Total SA to purchase 74.3 per cent of Paris-based Direct Energie for €1.4 billion as the European oil major shifts into natural gas and electricity distribution.  Bloomberg photo.

Total SA joins other European energy giants in shifting to cleaner-burning fuels, renewables

On Wednesday, Total SA announced it will purchase almost 75 per cent of Direct Energie, the Paris-based utility which provides natural gas and electricity to 2.6 million customers in France and Belgium.

The deal, unanimously approved by the Direct Energie Board of Directors, is valued at approximately €1.4 billion.  The Board says it will recommend the sale to shareholders, subject to confirmation by an independent expert that the terms of the tender offer are fair.

“This friendly takeover is part of the Group’s strategy to expand along the entire gas-electricity value chain and to develop low-carbon energies, in line with our ambition to become the responsible energy major”, said Patrick Pouyanné, Chairman and CEO of Total.

The Total SA purchase of Direct Energie is another sign that major oil companies are shifting to providing gas and electricity, and eventually preparing for a time when fossil fuel use is diminished.

“We now have, among the European oil majors, an unexpected battle emerging for market share in western European gas and power,” Rob West, an analyst at Redburn Europe told World Oil. “It is fascinating.”

In December 2017, Royal Dutch Shell announced the purchase of UK electricity and gas company First Utility.  Norway’s Statoil has expanded its offshore wind energy program and Italy’s Eni is another new player in the French electricity and gas market.

Total’s goal is to have a global capacity of at least 10 GW of installed capacity within five years, either with gas-fired power plants or renewable electricity capacities.

Xavier Caïtucoli, Chairman and CEO of Direct Energie. “The Direct Energie teams will be at the heart of the strategy of one of the greatest French companies.”

Total currently supplies electricity and natural gas to 1.5 million customers.  With the purchase of Direct Energie, the company hopes to become a standard-setting player in electricity supply in France and Belgium and bring its customer base up to 6 million in France and over 1 million in Belgium by 2022.

The sale is subject to the information and consultation process of relevant employee representatives as well as final approval from the European commission.

Total SA will finance the deal through available cash.