Royal Dutch Shell is set to purchase African solar provider, Daystar Power, as it expands its global renewables footprint and seek to work towards its carbon emission reduction policy.

The company which has operated in Nigeria for over six decades supports the ambitious goal to tackle climate change laid out in the Paris Agreement which is to limit the rise in average global temperature to 1.5°Celsius.

In October 2021, the oil giant set a target to reduce absolute emissions by 50 per cent by 2030, compared to 2016 and has come under immense pressure from investors to end its "incoherent" stance on climate action.

Shell is one of the most influential oil producers in Africa, but the Daystar purchase is its first power acquisition on the continent, underscoring its mandate to cut its greenhouse gas emissions massively by 2030.

"As we do this, we're helping to address a critical energy gap for many who currently rely on diesel generators for backup power," Shell's Vice President for Renewable Generation, Thomas Brostrøm, said in a statement.

But neither Shell nor Daystar commented on the sale price. Shell earmarked $2-3 billion in capital expenditure for renewables and energy solutions in 2022, according to Reuters.

Daystar, headquartered in Lagos, provides off-grid power to commercial and industrial clients in Nigeria, Ghana, Togo and Senegal, offering solar and hybrid power solutions with battery storage.

It has 300 power installations with installed solar capacity of 32 megawatts, but aims to boost capacity to 400 MW by 2025.

It also plans to expand to eastern and southern Africa, a goal that Daystar Chief Executive, Jasper Graf von Hardenberg, said would be easier to reach with Shell.

"For the next stage - really becoming a pan-Africa power provider - it requires an investor with the same vision. Someone really with sufficient firepower to finance this growth," Brostrøm added.

In his comments, von Hardenberg said his company needed to raise more money to meet growing demand but opted to sell to Shell due to the latter's strong balance sheet and "long history in Africa." Both parties started discussing a potential deal in 2019, it was learnt.

Pending regulatory approvals, Shell will fully own Daystar, but von Hardenberg and the management team will continue to run the company.

Shell's renewables and energy solutions division accounted for 6 per cent of company earnings in the second quarter, but new Chief Executive Wael Sawan is accelerating the drive for cleaner power, THISDAY reported on Tuesday.

The company has shifted hundreds of experienced oil and gas staff into renewables and in April purchased India-based renewable power platform Sprng Energy group for $1.55 billion.

The Nigeria deal will enable the company deliver carbon emission reductions and power cost savings to commercial and industrial businesses across Africa, according to an emailed statement from Daystar.

The cash inflow from Shell will help Daystar increase its installed solar capacity to 400mw by 2025 from 32mw and also expand services beyond Nigeria to East and Southern Africa where it is seeing increasing demand from South Africa, von Hardenberg, chief executive and co-founder, said in an interview.

"As part of Shell, we will be able to execute our mission even faster," he said, declining to disclose how much Shell is paying to acquire all of the company's shares.

The Lagos-based solar firm had said earlier this year that it is in discussion with financiers to raise as much as $100 million by next year to fund its expansion plans after demand surged in Nigeria, said Bloomberg.

"This deal marks our first power acquisition in Africa and a fundamental step for Shell in growing our presence in emerging power markets," he said the statement added.

Shell is also in the process of buying four solar farm projects with a capacity for 100mw from UK firm Anesco to meet growing demand for renewable power in the country, according to its website.

Founded in 2017 by the African venture builder Sunray Ventures, Daystar is taking advantage of inadequate electricity supply and high diesel costs to offer cheaper renewable solutions on the continent.

Following Shell's acquisition, Daystar aims to broaden its services to companies by offering standalone solar or hybrid solutions including gas generators, von Hardenberg said.

"Companies need their own power solutions to drive down costs, compared to expensive grids or diesel generators," he added.

But this could mean a further cutting down of the multinational's activities in Nigeria's oil and gas industry, with pressure mounting on the company to slow down its investment in hydrocarbons.

The reduction in investment in the upstream of Nigeria's oil and gas industry is already impacting on the country's ability to meet its Organisation of Petroleum Exporting Countries (OPEC) quota.

Shell has recently begun a divestment drive in Nigeria, citing the many troubles in the Niger Delta as well as the exigencies of the global energy transition which seeks to massively reduce carbon emissions.

But the process has been stalled by a court decision which is asking the company to resolve its environment-related issues with one of the communities it operates before moving on with selling off some of its onshore and shallow water assets.

Copyright This Day. Distributed by AllAfrica Global Media (allAfrica.com)., source News Service English