Italy-based utility company Enel S.p.A., announced it has sold for US$ 340 million an 80% stake in a Mexican holding company that controls three renewable energy plants and five more under construction.
Through its renewables subsidiary Enel Green Power S.p.A. (EGP), Enel today signed agreements with the Canadian institutional investor Caisse de dépot et placement du Québec (CDPQ) and the investment vehicle of the leading Mexican pension funds CKD Infraestructura México S.A. de C.V. (CKD IM) for the sale of 80% of share capital of a newly formed Mexican holding company (Holdco), owner of the entire capital of eight special purpose vehicles (SPVs) consisting of three plants in operation and five under construction for a total capacity of 1.7 GW.
Under the agreements, EGP will continue to operate the plants and will complete those still under construction by two newly formed subsidiaries. In addition, as from January 1st, 2020, EGP may transfer additional projects to Holdco. As a result of these possible transfers, it could therefore increase its interest in Holdco until it becomes again the majority shareholder.
The transaction is worth US$ 1.35 billion, of which a price of about US$ 340 million for the sale of 80% of the Holdco’s share capital and about US$ 1,010 million for financing (related-party loans) granted to the SPVs by CDPQ-CKD.
Taking into account the required investment for plants completion to be funded through project financing for approx. US$ 0.9 billion as well as the related party loans for a total of US$ 1.3 billion, a 100% valuation of Holdco's enterprise value will be equal to about US$ 2.6 billion, with the equity value amounting to about US$ 0.4 billion.
This transaction combines EGP's industrial know-how in business development, engineering & construction and operation & maintenance activities with the long-term investment strategy of CDPQ-CKD IM.
The closing of the transaction, subject to a number of pending ordinary conditions and receipt of the necessary authorization from the Mexican antitrust authorities, is expected to occur by the end of 2017. The price will be paid at the closing, bearing in mind that the amount will be subject to a subsequent price adjustment normal for this type of transaction, based on variations of the net working capital of Holdco.
The transaction will enable the Enel Group as of the date of closing, to reduce its consolidated net debt by about US$ 1.9 billion.
The eight SPVs own a portfolio consisting of three plants already in operation (a total of 429 MW) and five projects under construction (a total of 1,283 MW), for an overall total of about 1.7 GW. Specifically, the portfolio consists of about 1 GW from the solar plants Villanueva I (427 MW), Villanueva III (327 MW) and Don José (238 MW) as well as about 0.7 GW from wind farms of Amistad (198 MW), Dominica (200 MW), Palo Alto (129 MW), Salitrillos (93 MW) and Vientos del Altiplano (100 MW). These plants hold long-term power purchase agreements (“PPAs”).
Following the closing, Enel will retain in Mexico, direct control of about 300 MW of capacity already installed, represented by the wind plants of Stipa Nayaa (74 MW), Zopiloapan (70 MW) and Sureste (102 MW), and the hydroelectric plants of El Gallo (30 MW), Chilatan (12 MW) and Trojes (8 MW), as well as the solar plant COP 16 (134 kW).