Renault/Ampere: corporate giants cut loose their energy transition lifeboats
EV manufacturer Ampere may ultimately be worth more to its parent as a division than a demerger
Spinning out a business can electrify a company’s share price. That may be the hope behind Renault’s plan to float Ampere, its independent electric vehicle manufacturer. Yet Renault’s long-term future depends on switching out of combustion engine vehicles. So why sell any of its EV business?
Energy transition could place a slew of legacy businesses into run-off. Some can afford to retain new ventures with high growth potential in-house as insurance policies. Others lack the required capital. A third group believes a partial demerger will create new currency for anticipated M&A.
Consider the possibilities. Renault sold 228,000 EVs and hybrids in Europe last year. That placed the French carmaker third in market share.
An initial public offering of Ampere could raise €1bn-€2bn from share sales. But is the transaction really necessary? Renault wants to accelerate growth. It has enough available cash to cover Ampere’s needs for years, some €4bn-€5bn thinks Dan Roeska at Bernstein,
Germany’s Thyssenkrupp is in a different boat. It would like to float its hydrogen unit Nucera. The parent does not have the capital to give this energy transition business a decent push.
Nucera has electrolyser production capacity of 1GW annually, Lex estimates. That is high. But profits may take time to materialise and competition can only intensify.
The parent wants to simplify its structure and decarbonise other capital intensive businesses including steel. It could use any funds raised. Thyssenkrupp’s joint venture share in Nucera could be worth €2bn.
A successful IPO can, meanwhile, offer a smaller division a chance to grow independently. Competing for capital is tough within a conglomerate. Finance directors favour divisions with quick returns on investment.
Italian energy group Eni expects its renewables business Plenitude to grow partly via acquisitions and thinks a share currency will help. So far the markets have not warmed to the idea of a spin-off. Eni may try again. TotalEnergies and BP — both with in-house renewables units — will watch with interest.
We have omitted one reason for spinning off energy transition: corporate happenstance. Managerial ambition and activity for the sake of it are real factors. They would appear to apply at Renault more than strategic logic. Ampere may ultimately be worth more to its parent as a division than a demerger.