Banco Sabadell | Portugal’s EDP and Australia’s fund Macquarie have created a joint venture to acquire Spain’s Viesgo, the country’s fourth largest electricity company. EDP is acquiring Viesgo’s 500 MW of renewable assets for 615 million euros. Macquarie already owned the distribution assets (0.7 million customers). As a result, EDP will hold 75.1% of the capital of the new Viesgo and Macquarie will hold the remainder. Thus EDP will be the manager and main shareholder, while Macquarie will just be a financial partner.
This new company would have been valued at 2.7 billion euros when each partner contributed its previous assets (EDP its renewable and distribution assets and Macquarie its distribution assets), creating a new stronger competitor, growing especially in renewable energies. In terms of distribution, the new Viesgo will have around 1.3 million customers, which is still low compared with the 3.7 million of its nearest competitor, Naturgy.
Although a priori the creation of a new stronger competitor could mean pressure on the sector, our opinion is that it will have little impact. The greatest competitive pressures in the energy sector come from the commercialization leg, where oil companies such as Repsol and Total are entering. The new Viesgo already sold the commercialization line to Repsol in 2018.
The objective of the new group is to grow in renewables, where there is already a high level of interest from competitors in the Spanish market (more competition for Iberdrola and Acciona). It is complicated to extrapolate valuation multiples, as there are no financial metrics available for the renewables acquired, or for the part of distribution assets provided by Macquarie.
