Renewable Energy M&A: Brookfield takes full control over European solar developer X-ELIO, acquires remaining 50% stake from KKR for $1.8bn

The deal represents a 2.6X rise in the enterprise value of the platform since KKR’s entry in Jul’15

X-ELIO primarily specializes in the development, construction, financing, and operation of solar PV plants, and expects to have 3 GW of operating, under-construction, and ready-to-build assets by the end of 2023. The company also has over 10 GW in its near-term pipeline spread across Spain, Italy, the US, Australia, Japan, and Latin America. KKR acquired an 80% stake in X-Elio for $800mn in Jul’15, implying a valuation of $1bn on a 100% basis. Meanwhile, the recent deal values X-Elio at $3.6bn, implying a 2.6X rise in the company’s EV over the course of nearly 8 years.

The surge in X-Elio’s valuation is believed to be driven by more than a 40X rise in the company’s asset base. Following KKR’s entry into X-Elio, the company presented plans to increase its operating capacity from 300 MW to 2.5 GW by 2020. In Dec’19, Brookfield acquired a 50% stake in X-Elio for $560mn from KKR and previous shareholder Arek Renewables, making the platform a 50/50 partnership. Cumulatively, X-Elio has secured $2bn of development capital primarily through equity funding from its sponsors.

For Brookfield, the transaction marks a slight deviation from its recent corporate M&A activity, which has been focussed on takeovers of onshore wind and solar platforms in the US. Recent major moves include acquisitions of wind developer Scout Clean Energy and distributed generation platform Standard Solar, each for $1bn. The current deal marks the investment firm’s second major acquisition in Europe, following the takeover of Germany-based solar developer Sunnovis and its 1.7 GW pipeline in Dec’21. Enerdatics believes that the consolidation of its stake in X-Elio represents an expansion of Brookfield’s renewables portfolio beyond the US, amid recent challenges in the country’s clean energy landscape. One of the major concerns as highlighted by RWE, specifically in the solar sector, relates to “stringent checks” of solar module deliveries from China’s Xinjiang region, which has emerged as a global manufacturing hub of silica-based products used in solar installations. The checks are aimed at certifying that production of the imported panels did not violate any human rights, and are causing delays in project development schedules. Going forward, Enerdatics expects several large players to diversify their renewables holdings beyond the US, amid persistent issues in the country related to elevated interest rates, volatile power prices, and supply chain bottlenecks.

The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.