Enel SpA subsidiary Enel Green Power has sold 80% of its stake in a holding company that owns eight solar and wind projects in Mexico with a total capacity of more than 1,700 MW for $1.35 billion, the company announced Oct. 9.
Enel signed the deal with Canadian institutional investor La Caisse de dépôt et placement du Québec and the investment vehicle of Mexican pension fund CKD Infraestructura México SA de CV. Enel will still run the three operating plants, with a total of 429 MW, and complete the five other facilities that are under construction under its agreement with the investors. The deal is expected to close by the end of 2017, pending regulatory approval.
Three of the projects are solar, totaling 992 MW, and the other five are wind, totaling 720 MW. The output of all eight projects is secured under power purchase agreements. Mexico wants to supply 40% of its electricity needs with renewable resources by 2035.
Enel has been seeking to create 6,700 MW of renewable capacity between 2017 and 2019 as part of its strategic plan. About half of that added capacity is expected to come through Enel's build, sell and operate model, which CEO Francesco Starace said he felt confident about during the company's July 27 earnings call. The Mexican projects' sale has boosted the company's effort to beef up its renewables business, Enel Green Power CEO Antonio Cammisecra said in a statement.
"The new model represents an opportunity for partners willing to invest in a large and diversified portfolio of projects in strategic areas, supported by long-term power purchase agreements, with the plants developed, built and operated by Enel Green Power," Cammisecra said. "This strategy enables us to further exploit our global pipeline of solar and wind projects whereby [gaining] access to additional resources, accelerating our growth."
It also cuts Enel's consolidated net debt by $1.9 billion, or about €1.6 billion, which has been another important goal for the Italian energy company. During its earnings call, Enel reported its net debt at €38.8 billion for the first six months of 2017, up about €1.2 billion from December 2016.
Enel maintains its right to transfer additional projects to a holding company as of Jan. 1, 2020, which means Enel could become majority shareholder again, depending on how many projects it places within the holding company.
La Caisse and CKD, which consists of several Mexican pension fund managers and an infrastructure fund, established an investment platform in 2015 and have since invested in road and telecommunications infrastructure projects. The Enel acquisition is their first investment in energy.