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The logo of French oil and gas company TotalEnergies is seen at the company's headquarter skyscraper in La Defense near Paris on Oct. 12, 2022.GONZALO FUENTES/Reuters

More than two years ago, France’s flagship energy company made a statement on the Alberta oil sands.

Paris-based TotalEnergies SE TTE-N announced its Canadian holdings, developed over decades, didn’t fit with the company’s low carbon future. In the summer of 2020, Total took a $9.3-billion write down on stakes in the Fort Hills and Surmont properties, labelled them as stranded assets and drove home its message by quitting the Calgary-based Canadian Association of Petroleum Producers.

Last week, Total made a very different statement. The company spent $312-million to acquire an additional 6.7 per cent in Fort Hills from Teck Resources Ltd. TECK-B-T, which is also leaving the oil sands. Why would one of Europe’s leading energy companies commit more money to a region when it’s clearly heading for the exit?

Welcome to the business of the energy transition.

Total, in step with many investors, decided the best way to deal with the challenges that come with climate change is to divest its Canadian assets. The French company is plowing cash into renewable energy projects.

Canadian rivals, including Fort Hills’s controlling shareholder, Suncor Energy Inc., plan to meet their net-zero goals by reducing greenhouse-gas emissions from their oil sands properties. Their capital spending is around initiatives such as carbon capture and storage, and scale matters on these multibillion-dollar projects.

Total now sees an opportunity to maximize the money it makes as its retreats from Alberta. By increasing its stake in Fort Hills to 31 per cent of the project, the French company is increasing its leverage with Suncor, which owns a 69-per-cent interest.

In its public statements, Total says its exit strategy consists of spinning out all its Canadian holdings – oil sands projects, pipelines and trading operations – in a new, Toronto Stock Exchange-listed public company. The French company would continue to hold a minority stake in the business. Total shareholders are expected to vote on the concept in May.

When Total announced last week that it would acquire a larger stake in Fort Hills, chief financial officer Jean-Pierre Sbraire said: “By seizing this opportunity to grow its business under attractive conditions, TotalEnergies EP Canada will deliver value to the future shareholders of the spin-off entity.”

In private conversations, investment bankers say Total’s simplest and potentially most profitable path forward is selling its Alberta holdings to Suncor. However, to create tension in the sales process, and meet past promises on divesting oil sands properties, the French company is moving forward with the spin out.

Total’s Canadian operations generate about $1.5-billion in annual cash flow. If the spin out does go forward, the French parent is expected to shift some of its debt to the Canadian subsidiary and create a new company with an equity valuation in the $2-billion to $3-billion range. That would make Total’s new offspring one of the smallest public players in the oil sands.

There was a time – as recently as 2010 – when initial public offerings from pure play oil sands companies such as MEG Energy Corp. drew rave reviews from investors. Those days are long past.

The soaring costs that come with running massive projects while meeting emission-reduction goals makes northeastern Alberta a place where only the strongest companies can thrive. MEG Energy shares went into a prolonged slide after its IPO, and the company has been a takeover target in recent years. MEG Energy sports a $6.3-billion market capitalization, or three times what bankers forecast Total’s Canadian operations will command.

In announcing the planned spin off last fall, Total chief executive Patrick Pouyanné outlined the challenges facing energy companies in an investor presentation. He said the next decade is “decisive” when it comes to meeting climate-change goals, as investment in low carbon power must double to US$1.5-trillion annually. At the same time, he said: “Investment in new oil and gas developments is required until at least the mid-2030s to satisfy customer demand.”

Total will need all the capital it can raise to pay for its shift to low carbon energy. The French company is looking to Canadian markets, or Suncor, for a sizable chunk of that change.