Spanish companies as leading European partners for international infrastructure investors

In recent years, renewable energy has experienced significant growth worldwide. This is largely due to a combination of factors:

• Government policies and financial incentives in many countries to encourage the development and use of renewable energy sources (i.e. feed-in tariffs, which guarantee a certain price for electricity generated from renewable sources and tax credits for installing solar or wind systems)
• Technological advancements in solar panels and wind turbines that have made such projects more economically viable
• As the impacts of climate change become more apparent and environmental concerns grow, pressure is increasing to reduce greenhouse gas emissions and transition away from fossil fuels. Renewable energy is a key part of the transition, as it does not produce emissions that contribute to climate change
• Renewable energy is becoming more cost-competitive than fossil fuels, making this kind of energy more attractive proposition to investors

Being a pioneer over the past 10 years has allowed for the development and consolidation of a wide corporate fabric in Spain with outstanding technological and industrial capabilities. This has led to a large high-quality business ecosystem with vast proven experience in the development, financing, construction, operation, and management of renewable energy projects. That environment has enabled not only the well-known large-cap companies (e.g. Iberdrola, Siemens Gamesa, Acciona Energía), but also the mid and small-cap companies (e.g. Grenergy, Soltec, Dominion Energy, Valfortec) to establish themselves in potential growth regions in the coming years, such as USA, United Kingdom, Japan, Italy or Spain. Indeed, the traditional local Spanish pure developer or industrial companies are switching to a more value added vertical integrated business model, becoming leading Independent Power Producers (IPP) in the renewable energy sector with high-quality asset portfolios worldwide.

In this scenario, numerous well-known investors have coinvested through partnerships (joint investment structures) in the last few years with Spanish local players with a proven track-record, who can develop, construct, and operate assets worldwide. In that sense, there is a big shift in infrastructure funds and asset management companies toward renewables. Spanish companies have integrated through joint ventures with international investors more, in the last three years, than their European peers, accounting for up to 20% of total joint ventures, far surpassing Italian and French local companies, which make up 11% and 7%, respectively. Some recent relevant examples in Spain are:

• The freshly announced Norges Bank acquisition of 49% of 1.3 GW from Iberdrola for c. €600m
• Crédit Agricole Assurances and Energy Infrastructure Partners (EIP) signed an agreement to acquire 25% of Repsol Renovables for €905m
• U.K. pension fund Universities Superannuation Scheme bought 50% of solar developer Bruc Energy for €225m
• Vortex Energy, the private equity arm of EFG Hermes, entered into a definitive agreement with the developer Ignis Energy Holdings to inject over €625m for 49% of the company

In the coming years, more corporate deals are expected to follow, as:

• Projected Spanish players blended equity returns among geographies are above 10%
• The fact that they are looking to join forces with strong financial partners to realize growth plans