Deal details: TotalEnergies has acquired the 70% stake that it didn't already own in Total Eren for an enterprise value of ~$2.9bn. Following the acquisition, Total Eren will be fully integrated within TotalEnergies’ Renewables business unit. The acquisition will consolidate Total Eren’s portfolio of 3.5 GW of renewable assets, including solar, wind, hydroelectric, and storage projects, along with over 10 GW of development pipeline. The integration should result in an increase in TotalEnergies’ Integrated Power net operating income of around €160mn and Cash flows from operations (CFFO) of around €400mn in 2024.
TotalEnergies initially entered the platform back in Sept’17 when they acquired an indirect interest of 23% in France-based EREN Renewable Energy for $281mn. The deal enabled Eren to cover its financing needs and accelerate its development pipeline, while also allowing TotalEnergies to expand its portfolio and enter the wind power generation segment. As part of that agreement, TotalEnergies had the option to acquire the remaining stake it didn't already own after a period of 5 years.
Deal rationale: TotalEnergies' latest deal facilitates the integration of a portfolio of top-tier renewable assets into its green energy division at a discount to their present valuation. According to the CEO of TotalEnergies, the company negotiated the valuation for the takeover back in 2016, which enabled it to expand its portfolio economically, taking advantage of a pre-determined valuation.
The current deal is in stark contrast to the strategy deployed by fellow European oil major Eni with its renewables and power retail unit Plenitude. Eni is seeking investors for Plenitude and even had plans to list the unit, which it delayed citing market conditions. The company has adopted the approach of creating 'satellite units,' wherein independent business divisions are established for specific operations. Eni believes that strategy will help it attract investors focused on those particular businesses. Meanwhile, TotalEnergies’ move mirrors that of Canadian utility TransAlta, who also recently consolidated ownership of its renewables arm in a $1.4bn deal.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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