Shell (RDS.A) Buys sonnen to Boost Cleaner Energy Footprint

Royal Dutch Shell plc RDS.A recently agreed to acquire a Germany-based home energy storage company, sonnen, in order to ramp up sustainable energy business. The move is a significant step for the company, which is playing an important role in the transition toward low-carbon energy on a worldwide basis. The financial terms of the acquisition are yet to be disclosed.

What Does sonnen Offer to Shell?

sonnen makes residential battery systems, which are responsible for storing energy generated through solar panels. The company has its footprint in several countries in Europe like Germany, Italy, and the United Kingdom, as well as in Australia and the United States. The company has installed more than 40,000 battery packs all over the globe. In 2017, it generated around $73 million in revenues. Notably, sonnen entered the electric vehicle charging business in 2018. The latest deal is expected to be a significant one for Shell, which has boosted investments in renewable energy and power markets over the last few years.

This step puts it in direct competition with companies like Samsung, Tesla, Inc. TSLA and others. Markedly, Shell invested around $70 million in sonnen last May. Following the completion of the deal — expected in first-quarter 2019, per Reuters — sonnen will become Shell’s wholly-owned subsidiary.

Shell’s View

Shell expects electricity demand to rise in the coming years, with more people opting for electric vehicles and switching toward cleaner energy resources. Notably, in a similar manner, the company completed the acquisition of U.K.’s energy supplier First Utility last year, in a bid to lower its carbon footprint. The move enabled Shell to expand energy supply business from commercial and industrial customers and venture into the residential sector. Also, the company bought Dutch-based NewMotion electric vehicle charging networks in 2017.

All these moves are associated with Shell’s New Energies division, which was formed in 2016. This division is expected to spend around $1-$2 billion per annum until 2020, with a view to tap into commercial opportunities in advanced fuel and power markets.

Price Performance

Headquartered in The Hague, Netherlands, Shell’s stock has lost 2.1% in the past six months compared with 3.3% decline of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, Shell carries a Zacks Rank #5 (Strong Sell). Investors interested in the energy sector can opt for some better-ranked stocks as given below:

Madrid, Spain-based Repsol, S.A. REPYY is an integrated energy company. Its bottom line for 2019 is expected to increase 13.7% year over year. The company delivered average positive earnings surprise of 9% in the trailing four quarters. The stock currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

San Antonio, TX-based NuStar Energy L.P. NS is a midstream energy company. For 2019, its bottom line, which has witnessed three upside revisions over the past 30 days, is expected to grow 64.2% year over year. The company currently holds a Zacks Rank #2.

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