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Iberdrola sells of part of its Mexican business and plans to reinvest in renewables. ENGIE North America completes tax equity financing to fund U.S. solar and wind projects. Aquila and Octopus are in talks regarding a potential merger.
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Allen Hall: I’m Allen Hall, president of Weather Guard Lightning Tech, and I’m here with the founder and CEO of IntelStor, Phil Totaro, and the chief commercial officer of Weather Guard, Joel Saxum. And this is your News Flash. News Flash is brought to you by our friends at IntelStor. If you need actionable information about renewable projects or technologies, check out IntelStor at intelstor.com.
Iberdrola closed the sale of 55 percent of its Mexican business for around 6. 2 billion to a trust led by Mexico infrastructure partners. The deal includes 13 power plants with 8. 5 gigawatt capacity that are mostly gas plants contracted to Mexico CFE utility. Iberdrola retains 15 plants in Mexico and its Renewable Energy Project pipeline to keep growing wind and solar assets there.
Joel, Iberdrola is banking it right now. What’s happening?
Joel Saxum: I think that there’s a lot of development that is going to be going on in Mexico here to watch in the future as well. The president is going to be swapped over here pretty soon. This is the things that I’ve been watching and hearing and listening.
The new president is actually very fond of renewable energy. However, it is a, you’re, you got to keep Pemex happy. You got to keep everybody happy. The oil and gas business in Mexico is very big, but there is going to be more investment there. So interesting that Iberdrola is selling those assets.
I don’t know if their plans are to reinvest all of that capital back in Mexico. But they are keeping their pipeline going. So I would expect to see some of that happen as well.
Philip Totaro: Iberdrola has been not only banking in Mexico, but they’ve also been raising a lot of cash and capital in other markets.
They’ve been heavily looking into some of the emerging markets for offshore investments. Obviously Mexico’s offshore market is non existent at this point and probably isn’t gonna isn’t going to turn into one. However, yeah, I the Mexican market, Joel, you’re right, it’s been particularly bad, actually, under the current president, and everybody’s just counting down the days until I, there have been study after study that’s been recently released about, like, how.
Renewables has been completely trashed in that market. But I think Iberdrola’s move is a good one, and I think them holding onto that cash to potentially redeploy in project development in Mexico will be a good idea. Mexico’s a bit of a tough market because there’s, some folks in, in certain areas that don’t really they didn’t get a good feeling from some of the project developers that were there previously.
But it is a market that does need to decarbonize quite a bit. And, is obviously going to be able to get in there and do a lot with the pipeline that they have.
Allen Hall: Iberdrola reported a 10 percent increase in 2023 net profits to 4. 8 billion euros. They set a new investment record in 23 also of 11. 4 billion euros with grid and offshore wind as the main drivers. Over 5 billion euros was invested in renewables like offshore wind farms, now operating in France and the United States ROA plans a 2024 investment record of 12 billion euros, including two gigawatts of new onshore renewables. So Phil ROA is taking those profits and reinvesting them in some smart areas.
Philip Totaro: They’ve got a significant pipeline in not only the United States for offshore wind, but their onshore wind. Asset portfolio in the United States is probably going to start coming up for repowering here in about five to seven years. So having this much capital at their disposal is going to be a good thing for them because they’re going to have an opportunity.
They’ve been the reason they haven’t repowered after 10 years is because they’ve been riding out some very. High priced power purchase contracts to the end of the 20 years of the PPA and the end of the 20 year asset life that they have. So they are going to be repowering a lot of projects and they’re going to need capital to, to deploy, to be able to do that.
But they’ve got a rather substantial amount that, is in that, that queue at this point.
Joel Saxum: So one of the things I want to touch on here with Iberdrola is when we talk Iberdrola, everybody sees Iberdrola, yes. But we need to make sure that you also understand that Iberdrola is a bunch of companies.
Iberdrola, Spain. Scottish Power, which is doing a lot of offshore things as well. Avangrid, which operates in the United States and other places in North America. Neo Energia, which is a Brazilian company. That’s their Brazilian kind of arm. Then you have Iberdrola Mexico and Iberdrola Energia International.
