Abu Dhabi’s ambitious green energy group Masdar has outbid US asset manager Apollo to win a second major deal in Europe in as many months as the region’s cash-strapped utilities search for ways to fund their renewable projects.
Masdar said on Thursday that it would pay €817mn for a 49.9 per cent share of 48 solar farms in Spain operated by Endesa, a subsidiary of the debt-laden Italian company Enel.
The two sides are also discussing a wider partnership that would allow Masdar to build a significant platform of over 5 gigawatts of solar generation in Spain as well as stakes in projects that Enel operates in Brazil and the US, according to two people familiar with the negotiations.
“Masdar clearly has an industrial strategy in Europe, and if you want to acquire a large portfolio of renewables, Spain is the perfect place,” said Francesco Gazzoletti, managing partner of FortyEight Brussels, an energy consultancy.
The Spanish deal is the latest example of how cash-rich buyers from the Gulf states and the US have swooped to buy up swaths of Europe’s renewables sector from owners that have trimmed their growth plans in a higher interest rate environment.
Enel, which is 23 per cent owned by the Italian state, is one of the world’s largest green energy companies, with a pipeline of 160GW of potential projects at “an advanced stage”. It currently has more than 60GW of renewable generation split between Europe, North America and Latin America.
But its €69bn debt pile became a point of contention with Italy’s right-wing government, which ousted Enel’s former chief executive Francesco Starace last year despite a clash with investors in London.
Enel’s new management team said in November that it would cut its spending on renewables by nearly a third and sell assets to cut its debt by €11.5bn by the end of this year. It has said it wants to partner with other investors on about €6bn of renewable projects, so that it can share the high capital costs of building out new plants.
Enel’s progress in cutting debt was demonstrated on Thursday evening when its latest results suggested that its ratio of debt to Ebitda would be 2.6 times by the end of this year, according to Goldman Sachs analysts, which would make it among the lowest of its European renewables peers.
As the scale of new renewable projects grows, utilities are increasingly bringing in partners to lower their risk, said Fernando Garcia, director of European utilities research at RBC Capital Markets.
“Three years ago, companies could have higher leverage, but now the situation has changed [with higher interest rates],” he said. “We see the trend is to invest a little bit less and sell a little bit more in order to comply with the debt ratio requirements of rating agencies,” he said.
Simone Mori, previously Enel’s head of Europe and now a senior fellow at the Bruegel think-tank in Brussels, said it was “quite natural that large international investors are coming” into European renewables. “Partnerships between financial investors and operators sound very reasonable. You have someone with their hands in the kitchen, and someone guaranteeing the cost of capital will be very low.”
Masdar, which is funded by the UAE’s sovereign wealth fund Mubadala, its power and water company Taqa and its national oil company Adnoc, promised more investments in Europe last month after a €3.2bn deal for Greece’s largest renewables company Terna.
(Financial Times, July 25, 2024)
