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Statkraft’s acquisition of Solarcentury

Updated: Jan 17

By: Gurneek Gill, Krzysztof Nosowicz and Nikola Radisic


Overview of the deal


By acquiring Solarcentury, StatKraft will look to build upon its rich heritage of 125 years’ worth of investments into renewable energy entirely. The firm is a pioneer in the hydropower industry, however, after this deal is complete, they look well positioned to become a leader in the European solar market, as the global energy transition begins to make headway. The deal was announced on the 2nd November 2020 and is expected to close in the second quarter of 2021, with StatKraft looking to immediately start the amalgamation of both firms.


Company Details: Statkraft


Headquarters: Oslo, Norway

President/CEO: Christian Rynning-Tønnesen

Number of employees: 3600 (2020)

Market capitalisation: N/A

EV: N/A

LTM Revenue: £3665 million (FY2019)

LTM EBITDA: N/A

LTM EV/Revenue: N/A

LTM EV/EBITDA: N/A

Advisor: Dentons



Company Details: Solarcentury


Headquarters: London, United Kingdom

President/CEO: Frans van den Heuvel

Number of employees: 4000

Market capitalisation: N/A

EV: £117.7m

LTM Revenue: £190.566m

LTM EBITDA: £23.694m

LTM EV/Revenue: 0.62x

LTM EV/EBITDA: 4.97x

Advisor: Evercore


Background


StatKraft is Europe’s largest generator of renewable energy, functioning in 17 different countries, and in 2019 the group produced 61 TWh of electricity. Despite specialising in hydropower, the Norwegian state-owned electricity group also has operations spanning across wind power, solar power, gas-fired power and supplied district heating. Beyond this, StatKraft manages trading and market operations for these projects and those of third parties. Solarcentury is the UK’s largest solar company. The firm operates an integrated model where they develop, build, own and operate solar farms allowing them to have maximum control over projects; from start to end. They also manage their key financial and commercial stages – from equity and debt, to the PPA and energy management.



Synergies


This acquisition aligns with Statkraft’s strategy of diversifying its revenue and expanding into solar power in order to become one of the leading renewable energy companies in the world.


The £118 million deal gives Statkraft access to a 5 gigawatt (GW) pipeline of PV (Photovoltaic) projects in Europe and just over 1 GW in South America. Furthermore, Solarcentury has developed 1.2 GW of utility-scale projects since 2013. The 300 MW Talayuela solar plant, in construction in Spain, will contribute to that number significantly. Solarcentury recently acquired 284 MW of projects in Greece to complement major projects in the Netherlands, France, and the United Kingdom. With financing to make these projects made simpler and some economies of scale on offer, Solarcentury can expect to build the next 1.2 GW faster.


As a global leader in energy market operations, Statkraft is uniquely positioned to add value to the acquired project pipeline through its market integration capabilities and has a target to develop at least 8 GW of wind and solar by 2025, with 2 GW of solar and 6 GW of wind.


Risks and uncertainties


Statkraft’s acquisition of Solarcentury holds a few key risks. One of them is the outbreak of Covid-19. Numerous governments have raised record deficits this year to fight with the pandemic, which may cause future budget cuts and the postponement of key infrastructure investments, including solar power. Social‑distancing guidelines and lockdown measures have been triggering supply chain disruption and delays in project construction, having a direct impact on the commissioning of renewable electricity projects, biofuel facilities and renewable heat investments. All of these factors may put projects at risk, even if they are at an advanced stage. That could slow Solarcentury’s growth in the next few years.


Furthermore, Solarcentury’s eightfold growth of revenue in 2019 comes largely from constructing and operating unsubsidised solar farms in southern Europe, Latin America and Africa, which further decreases the share of its UK operations, increasing the exposure to currency exchange volatility for Statkraft. Moreover, Statkraft’s possible synergies are limited by the company’s focus on hydropower production, which restricts fixed costs synergies such as salaried staff.


The transaction is conditional upon customary regulatory and local competition approvals and is expected to be completed by the end of 2020. However, with the Brexit transition period coming to an end, it is uncertain what both sides will agree to. One of the issues is the regulatory environment to prevent unfair competition and its significant changes could affect Solarcentury’s home market, as well as its power plants in the EU.


Concluding remarks


Ultimately this deal will bring Solarcentury closer to their goal to make a substantial difference in the current fight against climate change, through the widespread implementation of solar power, as this investment will go a long way in helping them sustain the pace of their recent growth. With an 8GWp combined solar pipeline, this deal is sure to accelerate the growth in solar; solar PV generation increased 22% (+131 TWh) in 2019. Both companies clearly have portfolios that are well aligned in their interests so considerable operational value will be added to both companies. This is only likely to continue, even amongst the extensive turmoil that has been caused from the coronavirus pandemic that has affected all energy companies, both large and small.




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