Galp explores renewables in Americas
Portugal’s oil and gas company Galp is studying the prospect of developing two gigawatts in power outside the Iberian peninsula.
The company’s strategy is to transfer 50% of its renewable assets outside Portugal and Spain by 2030 with emphasis on the Americas.
So far Galp has various upstream projects from the exploration to production phase with South American offshore projects in the Santos basin off the coast of Brazil which has one of the largest known accumulations of deep water oil and natural gas.
Galp currently has 1 GW of installed renewable energy in operation. But in terms of projects under development it closed a deal with the Spanish from AC in 2020 to build 2 gigawatts on the Iberian peninsula.
Beyond this partnership, the company expects to build another 800 megawatts in Portugal and Spain.
According to its strategy plan presented on 2 June, Galp expects to have four gigawatts of renewable energy operational by 2025, with a focus on energy in the Iberian market.
But by 2013, the petroleum refiner will expand its renewables activities with plans to install 12 gigawatts with more than 50% located outside the Iberian peninsula, diversifying energy production technology to include solar panels, wind and energy storage.
“Most growth (in renewables) from the second half of the decade will be outside the Iberian peninsula, with a particular focus on the Americas”, said Galp CEO Andy Brown on 2 June on his presentation to the market.
The executive says that the Iberian peninsula is a very “competitive market”, a great market for solar energy, but the company wants to diversify its risk and believes that there are PPA (Power Purchase Agreements) opportunities to sell electricity from a central generator to a more attractive electricity company/supplier outside Portugal and Spain.
Galp expects to leverage its renewable energy plan through partnerships and asset rotation. To 2030 the company aims to hold 50% of its assets in renewables.
Galp’s total projected renewable portfolio consists of 3.3 GW capacity to be installed and operating by 2023 with a longer-term ambition to reach around 10GW by 2030, starting in Iberia and then exploring other regions in which the company has competitive advantages.
Galp states that it is in interested in developing zero carbon projects or getting involved in such projects that are at an early stage, making clear that it is not interested in investing in going concerns.
Andy Brown gave his first interview with Expresso about his plans for Galp since taking the helm at the company after spending three decades at Shell, an interview in which he said his challenge was to ensure that Galp did not miss the decarbonisation train.
The Galp CEO also restated Galp’s interest in the lithium business, a promising area in which “Portugal is clearly a strong competitor which is carving out an important role”.
He said that regarding the speculation about what Galp would do in relation to lithium he said that companies needed to see where the world was heading, what governments wanted and where the opportunities lay.
Brown said that in Europe there is a desire to create a batteries value chain and said that this would be done where renewable energy was cheapest and where there was lithium.
“Portugal has one of the best lithium sources in Europe and Portugal is clearly in a strong competitive position to develop a leading role in the batteries value chain,” he said adding that Galp, as one of the largest industrial companies in Portugal understands the business, has the right qualified workforce, good engineers and the right skills.
Galp aims to develop a profitable renewable power generation business, with 10-15% of its future investment to be allocated to these activities as well as to new businesses that can be scaled up.
In Q1 Galp reported strong cash generation benefitting from improved conditions and completion of Natural Gas Distribution transaction. Its EBITDA RCA was €499 million, free c ash flow €518 million, adjusted operating cashflow €445 million and its net debt to EBITDA RCA was 1.1x.