2023-07-28 21:23:11
Some of the largest oil companies in the world continue to buy assets to make their energy transition — and Brazil has become an important stage for this strategy.
After France’s TotalEnergies bought wind farms from Casa dos Ventos last year, Equinor (the Norwegian giant formerly known as Statoil) this month closed the purchase of Rio Energy, a wind and solar power generator.
The purchase involves assets that add up to a generation capacity of 2 GW.
Of this total, only 223 MW are already operational: the Serra da Babilônia 1 wind farm, which is located in the northeast of Bahia and is 100% contracted in the regulated market.
The rest are three solar parks with a total capacity of 600 MW and are in the pre-construction phase; and a pipeline of wind and solar projects totaling 1.2 GW.
Despite still being under construction, the three solar parks (São Conrado and Urca I and II) are practically 100% contracted, with a good part of the energy that will be generated in the coming years already sold on the free market.
Equinor bought the assets of Denham Capital, a London manager focused on energy transition that created Rio Energy from scratch 11 years ago.
Denham chose to sell now because its fund has entered the divestment phase. At the end of 2019, the manager even considered an IPO of Rio Energy, but ended up giving up when the pandemic broke out.
According to a source familiar with the matter, Denham had already negotiated a sale with others players of the sector, but engaged in an exclusive negotiation with Equinor six months ago.
The sale went to one enterprise value of around R$3.5 billion, of which R$1.5 billion is debt on assets, a source close to the company told the Brazil Journal.
The value was attractive to the seller — and shows how the renewable energy sector is heated.
The amount paid implies an EV/EBITDA multiple of 13x for 2023, above the players industry listings. Omega Energia, for example, is trading at around 11.5x this year’s EBITDA.
Equinor said it projects a 4% to 8% real IRR for the assets. (The already operational asset has a lower IRR, while the parks under construction and the pipeline of projects have a higher IRR).
For comparison, Omega trades at a real IRR of around 7% to 8%.
Denham also retained some assets from RioEnergy adding another 1.1 GW of capacity – including three already operational wind and solar farm projects and one pipeline yet to be executed.
The transaction gives Equinor a relevant platform for expansion in this segment in Brazil. In addition to the assets, it also bought the RioEnergy brand and took 140 employees from key areas such as project development and management.
Equinor already had a few renewables assets in Brazil, including a stake in the Apodi complex, in Ceará, with a generation capacity of 162 MW, and in Mendubim, in Rio Grande do Norte, with a capacity of 531 MW.
In March, Equinor also announced a partnership with Petrobras to study the feasibility of seven offshore wind projects that could reach a capacity of 14.3 GW.
Equinor is not the only global ‘major oil’ investing in renewable assets in Brazil. Last August, TotalEnergies bought 34% of a joint venture which brought together all the already operational wind assets of the Brazilian company.
That JV was evaluated in a enterprise value of BRL 12.4 billion.
Bank of America and Itaú BBA advised RioEnergy.
Equinor has not worked with financial advisors.
Peter Arbex
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