Aramco invites Repsol to join its renewable energy subsidiary

Aramco is interested in joining the capital of Repsol Renovables. According to several market sources consulted by EXPANSIÓN. Saudi Arabia’s state oil company, the world’s largest, wants buy a minority stake in a subsidiary companySpanish group, whose capital also includes a French insurance company Credit Agricole Assurance and Swiss foundation Energy Infrastructure Partners (EIP) with a 25% stake.

Repsol will always remain the majority shareholder of the subsidiary. whose advice Aramco turned to unsolicited. Considering the proposal from Saudi Arabia, The Spanish oil company hired Banco Santander to study the deal. of which there is no guarantee that this will succeed.

Aramco has not yet submitted a proposal, although it has contacted several major investment banks operating in Spain in recent weeks. choose a financial advisor who will support you during the possible negotiation process. His main interest in the green subsidiary Repsol is projects that the company has in the USAAs explained by interviewed sources.

Credit Agricole and EIP, who express their participation in Repsol Renovables through the company Janus Renewable Energy, The company does not plan to exit its shareholding. In its turn, Repsol, which will always retain a majority stake, does not wish to dilute its stake in the subsidiary at a ratio lower than that obtained upon the entry of Crédit Agricole and EIP.

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In 2022, the Spanish oil company sold 25% of the capital of Repsol Renovables for 905 million euros in an operation that provided the subsidiary with an enterprise value (including debt) of 4.383 million. Euro. The subsidiary’s enterprise value is now approximately $5.9 billion. euros, according to a recent UBS report compiled by Reuters, which has increased investor interest in getting involved in Repsol’s green business.

While it may seem counterintuitive, despite Repsol Renovables’ current higher value, prices in the sector have since fallen.. Thus, the higher price that the market offers to a subsidiary has more to do with its growth in recent years than with multiple arbitrage.

The operation is thereforethis would not make sense to a financial investor, but it might make sense to an industrial investor, like Aramco, with a longer-term vision. The arrival of the Saudi oil company was initially proposed through a capital increase.

The Saudi oil company is already a partner of Repsol in the Basque Country. in a project worth 60 million euros for producing zero-emission synthetic fuels from green hydrogen.

Negotiations between the parties take place at the moment when Aramco is seeking investment opportunities in the renewable energy sector outside Saudi Arabia. As its President and CEO admitted, Amin Nasser, at a recent meeting of the World Economic Forum in Riyadh.

The Saudi state oil company has more than enough resources to pull off a deal like the one with Repsol Renovables. It had $65 billion in cash and cash equivalents alone. in late March. Taking into account expenses for 2023, when the company earned $121.3 billion, it approved dividends of $97.8 billion.

Although the operation is complicated, if it eventually materializes Repsol could use resources from the potential capital increase to accelerate the development of its renewable energy projects.

The Spanish oil company plans capital expenditures of between $16 billion and $19 billion between 2024 and 2027. euros, of which approximately 35% will be allocated to ecological transition. To ease your financial burden in the current interest rate environment, Repsol has already entered Pontegadea, Amancio Ortega’s investment holding company, into several renewable energy projects.

The company has also made several acquisitions in this sector recently. In September, acquired US group ConnectGen for $768 million, whose project portfolio totaled 20,000 megawatts (MW). Also withbought 7700 MW from Asterion for 600 million in December 2022.