Shell Expands Renewable Foothold, Buys Stake In Silicon Ranch

In a bid to bolster its renewable energy business, Royal Dutch Shell (LON:RDSa) plc RDS.A recently inked a deal to acquire a 43.8% stake in Silicon Ranch Corporation from Partners Group. The deal will help Shell leverage its position as one of the top three wholesale power sellers in the United States along with boosting its New Energies division.

Silicon Ranch is a leading solar energy company in the United States and the deal will make Shell its largest stakeholder. Silicon Ranch operates around 100 solar facilities across the United States, having about 1.9 gigawatts of solar-based power facilities in its development portfolio. Per the deal, the company will continue to operate under its existing management and retain its brand.

The transaction could be valued up to $217 million in cash, contingent on Silicon Ranch’s performance. Subject to regulatory approvals and satisfactory closing conditions, the deal is scheduled for completion in the first quarter of 2018. Further, the deal also provides Shell an opportunity to increase its stake in Silicon Ranch after 2021.

The deal is one of the latest in Shell’s acquisition spree — after collaborating with IONITY, New Motion and First Utility — as it attempts to diversify its portfolio beyond oil and gas. With renewable energy becoming affordable, the oil conglomerate sees potential in developing projects like hydrogen fuel-cells, alternative energies, liquefied natural gas and next-generation biofuels.

Silicon Ranch is the latest addition in Shell’s New Energies division,in which the company intends to invest around $1-$2 billion per year till 2020 to shift its focus on cleaner and renewable energy sources.The new business will serve as a hedge for reduced gasoline and diesel fuel demand. The company believes pumping money into New Energies unit is likely to increase their customer base significantly and drive revenues.

The deal comes a month after Shell’s rival BP plc (NYSE:BP) entered into the solar sector by a strategic collaboration with Lightsource. Various other biggies including TOTAL S.A. (NYSE:TOT) , Chevron Corporation (NYSE:CVX) , ExxonMobil (NYSE:XOM) Corporation, have started to reorient and restrategize to adapt to the changing times. They have started making efforts to decarbonize the energy system with gradual shift to alternative fuels to sustain their business models.

Headquartered in Netherlands, Shell is one of the largest integrated energy companies engaged in production, refining, distribution and marketing of oil and natural gas. The company currently sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Shell have rallied 27.7% over a year compared with 13.6% growth of its industry.

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