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Renewable Energy M&A: Singapore’s GIC commits to invest ~€1bn to acquire a 5% stake in EDP Renewables (EDPR)

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The firm has signed an investment agreement for the subscription of ~€1bn of EDPR common stock at €19.25-20.50/share. The final offering price will be determined when the equity raise is launched, the timing of which is dependent on market conditions. Further, EDPR has the option to reallocate up to ~€0.15bn of the committed amount to select institutional investors, at the same price agreed with GIC. 

EDPR announced the equity raise as part of its strategic plan for 2023-2026, under which it targets to invest ~€20bn to increase its renewables capacity by more than 4 GW/year, on average, to reach 17 GW by 2027. The funds will be deployed in the company’s core, low-risk markets, with 40% of the allocated to projects in North America and Europe each, while APAC and LatAm account for the remaining 20%. Onshore wind and utility-scale solar will each account for 40% of the investments, with the rest to be deployed towards emerging technologies such as distributed solar, energy storage and hydrogen. On the offshore side, EDPR expects to accelerate capex post-2025 to develop its 16.6 GW gross portfolio, controlled by its Ocean Winds JV with ENGIE. By 2027, the company expects its technology mix to comprise 29% utility-scale solar, 8% distributed solar, 59% onshore wind, 2% offshore wind, with the rest accounting for clean hydrogen and energy storage.

The plan will result in a doubling of EDPR’s onshore wind and solar capacity by 2027. Additionally, the company claims to have a wide pipeline of additional opportunities that it may choose to pursue, given the right market conditions.

The equity raise proposed by EDPR underscores the rising trend of large-cap energy companies altering their financing strategies to secure equity financing, instead of targeting debt markets. Rising interest rates and supply chain constraints have raised the cost of capital, at the corporate as well as the asset level, and spurred companies to pursue stake sales to fund growth. EDPR, in its strategic plan, highlighted a few of the financial constraints, estimating that Europe and the US have witnessed a 7-8% rise in inflation during 2020-2022, with bond yields climbing 250-300 basis points in both markets during the period. The company also expects the average capex/MW for renewable energy projects to rise by 20-30% during 2023-2026, compared to 2020-2021 levels, driven by elevated commodity and shipping prices. In the medium term, Enerdatics expects large utilities to continue tapping the equity markets to fund growth in the US and Europe, as developed economies implement measures to reduce inflation and build manufacturing facilities, to stabilize the supply chain.\

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.


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