The Issue
BP is rapidly growing its EV charging operations as part of its push to generate some 20% of its revenues from five “Transition Growth Engines” by 2030. EV charging appears to be a natural fit for many European oil majors because they can often use their existing forecourt locations, but not all see it as a significant growth business. Investors have yet to allocate material value to transition businesses, but that could change as companies like BP show growing clean energy revenues and free cashflow.
Fast-Charging in Four Key Countries
BP’s plans to grow its EV charging business are among the most aggressive of all the European majors, including the highest targets for earnings and revenue growth. The company built up its EV division through a series of acquisitions and partnerships before combining them into its BP Pulse charging unit in late 2020. As EV adoption progresses rapidly — but unevenly — across the globe, BP is rethinking where it sees the best charging opportunities.
BP recently narrowed its charging strategy to focus on just four countries — down from 12 less than a year ago — and to focus on fast-charging at forecourts rather than at fleet facilities. The change in strategy was outlined by CEO Murray Auchincloss during the company’s fourth-quarter call, when he said BP’s charging focus has been pared back to just four countries: China, Germany, the UK and the US. “You’ve seen us very, very focused on where are the places that we think maximum adoption rates will happen,” Auchincloss said. “You can see that two of those countries [China and Germany] are profitable already, and we feel very comfortable that we’ll move into profitability with the other countries as well.”
BP Pulse is already one of the leading rapid and ultra-fast public EV charging networks in the UK, while in Germany, Aral Pulse is one of the largest ultra-fast charge point operators and has been awarded best charge point operator in the country, BP Pulse CEO Richard Bartlett told Energy Intelligence. Nevertheless, the change means that BP will deploy less capital in its EV business than it had originally planned, according to Auchincloss.
A second significant tweak to BP’s EV charging strategy is a shift away from providing charging services for fleets and toward providing fast charging at forecourts. “We thought fleets would move first, but given recessionary pressures and some relief from governments, fleets have slowed down,” Auchincloss said. “Contrasted with that, consumers have moved faster.” Headwinds for the fleet charging model came to the fore earlier this year when car rental giant Hertz announced plans to sell much if its US EV fleet. In September 2022, BP had announced a partnership to help Hertz build out a charging network at its key US rental locations. But, despite now focusing spending on just four countries, BP has kept targets to grow the number of charge points globally by more than 400% to more than 40,000 points by 2025. And electricity sales for charging grew by more than 150% last year in volume terms, Auchincloss told investors.
BP Convenience & Mobility Targets | ||||
2019 | 2022 | 2023 | 2025 Target | |
Customer Touchpoints (million/d) | >10 | ~12 | >12 | >15 |
Strategic Convenience Sites | 1,650 | 2,400 | 2,850 | ~3,000 |
EV Charge Points | >7,500 | ~22,000 | >29,000 | >40,000 |
Source: BP |
Integrating Charging and Renewables
BP’s charging and convenience business strategies are closely intertwined. Together, BP is hoping the two sectors can produce $1.5 billion in earnings annually by the end of next year. Partnerships with food retailers, including M&S in the UK, can drive both convenience margins and charging revenues. “The utilization on those assets can sometimes be twice the national average, so then the [rate of return] lifts,” Bartlett said.
Charging is also becoming increasingly important to BP’s renewable power strategy, where it hopes it can boost the assumed 6%-8% returns of renewable power projects by linking new power production to power-hungry businesses with higher returns, including EV charging and hydrogen. BP has significant renewable power plans, including solar and offshore wind, in three of the four countries — the US, UK and Germany — in which the UK major is now concentrating its EV charging growth.
Bartlett said BP estimates a combined >15% rate of return in its convenience and charging business. Investors are beginning to better understand the charging business and its contribution to BP’s bottom line, but Bartlett admits that it wasn’t that well understood just three years ago. “If the numbers work as we expect them too and we provide more transparency around it and disclosure, then you’ll start to see the [results],” Bartlett said.
BP has this year increased financial disclosures for all of its transition growth engines, but the numbers are still well short of the more detailed information released for its traditional fossil fuel businesses. Activist investor Bluebell Capital Partners, which has launched a campaign pressing the UK major to re-emphasize oil and gas growth and cut transition spending, complained in an October letter to BP of the “very limited visibility” investors have into businesses such as EV charging and hydrogen.
Bartlett, who has headed BP Pulse for over three years, said charging is one of the most complex businesses he has worked in across his BP career. “If you crack it, it’s going to be a really good business that creates really great returns because a lot of people are just going to give up,” he said.
2023 BP EV Charging Milestones | |
BP Pulse and Uber Global agreement | Supporting Uber with its 2040 zero-tailpipe emissions ambition |
Strategic Collaboration Agreement with Iberdrola | Plans to install ~11,000 fast charge points across Spain and Portugal by 2030 |
BP Pulse EV charging investment | Plans to invest $1billion in EV charging in the US by 2030 with ~$500 million approved for next 2-3 years |
Agreement with Tesla | Future purchase of $100 million of ultra-fast chargers |
Launch of the UK’s largest public EV charging hub | With EV network and NEC Group, launched the hub enabling 180 EVs to charge at once |
Source: BP |
Main Competitors in Europe
BP is not the only European major rethinking its approach to charging. Until recently, Shell had the largest targets of its peers for its EV charging network. Plans to build out a global network of 500,000 charge points by 2025 and more than 2.5 million by 2030 were among the more than 40 transition-related targets scrapped by Shell in June 2023.
Shell’s original figures included home-based charge points to be serviced by Shell’s expanded retail power operations — another business that was scaled back in last year’s strategy rethink. Like BP, Shell is now focused on public fast-charging, where it can build on synergies between its convenience and charging businesses to boost the returns of both. Shell is targeting a 12% rate of return for its charging business and hopes that its convenience and charging operations can deliver annual earnings of $1 billion-$1.5 billion by 2030.
In contrast, TotalEnergies has not emphasized its charging — or convenience — business to the same extent as either BP or Shell. Total continues to target significant growth in its charging network, which is focused along highways in France, where it has a 40% market share. However, CEO Patrick Pouyanne told investors in September that he expects most EV charging eventually to take place at home or at work — not on forecourts — except when people are taking longer trips. And he is skeptical that he can boost the returns on either his charging or his convenience retail business with an aggressive buildout of charging at Total-operated service stations. “I’m ready to look at diversification in energy, but not at selling bread or hotdogs,” he said last year.
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