So when we say Iberdrola, we’re not just talking about things branded Iberdrola. Look at all the brands that have the nice three little green leafs on them or green leaf, blue leaf, orange leaf. Those are all the Iberdrola family and that’s the money we’re talking about here.
Allen Hall: ENGIE North America completed a 1 billion tax equity financing deal to fund recently built renewable energy projects in the United States.
Their portfolio consists of six projects totaling 950 megawatts of solar capacity and 353 megawatts of wind power. Power across ERCOT, MESO, and the SPP grids. The 1. 3 gigawatt portfolio represents one of ENGIE’s largest U. S. tax equity financing arrangements. ENGIE says this shows that their strong track record of developing, building, and operating renewable assets in North America is why they can do these tax equity deals.
Phil, everybody is looking to do tax equity deals. Because it’s such a huge fundraiser right now, it raises a ton of cash.
Philip Totaro: Yeah, and since the, we now have consistency in the production tax credit through the IRA bill, everybody’s getting back on the bandwagon. Plus, the fact that we have that consistency.
Out to 2033, where you’re going to theoretically have an opportunity to repower under the same tax regime today, that gives you an opportunity to get some certainty on the investments that you’re going to make. Expect. We even projected it’s going to be about 11. 3 gigawatts this year at a minimum in onshore wind for the U S we’re going to be cooking almost doubling what we put in the ground last year.
Joel Saxum: So speaking about these tax equity financing deals this is a specifically complex finance vehicle used to fund these things. So the majority of people that play in that market are your big banks, your JPMorgan Chase and Wells Fargo and things like that. However, because more people are looking to use that financing vehicle to fund things, you’re going to start seeing some more players enter that market.
Now, the majority of our listeners, that’s outside of the normal realm that we deal with. But if you’re interested in it we did talk with David Burton from Norton Rose Fulbright about some of these these finance vehicles. And if you’re interested about learning on them scroll back through some of our YouTube channel, find that episode, take a listen.
And maybe reach out to him.
Allen Hall: Renewables investment firm, Aquila European Renewables, has started talks regarding a potential merger. This comes after UK firm, Octopus Renewable Infrastructure Trust, proposed combining with Aquila in December. Aquila says they’ve received interest from multiple parties and have begun mutual due diligence.
So as soon as Octopus Renewables talked about merging with Aquila, Bill Aquila got a lot of suitors very quickly. This is starting to make sense. These assets are worth a lot of money right now and are very valuable from an investment standpoint.
Philip Totaro: Aquila’s got a portfolio in Europe that is actually highly attractive, which is why they’re putting the feelers out to a lot of other potential partners.
It’s also, a negotiating tactic to, even if they want to go with octopus trust they can, use this as negotiating leverage to, to get a better price. But at the end of the day, Aquila is very studiously made specific investments throughout Germany and the Scandinavian countries to build out a portfolio, mostly wind, a little bit of solar.
And I think they’ve also been looking at some battery storage investments as well yeah it’s a good buy and I, interestingly, I think a combination with Octopus would be good for both of them because Octopus is definitely on the bandwagon of let’s invest in companies that have already made early moves in decarbonization, they’re doing a lot of things.
They have a lot of initiatives. That’s I think that’s a healthy thing.
Joel Saxum: Looking at this from a a macro level as well, it is in line with what we talked about a couple of weeks ago with Larry Fink and BlackRock saying, Hey, these are the next big investments instead of, they’re looking at large capitals looking at energy investments, right?
And energy used to mean oil and gas investments. Now it means infrastructure investments, and that’s what the market is really starting to change to in that large capital space. You see something like this tying up together, Octus Renewal and Aquila, that’s a play. Great, fantastic, they call it, whatever you want, Octopus, Aquila, in two to five years, they’ll be for sale again.
That’s what I would say. But that’s, this is the trend that you’re starting to see large capital piling up infrastructure.
