Acciona: renewables IPO will unlock Spanish conglomerate’s discount

A separate listing for Acciona’s renewable energy business is as much about the green-eyed monster as it is the green revolution. The Spanish conglomerate headed by José Manuel Entrecanales advanced its plans to sell at least a quarter of the division on Thursday, appointing bankers including Goldman Sachs. The buzz around green energy stocks should deliver a valuation that will help Acciona to pay down its debts.

The creator of Spain’s first commercial wind farm back in the 1990s gets little credit for its renewables pedigree or the high proportion of earnings these assets now generate. Acciona’s share price has kept pace with offshore wind pioneer Iberdrola in recent years but renewables are a smaller share of the larger utility’s earnings. Entrecanales will have an eye on achieving the loftier valuations commanded by purer renewable energy generators such as Denmark’s Orsted. 

Renewable energy generation accounted for three-quarters of Acciona’s ebitda earnings last year. The remainder came from lower margin infrastructure activities. The bulk of current generating capacity is onshore wind. A bold expansion plan accompanies the IPO which aims to double installed capacity to 20GW by 2025. New additions will be split equally between onshore wind and solar. 

Acciona shares currently trade at an enterprise value 10 times this year’s expected earnings. The valuation includes some €4bn of net financial debt, or more than 4 times ebitda. A portion of the stake sale will go towards reducing that. 

At a one-third discount to Orsted shares, or 13 times ebitda, Acciona Energy would be valued at €12bn. That is equal to the current enterprise value of the entire group. At that price, half of the proceeds for debt reduction would reduce net debt to a more manageable two times ebitda.

If successful, an improved credit rating and higher rated shares for the subsidiary might shave 200 basis points from the group’s weighted average cost of capital. Greener pastures for shareholders should accompany the greener company profile.

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