Iberdrola: Pontegadea could enter negotiations to buy a stake in Proyecto Romeo’s renewables; Norges Bank has exclusivity on the deal for 1 month

Bankinter | Norges Bank Investment Management, which manages Norway’s sovereign fund, is in exclusive talks with Ibedrola to buy a stake of up to 49% in a mega portfolio of renewable assets owned by the Spanish utility. The portfolio is called Proyecto Romeo and is valued at 1.2 billion euros. It includes wind and solar projects in different phases of development with a total output of 1.266MW. Of the whole portfolio, only 167MW are operational and Iberdrola has assumed the risk for the development of the rest. It is expected that 1.094MW will become operational before end-2024, with the remaining 50MW operational in 2025. Norges Bank has presented a binding offer, subject to certain conditions, requesting exclusivity in the negotiating process. Iberdrola has granted this exclusivity for one month. In the last few days, Pontegadea has proposed to Iberdrola the possibility of analysing the project ahead of participating in the transaction. However, the exclusive negotiations with Norges was already underway, so Pontegadea’s entry will depend in the last instance on Norges’ disposition. If Norges decides to continue to go it alone, there would always be the possibility of exploring the participation of Pontegadea in other renewable projects of Iberdrola, once the holding company owned by Inditex’s founder has shown interest in the utility’s assets.

Analyst team’s view: Good news. Iberdrola would receive nearly 600 million euros for 49% of this portfolio. These type of operations are included in the group’s Strategic Plan 2022-2025. The plan envisages obtaining up to 2.6 billion euros with the sale of minority stakes in its projects, especially renewables. This type of agreement is favourable for both sides involved. On the one hand, Iberdrola manages to cushion the burden of financing and with the capital obtained it can continue to develop new projects and meeting its objective of reaching 90.000MW for 2030. Meanwhile, the financial partners have the opportunity to invest in assets which generate an attractive and stable yield, hand in hand with a top level industrial partner. Along these lines, in September Iberdrola sold 49% of Wikinger, an offshore wind project in Germany, to EIP (Energy Infrastructure Partners) for 700 million euros. In 2019, the Spanish firm closed the sale of 40% of its offshore wind farm of East Anglia One to GIG for 1.750 billion euros.