Brookfield’s €6.1 billion deal with Neoen aims to increase exposure in France and Australia

Brookfield Asset Management has agreed the initial stages of acquiring Paris-listed renewable energy developer Neoen, in a bid to value the company at €6.1 billion.

As part of the transaction, Global Transition Fund II is entering into exclusive negotiations to acquire a 53.3% stake in Neoen from shareholders Impala, Fonds Stratégique de Participations (FSP), Cartusia and Xavier Barbaro at a price of €39.85 per share. Once agreed, it will make an offer for the remainder of the company at the same price, which is 26.9% higher than the last closing price. The company’s EV value is 12.8 times its EBITDA for 2023.

“We’re doing it this way because we wanted to make sure we took a controlling stake,” explained Ignacio Paz-Ares Aldanondo, managing partner in Brookfield’s Renewable Power & Transition group. Infrastructure Investor.

Paz-Ares Aldanondo added that Brookfield has been monitoring the company since its IPO in 2018 and expressed his admiration for the markets in which it operates and its management team, and believes that now is the right time to partner with Brookfield.

“These businesses are so capital intensive and growing at such a fast pace that they need a lot of capital and (Neoen was) at an inflection point that to get to the next stage of growth they needed a partner or sponsor that could really support them in the right way with capital, to continue to develop,” he said.

The transaction is supported by Singapore’s state investment firm Temasek, and EUR 500 million is being contributed by Brookfield’s listed partner, Brookfield Renewable, the statement said.

Neoen, which develops solar, wind and battery storage projects, operates in 16 countries, although its largest markets are in France and Australia, with a significant presence in Finland and Sweden. According to the group’s 2023 annual report, Australia held 47 percent of its assets, and in February it announced it had completed financing for a portfolio of eight wind, solar and battery assets with a capacity of 1.5 GW, raising more than A$1.1 billion ($730. 4 million dollars; 673.9 million) debt.

Storing success

Not much will change on that front as Paz-Ares Aldanondo expects France and Australia to continue to be growth engines under Brookfield.

“France has very high ambitions for renewable energy in terms of targets, which is supported by a very attractive feed-in tariff regulatory regime that supports the development of renewable energy sources,” he said.

Brookfield’s transition fund series has a rich history in Australia. It was rejected during attempts over the past few years to secure multibillion-dollar acquisitions of utilities AGL Energy and Origin Energy, following plans to transform both companies’ carbon-intensive operations towards a more renewables-based focus.

“It’s a market we know really well. We know how much renewable energy they need to deploy to decarbonize the grid, and at the same time we know the impact of this penetration and the imbalance it will cause in the grid,” said Paz-Ares Aldanondo. “So there is a huge demand for warehousing in Australia and Neoen is really well placed to take advantage of this opportunity having pioneered this technology, particularly in Australia.”

In November 2017, Neoen and Tesla completed construction of the 150 MW Hornsdale Power Reserve energy storage project in South Australia – the world’s first large-scale battery storage facility providing grid services. It was built in 100 days as part of Elon Musk’s bet with the state government. Last year, Neoen was awarded a capacity services contract by the Australian Energy Market Operator for the 219MW Collie Stage 1 battery in Western Australia, with commercial commencement scheduled for the fourth quarter of this year.

Overall, Neoen has a portfolio of 8.3 GW, of which approximately 5 GW is in the operational phase. According to the 2023 annual report, approximately 71% of this amount is contracted through PPAs, with the remainder subject to commercial prices.

“I think whenever we build new renewable energy projects, our first option is to contract them,” Paz-Ares Aldanondo said. “We see that the risk return proposal contained in these contracts makes sense and we do not intend to change it in a mature way. Maybe things will change around the edges, but in terms of direction, we should continue with the same strategy.

Neoen will be the third transaction for Brookfield’s Global Transition Fund II. Previous deals include the $600 million acquisition of British developer Banks Renewables – renamed OnPath Energy – and a deal to invest up to $845 million to develop a pipeline of wind and solar projects in India with Axis Energy. The fund secured a first close of $10 billion in February, ahead of its $17 billion target. Final closing is expected to occur later this year, Brookfield Chief Financial Officer Hadley Peer Marshall said on a first-quarter 2024 earnings call.