BayWa – Focus
Embracing renewable energy
BayWa is an international trading company operating in the fields of energy, agriculture and building materials. In this thematic report, which is the third in a sequence of short notes and interviews about BayWa, we examine how BayWa’s energy segment is evolving in response to society’s shift away from fossil fuels. The review includes both BayWa’s strategic investment in renewable energy related activities and numerous environmentally friendly new products launched by the group’s conventional energy business.
Renewable energy business driving group growth
BayWa’s renewable energy business, BayWa r.e., dates back to 2009, making it a relatively new addition to the group. It has grown rapidly since then, generating €110.9m EBIT in FY21, which represented 37% of group operating EBIT. In December 2020 BayWa announced that funds advised by Energy Infrastructure Partners (EIP, formerly Credit Suisse Energy Infrastructure Partners) would take a 49% stake in BayWa r. e., implicitly valuing the renewables business at over €1bn. At the time management noted that this investment would enable BayWa r.e. to scale up its solar and wind farm project business and expand both its independent power provider (IPP) activity and its photovoltaic (PV) distribution business, potentially boosting BayWa r.e.’s EBIT to over €170m by 2023. (For comparison, management’s target is for group EBIT to reach more than €350m by 2025.)
BayWa r.e. is benefiting from participation in the global switch to renewable energy generation. According to the International Energy Agency (IEA), the global PV market outside of China grew to at least 90GW of capacity installed in 2020, a 14% increase year-on-year. The amount of generation capacity in China grew by 60% during 2020 to 48.2GW, which was a return to 2017 levels after two years in a row of market slowdown. The Global Wind Energy Council states that 93GW of new wind capacity was installed globally in 2020, a 53% year-on-year increase, taking cumulative installed global capacity to 743GW.
Conventional energy business adapting to meet climate targets
BayWa’s longer-established Conventional Energy business unit is primarily engaged in selling heating oil, fuels, lubricants and wood pellets, so it is adapting its activities to meet the changing requirements of its customers as they begin to adopt more sustainable options. For example, investment in capacity to support rising consumer demand for wood pellets, which are treated as a carbon-neutral energy source and are therefore exempt from carbon taxes in Germany, resulted in a 31.2% year-on-year rise in wood pellet sales during the first three quarters of FY21. The business unit was restructured in January 2020 to bring its sustainability initiatives together as BayWa Mobility Solutions (BMS). BMS’s activities are split into three fields: the planning, installation, operation and maintenance of electric vehicle (EV) charging infrastructure; the establishment of a network of filling stations for liquefied natural gas (LNG); and filling station charge card solutions for EVs.
BayWa is a client of Edison Investment Research limited
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