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TOTAL's (TOT) Unit to Expand Energy Storage Operation Via JV

Zacks Equity Research

TOTAL S.A. TOT announced that its subsidiary Saft has entered into an agreement to create a joint venture (JV) with Tianneng Energy Technology (TET), a subsidiary of the Chinese privately-owned Tianneng Group, in order to expand their energy storage businesses.

The JV will be manufacturing advanced Li-ion cells, modules and packs from the Changxing Gigafactory, with a potential capacity of 5.5 gigawatt hours (GWh). Saft will have a 40% shareholding in the new JV, while the Tianneng Group will hold the remaining shares.

Demand for Energy Storage is Soaring

Per a report from ReportLinker, the global market for lithium-ion battery will touch $56 billion by 2024 from the current level of $24.5 billion on the back of rising demand for energy-efficient, safe and low-cost batteries.

TOTAL’s strategy to expand the production of lithium-ion products is well timed, and will be able to cater to the rising demand in Chinese and worldwide markets. The increasing usage of E-bikes and electric vehicles, and growing reliance on producing electricity from renewable sources will continue to create demand for lithium-ion products.

The JV partners plan to expand the Changxing facility to ramp up its production capacity for meeting future demand.

TOTAL’s Renewable Goal

TOTAL has been investing in developing renewable energies, with an objective to diversify its global energy mix. The company believes that renewables are an ideal complement to fossil fuels. It has acquired a majority stake in SunPower Corporation SPWR to expand its operation in the renewable space.

TOTAL projects the share of solar and other renewable energies in the global energy mix to increase from 9% to 20% by 2035. The increasing usage of solar and renewable energy creates increasing demand for solar panels and battery storage devices. TOTAL is well placed in the renewable market space through acquisitions and JVs. The company continues to expand its footprint in the renewable space through strategic alliances.

Price Movement

TOTAL’s shares have underperformed its industry in the past three months.

Zacks Rank

Currently, TOTAL carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Some better ranked stocks in the same space are Royal Dutch Shell PLC RDS.A and Braskem S.A. BAK, both holding a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate of Shell’s 2019 earnings has moved up 2.8% in the past 60 days to $5.16 per share. Its long-term (three to five years) earnings growth is pegged at 7.67%.

The Zacks Consensus Estimate of Braskem’s 2019 earnings has been upwardly revised by 1.3% in the past 60 days to $2.28 per share. Long-term earnings growth is projected at 13.87%.

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