With Tuesday’s announcement that KKR (US:KKR) has agreed to sell its 50% interest in global renewables developer X-ELIO to joint-venture partner Brookfield Renewable (CA:BEPC, US:BEPC), it’s time for investors to consider Brookfield as a solid solar play.
X-ELIO was founded in 2005. It specializes in developing, financing, and operating solar PV plants and other renewable-related assets. Upon completion of the deal, Brookfield will own 100% of the Madrid-based company.
KKR first invested in the Spanish firm in July 2015, via its acquisition of 80% of what was then Gestamp Asetym Solar, rebranding as X-ELIO in February 2016. The KKR Global Infrastructure Investors II funded the transaction, valuing the entire business at US$1 billion. Corporación Gestamp held the other 20%.
The transaction comes as global investments in renewables have become concentrated in specific technologies and uses, with solar photovoltaic making up 43% of those US$1.3 trillion investments in 2022, the International Renewable Energy Agency reported last month. However, as Deloitte highlighted, annual investments need to at least quadruple to remain on track to achieve the 1.5°C scenario in that Agency’s most recent outlook.
Unique Opportunity
Brookfield entered the picture in July 2019 when it agreed to buy the 20% stake from the Ribera family, who owned Spanish automotive parts company Gestamp. In addition, KKR agreed to sell Brookfield 30% of its stake. In total, they paid US$500 million for 50%.
“This is a unique opportunity to invest in a high-quality portfolio of operating assets including a near-term pipeline of construction assets with an experienced management team, integrated development platform and best-in-class contracting capabilities,” Brookfield Renewable CEO Sachin Shah said at the time.
“This investment allows us to grow our solar capabilities to include global solar development and offers another meaningful growth lever for our business.”
At the time of the 50% investment in 2019, Brookfield had renewable power projects operating on four continents, with more than 17 gigawatts (GW) of installed capacity and 8GW more in development.
X-ELIO had 273 megawatts (MW) of operating capacity in 2019, with an additional 4.8 GW in the pipeline.
Flash forward to 2023 and X-ELIO will soon have 3 GW of capacity, either operating or ready-to-build, in Spain, the U.S., and several other countries. In addition, it has more than 10 GW in the near-term pipeline.
“X-ELIO is a business we know well following our initial investment and we are thrilled to continue to support this leading global platform with significant growth ahead,” stated Ignacio Paz-Ares, head of European Renewable Power and Transition Investments at Brookfield.
“This transaction is very aligned with Brookfield’s strategy as a leading owner, operator and developer of renewables worldwide, driven by the incredible tailwinds for this sector.”
Brookfield Renewable had 4GW of solar installed capacity at the end of December. That’s about 15% of its 25GW total installed capacity. The addition of X-ELIO nearly doubles its solar capacity overnight.
Moving Fast
While terms haven’t been disclosed, The Financial Times’ sources suggest X-ELIO’s equity is worth approximately $2 billion, double the value from 2019. Brookfield affiliate, Brookfield Asset Management (CA:BAM, US:BAM), is expected to start raising funds for its second clean energy transition in June. Its first fund raised US15 billion. It’s looking to raise US$20 billion the second time around.
Brookfield Asset Management Vice Chair Mark Carney, who’s served as the governor of both the Bank of Canada and the Bank of England in his career, believes the opportunities to grow clean energy at scale are enormous.
“Carney said Brookfield has ‘gone from 20 gigawatts in our pipeline of building renewables to over 100 gigawatts in just 12 months,’ which ‘gives you a sense of how fast things are moving,’” the Financial Post reported Carney’s November comments while appearing on Bloomberg TV.
The sale is expected to close in the second half of 2023.
This article originally appeared on Fintel
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