Shell divests sustainable subsidiary: too little profit

Shell is selling its Shell Energy business because of disappointing financial results. The company announced this on Wednesday. The oil and gas group invested in Shell Energy in recent years as a new energy supplier for private individuals, but ultimately failed to make the subsidiary profitable enough. Shell’s share price rose slightly after the announcement.

In the Netherlands, about 12,500 people have an energy contract with Shell Energy. Nothing will change for them, a Shell spokesperson told ANP news agency. The company will also stop supplying energy to households in Germany and the United Kingdom.

Shell Energy’s electricity would come exclusively from wind turbines and solar panels. The subsidiary was therefore part of Shell’s activities in the field of renewable electricity. But those parts must also be sufficiently profitable: Shell director said earlier Steve Hill all that less successful parts would have to be divested. That fate has now befallen Shell Energy.

Strict supervision

Shell Energy’s disappointing financial results were partly caused by the fluctuating prices in the energy market. As a result, margins came under pressure. The energy market in the United Kingdom, where Shell Energy supplies approximately 1.4 million households with energy, came under close scrutiny from a special regulator, which sets maximum rates that suppliers can charge private individuals. In Germany, Shell Energy has approximately 110,000 customers.

Although the erratic energy market put pressure on Shell Energy’s margins, Shell as the parent company still made a mega profit of 9.6 billion dollars (8.7 billion euros) in the first quarter of this year – more than 1.5 billion dollars above expectations. This was mainly due to higher earnings from the chemical division’s petrochemical products (processing of petroleum into products).

However, the company was faced with undervaluation on the stock market: the share lagged behind American competitors such as ExxonMobil and Chevron. At the shareholders’ meeting two weeks ago, investors nevertheless appeared to support the top of the company. However, that meeting was disrupted by climate activists, who held a relay demonstration. Despite strong support for CEO Wael Sawan, criticism of Shell’s climate policy resulted in relatively meager support for chairman of the supervisory board Andrew Mackenzie.

According to Shell, the policy is in line with the Paris climate goals: it has the ambition to be climate neutral by 2050 and wants to reduce CO2product emissions every year. But now it is rejecting an industry that runs on green electricity, because it produces too little.