BP Solar to Shut Sydney Production Plant to Cut Costs

By Angela Macdonald-Smith

Nov. 18 (Bloomberg) -- BP Plc, Europe's second-biggest oil company, said it will close its solar power equipment manufacturing plant in Sydney at the end of March to focus operations on lower-cost locations.

About 200 jobs will be lost from the plant at Sydney Olympic Park, which produces solar photovoltaic cells and panels, BP Solar said today in an e-mailed statement. BP Solar's sales and marketing team in Australia will remain, it said.

The move follows BP's decision earlier this month to end planned wind power projects in India, China and Turkey to focus on onshore plants in the U.S. as it concentrates resources on larger-scale ventures. The most modern solar photovoltaic manufacturing sites are as much as 20 times larger than the Sydney plant, BP said.

``The challenge for solar power is to reduce its costs to the level at which it competes on an equal footing with conventional electricity delivered through the power grid,'' Reyad Fezzani, global chief executive officer of BP Solar, said in the statement. ``We've looked at all options in our Sydney manufacturing site and the physical location, lack of expansion potential and lease agreements just don't make it competitive.''

In February, BP said it planned to invest about $1.5 billion in alternative energy projects this year, accelerating a 10-year business development program.

Homes, Schools

Earlier this year BP valued its alternative energy business at $5 billion to $7 billion. The solar market is expanding at more than 30 percent a year, even amid a worldwide constraint on solar-grade silicon, BP estimates.

BP, which entered the Australian solar energy market in 1985, manufactures solar power systems for households, businesses and schools at its Homebush site in Sydney's west. It also has solar systems manufacturing sites in Spain, the U.S., China and India and says on its Web site it intends to expand manufacturing capacity for solar cells to more than 700 megawatts in the ``next few years.''

``Faced with a tough external environment, and an increasingly competitive solar market, we are focusing hard and listening to our customers,'' Fezzani said in the statement.

Royal Dutch Shell Plc is Europe's biggest oil company.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net