EDP – Energias de Portugal has entered into an agreement with funds managed by Macquarie Infrastructure and Real Assets (MIRA) for the €2.7 billion acquisition of Viesgo, and the establishment of a long-term electricity distribution partnership with MIRA in Spain.
Under the terms of the agreement, EDP‘s Spanish electricity distribution subsidiary, ERedes, and Viesgo‘s electricity distribution units, Viesgo Distribución and Begasa – with a total RAB [regulatory asset base] of €1.8 billion and EBITDA of €320 million – will be 75.1 per cent-owned by EDP and 24.9 per cent-owned by MIRA.
As part of the transaction, EDP will also acquire – via its 82.6 per cent-owned subsidiary EDP Renováveis (EDPR) – Viesgo’s renewables business, which comprises 24 wind farms and two mini hydro power plants located throughout Spain and Portugal, for €565 million. They represent a total of over 500 megawatts of installed net capacity.
EDP will also acquire Viesgo’s two thermal generation plants in the south of Spain, which carry potential interconnection rights under the European Union’s “Green Deal Investment Plan and Just Transition Mechanism” following completion of their decommissioning.
The enterprise value of €2.7 billion for Viesgo implies a multiple of 11.8x EBITDA 2019 (excluding contribution from the thermal generation business).
The consideration of €565 million to be paid by EDPR to Viesgo for its renewables business implies an enterprise value multiple of €1.1 million per net megawatt.
The Viesgo transaction implies a net equity investment by EDP of €0.9 billion and will result in EDP consolidating Viesgos’s existing net financial debt of €1.1 billion. MIRA will invest a total of €0.7 billion across debt and equity as part of the Viesgo transaction.
Closing is expected to occur by the end of 2020.
The Viesgo transaction will be primarily funded through a rights issue of €1.02 billion, a fully underwritten increase of share capital of 309,143,297 new shares of EDP, representing in total approximately 8.45 per cent of EDP share capital, with subscription reserved for shareholders in the exercise of the corresponding pre-emption rights and other investors who acquire subscription rights.
Banco Comercial Português, J.P. Morgan Securities, Morgan Stanley & Co. International, BNP Paribas, BofA Securities Europe and Goldman Sachs International (the underwriters) have agreed to procure subscribers, or otherwise themselves to subscribe, for any new shares not subscribed under the rights issue.
King & Wood Mallesons (KWM) advised EDP on the deal. The KWM team included partner Roberto Pomares and senior associate Gonzalo Fernández. Other members of the team included partners Gonzalo Olivera and Carlos Gil, senior associates Fernando Jiménez, Sandra de Andrés and Alberto Artés, and associates Enrique Murillo and Oscar Fuertes.
Macquarie was advised by Jones Day.
Viesgo is an electricity company with almost 700,000 customers in the north of Spain and a production of around 1,400 megawatts. Viesgo has 24 wind farms throughout Spain and Portugal as well as two mini hydro power plants located in Jaen and Murcia representing over 500 megawatts of installed net power. In 2019, Viesgo reported total assets of €1.91 billion and EBITDA of €174 million.
Macquarie Infrastructure and Real Assets (MIRA) is an alternative asset manager with €124 billion of assets under management. The assets include 151 portfolio businesses, 500 properties and 4.8 million hectares of farmland.
Macquarie Infrastructure and Real Assets’ head of EMEA is Leigh Harrison. EDP is currently led by interim CEO Miguel Stilwell de Andrade.