricity businesses that could account for up to 40% of its sales by 2050. At the end of 2020, the French energy giant had global gross power generation capacity of 12 GW, including close to 7 GW of renewable energy.

Shares in Total have been hit hard dropping almost 19% over the past year as the coronavirus pandemic pushed energy prices down and significantly impacted demand. Looking ahead, the average analyst price target stands at $50.10 and implies 13% upside potential to current levels.

Scotiabank analyst Paul Cheng recently lifted the stock’s price target to $46 from $44 amid expectations that major oil stocks are set for a recovery as oil prices rebound. Although the analyst has a positive outlook on the large oil companies, he maintained a Hold rating on TOT for now.

Overall, Wall Street analysts are cautiously optimistic on the stock. The Moderate Buy analyst consensus shows 2 Buy ratings versus 4 Hold ratings. (See Total stock analysis on TipRanks)