Neoen [EPA:NEOEN], a French independent producer of renewable energy has an ambitious plan to enter "one new European geography each year through to 2025," CFO Louis-Mathieu Perrin told Mergermarket, adding that the company could also explore a rights issue for financing power.
The expansion into new markets will be primarily through organic growth but acquisitions could be considered for distressed renewables assets, such as onshore winds farms and solar panels, close to the end of their life or old assets with repowering potential, the CFO explained.
The company's "recourse to M&A would be only marginal" and not specifically related to the expansion strategy in new European geographies, Perrin said. "Potential operations would not specifically target European countries," he added.
For distressed renewable assets struggling to attract investors, a strategic buyer like Neoen could better harness their turnaround potential given its proven track record in developing, operating, and maintaining renewable energy projects along their life cycle, he noted.
However, “M&A is not a priority” for the renewable energy specialist, which embarked on a five-year growth plan in 2021 with a target to reach 10 GW of assets in operation, or under construction, by 2025, Perrin explained, adding that already more than 6 GW was reached as of 31 December 2022.
France, Sweden and Finland are the key markets where the company will strengthen its foothold, followed by Portugal, Ireland, and Italy where it will continue to expand by 2025, he added.
Other undisclosed geographies in Europe could be studied for expansion, he said, declining to give further details.
New capital increase
Over the period 2021-25, the company has pledged to raise up to EUR 1.2bn to fund its growth plan, announced in 2021.
In April 2021, it completed a EUR 600m rights issue to fund future asset purchases as part of a first investment cycle due at the end of 2022.
To reach the EUR 1.2bn new capital needed to fund Neoen investment program, the possibility of a new rights will be studied this year, the CFO explained.
However, the timing is yet to be determined and will depend on several factors, including market conditions, he said, declining to give further details.
Renewables companies are attractive for investors and a capital increase from Neoen could follow the successful EUR 490m right issues completed by Voltalia [EPA:VTSA] at the end of 2022, an ECM banker suggested.
Neoen is a frequent ECM issuer, and as IPOs are not expected to prosper in volatile markets, right issues will be a focus for ECM bankers especially in the resilient renewable energy sector, another ECM banker noted.
The company's main shareholders, investment company Impala – which holds a 46% stake – investment fund FSP (6.49%), French state-controlled investment fund Bpifrance (4.69%) and CEO Xavier Barbaro and family’s fund Cartusia subscribed to the rights issue in 2021 and would likely want to retain their ownership stakes after any new raise, the CFO noted.
Neoen has a 40.7% freefloat.
Impala and Bpifrance have committed for the previous EUR 600m rights issue to exercise at least two-thirds of their preferential subscription rights; FSP, Noen’s second largest shareholder, has committed to exercise at least 85% of its rights, as reported.
Stable shareholding structure
As infrastructure funds and oil majors are mulling opportunities to acquire renewables assets to comply with CO2 emissions reduction obligations and to transition towards green energy production, Neoen along with French peer Voltalia [EPA:VTSA] and UK-based SSE [LON:SSE] appear as potential targets, this news service recently reported.
Neoen is well funded and happy with its current shareholding structure, the CFO noted.
The French independent energy producer will not compete with energy giants eager to carry out buy-and-build strategy to boost their expansion in the renewables arena but will keep on displaying its ability to accompany renewable assets development throughout their entire life cycle, he explained.
Neoen relies on its expertise to engage with local communities to develop solar panels, wind farms and energy storage solutions to grow organically and win markets share, he added.
The CFO does not see majors as direct competitors but explained that Neoen can be in competition with energy giants’ renewables units, like those at Engie [EPA:ENGI] or TotalEnergies [EPA:TTE], and with pure players like Voltalia, Acciona Energy [BME:ANE] or Norway-based Scatec.
Neoen’s business model relies on different key geographies – Australia, Europe and Americas – and a different split in its renewable power activities – solar energy, wind farms and to a lesser extent energy storage, Perrin explained.
Around 40% of its revenues are generated in Australia, 40% in Europe and 20% in Americas. Solar energy represents around 50% of its activities and wind energy around 40%. Energy storage which represents just over 10% today could increase to up to 20% of revenue, the CFO noted.
The company posted a total asset value of EUR 4.9bn in FY21 and generated a EUR 333m revenue with an EBITDA of EUR 300m. The company’s market capitalisation stands at around EUR 4.1bn with a share which traded yesterday (16 January 2023) at EUR 35.98.
