The crisis unleashed in the markets by the coronavirus has surprised Iberdrola amid preparations to launch a large operation in its renewable business, having started the search for a financial partner for its Wikinger wind farm, located in German waters of the Sea. Baltic.
According to sources close to the transaction, the Spanish group is considering transferring around 40% of that installation, with 350 megawatts (MW) of power, for a price of more than one billion euros. An Iberdrola spokesman declined to comment.
This is a similar transaction to that agreed last year at East Anglia One, a 714 MW park located in the North Sea. The Australian group Macquarie, through one of its investment funds, agreed to disburse 1,600 million pounds (1,750 million euros) for 40% of the British installation.
Iberdrolas strategy is to sell minority stakes in already operating or near-finished parks, such as Wikinger and East Anglia One, to invest in other new offshore wind projects. Along with Wikinger, for example, Iberdrola has two other parks under development. Furthermore, the Spanish company has just raised its position to 100% in Saint-Brieuc, a park in France that requires an investment of 2.4 billion euros.
To probe investor interest in Wikinger, Iberdrola relies on the services of investment bank JPMorgan. The entity is testing large pension plans, infrastructure funds and sovereigns. The idea is to look for financial partners, with no interest in influencing management, who are looking for assets that can give a stable return over a long period of time.
In recent years, in addition to Macquarie, other investors who have taken stakes in offshore wind farms are Global Infrastructure Partners (GIP), Credit Suisse, Glenmont, Danish Pension Plan and Caisse de Depôt du Quebec.
Some of the funds that have begun to analyze the new operation indicate that Iberdrola would seek a valuation of around 2.5 billion euros for 100% of Wikinger. The investment made in this asset, opened a year and a half ago, was 1,400 million.
The Spanish utility’s intention was to be able to close the transaction before summer, and wanted to start receiving the first non-binding offers at the end of this March.
However, some of the investment banks that are working with potential stakeholders point to the need for a delay in the process in the face of the coronavirus crisis. Although the valuation of the offshore wind farm should not be greatly influenced by the current recession (investors estimate their income for the next 30 years when making their offers, and the growth trend of renewable energy in that term is unstoppable) Now there may be problems in designing attractive financing when requesting money from banks.
They could now ask for a higher interest rate than they did a few months ago to give credit, as there is a higher risk environment. Many entities are now focused on protecting their capital and liquidity, rather than expanding their balance sheet. In the case of East Anglia, the Macquarie fund obtained financing from a group of banks, including Santander, ING, Lloyds and Sumitomo, among others, in what is known as the Bilbao Project.
In any case, some analysts who follow the evolution of Iberdrola emphasize that the group chaired by Ignacio Galan should not be in a hurry to close the transaction in Germany. After the sale of East Anglia One, pending execution this year, the power company meets its objective of selling the strategic plan assets until 2022. But selling the stake in Wikinger would give the group a significant liquidity buffer, given the possibility that the pandemic crisis will drag on and lead to sharp decreases in energy consumption in Spain and other countries for many months.
In the last month, Iberdrolas share price has dropped from 11 to 8.74 euros, which leaves the company with a capitalization of 58,270 million.
Iberdrolas asset “rotation” program in the 2018-2022 plan contemplates divestments of 3,500 million. The transfer of stakes in East Anglia and Siemens Gamesa, along with other businesses, has already enabled it to be achieved. Read