By Diana Usova, Hisha Tharmarajah, Martin Atkinson, and Smit Kotak (University of Bristol); Grace Pui, Mateo Sy, Karson Shi, Parth Talwar (Hong Kong University)
Photo: Lincoln Electric Systems (Unsplash)
Overview of the deal
Acquirer: Abu Dhabi Future Energy Company (Masdar)
Target: Saeta Yield, S.A
Total Transaction Size: $1.4 billion (€1.2 billion)
Closed Date: Pending (Expected to occur around end of 2024 subject to customary approvals)
Acquirer Advisors: Citigroup Global Markets Limited (transaction), Linklaters (Legal), UL (technical) and KPMG (financial and tax)
Target Advisors: Santander and Société Générale (transaction), Uría Menéndez (legal), G-Advisory (technical) and KPMG (tax)
On September 24, 2024, Masdar, the UAE’s foremost clean energy powerhouse, announced its plan to acquire Saeta Yield, S.A. from Brookfield Renewable Partners L.P. for around $1.4 billion (€1.2 billion). This strategic move would significantly bolster Masdar’s renewable energy footprint in the Iberian Peninsula, incorporating 745 megawatts (MW) of mainly wind assets along with a 1.6 gigawatt (GW) development pipeline in Spain and Portugal. The portfolio comprises 538 MW of wind assets in Spain, 144 MW in Portugal, and 63 MW of solar PV assets in Spain, while excluding a regulated portfolio of 350 MW of concentrated solar power that Brookfield will retain.
Previously, Brookfield acquired Saeta in 2018 and effectively implemented a business strategy aimed at divesting non-core assets, enhancing its capital structure, and positioning the company for growth through hybridization, repowering, and greenfield development.
This acquisition follows Masdar's agreement to acquire a 49.99% stake in Endesa’s 2.5 GW renewable energy portfolio in Spain in July 2024. Together, these initiatives reflect Masdar’s strategic focus on solidifying its position in the European market. The latest acquisition supports Masdar’s ambitious target of reaching a global capacity of 100 GW by 2030, further underscoring its dedication to sustainable energy solutions. By enhancing its operational capabilities and broadening its renewable energy portfolio, Masdar is establishing itself as a prominent player in the global renewable energy market, reinforcing its long-term sustainability goals.
As part of the company’s efforts to reinforce its presence in Europe, this landmark deal with Brookfield Renewable (Saeta) "builds on Masdar’s strong growth story, demonstrating [its] commitment to the EU’s wider net zero by 2050 target and unlocking new capacity.” Dr Sultan Al Jaber (Chairman of Masdar)
Company Details (Acquirer - Masdar)
Masdar is one of the world’s fastest growing renewable energy companies and a green hydrogen leader, placing the UAE at the forefront of the energy transition. With its purpose of providing affordable clean energy to the world for a more sustainable future, Masdar positions itself as a pioneer in advancing the clean energy sector and a key enabler of the UAE’s vision as a global leader in sustainability and climate action. The company has developed projects in more than 40 countries across 6 continents with a combined capacity of more than 31.5GW.
Masdar's service offering includes project development, financing, and operations in renewable energy, developing utility-scale power plants, community grid projects, energy storage, efficiency-focused systems, and technology demonstration projects.
Founded: 2006
Headquartered: Abu Dhabi, United Arab Emirates
CEO: Mohamed Jameel Al Ramahi
Number of employees: 800-900
Market Cap: N/A
Enterprise Value: N/A
LTM Revenue: AED 3.35bn
LTM EBITDA: AED 9.42m
LTM EV/Revenue: N/A
LTM EV/EDBITDA: N/A
Company Details (Target - Saeta Yield)
Saeta Yield is a renewable energy company with an operational asset portfolio spanning across the Iberian Peninsula, offering contracted revenues through regulatory agreements and power purchase agreements (PPAs) for the next 15 years.
Founded in late 2014 as a spin-off from Cobra, it became the first YieldCo listed on the Ibex35 in the spring of 2015. Since then, Saeta Yield has expanded its asset base and championed its 2018-2023 Strategic Energy Plan, positioning itself for growth in southern Europe while actively contributing to the global decarbonization challenge.
The firm’s operational portfolio currently consists of 28 wind farms, 10 photovoltaic plants and 7 solar thermal plants across Spain and Portugal, with an aggregate generation capacity of 1,188 MW.
Founded in 2014; headquartered in Madrid, Spain
CEO: Álvaro Pérez de Lema
Number of employees: 150
Projections and Assumptions
Short-Term Consequences
Masdar’s acquisition of Saeta is set to leave a lasting impact on the renewable energy sector across the Iberian Peninsula. Since its founding in 2006, Masdar’s portfolio has primarily consisted of renewable energy solutions and infrastructure projects including PV plants and wind farms; this new acquisition of over 745MW of wind assets in Spain and Portugal would continue to build on such efforts.
In the short term, Masdar may likely shift its operational focus towards Europe relative to other continents, effectively diversifying its geographic footprint. This is especially significant given that most of its projects have been in Asia, Africa, and the Americas. At the same time, Masdar’s enhanced presence in one of the world’s largest renewable energy markets would enable it to leverage industry-wide economies of scale and benefit from revenue streams through additional power purchase agreements and grid sales. Moreover, Masdar’s research and development team’s industry-specific expertise, compared to The Brookfield Group, is expected to realize technological synergies through knowledge-sharing and enhanced innovation.
However, it should be noted that further interest rate cuts from the European Central Bank by the end of this year could place inflationary pressures on Masdar’s inputs and increase its costs of operation in the short run.
Long-Term Upsides
Masdar’s $1.4 billion acquisition of Saeta Yield, which is expected to occur by the end of 2024, aligns well with its long-term goal of having equity investments in 100 gigawatts of renewable power projects by 2030. The portfolio in the proposed acquisition consists of 745 megawatts of wind and solar power assets across Spain and Portugal - this strategic decision will significantly boost Masdar’s operational capacity and strengthen its positions on one of Europe's key renewable markets. As the portfolio also includes around 1.6 gigawatts of projects under development across Iberian Peninsula it enables Masdar to gain significant future profits capitalizing on the huge demand for renewable energy.
Masdar’s acquisition of Saeta Yield is also strategically beneficial for both ESG alignment and financial synergies. It substantially develops Masdar’s renewable portfolio, contributing positively to environmental sustainability by increasing clean energy output, which aligns with global carbon reduction goals. Additionally, the integration of Saeta’s assets and development projects offers substantial cost and revenue synergies, optimizing operational efficiencies and maximizing future profit potentials in Spain and Portugal.
In addition to being in line with Masdar's strategic goal to lead the renewable energy industry, this acquisition puts the business in a strong position to take advantage of new developments and technology in the field of green energy, maintaining a competitive edge in the quickly changing energy market.
Risks and Uncertainties
Announced back in June, Masdar's €817 million investment in Spanish solar plant Endesa, in combination with its acquisition of Saeta Yield’s Spain and Portugal renewable energy portfolio are both pending customary, foreign investment approval, set to close by the end of 2024. Two large transactions in close succession could lead to overconfidence in UAE-Spain relations, as well as cultural friction between Endesa and Saeta Yield’s integration into Masdar. Not to mention, an overestimation in cost-saving synergies of Saeta Yield into Masdar’s operation could arise, which could lead to undervalued returns from the transaction, and thus friction amongst shareholders. Masdar is a global clean energy pioneer and its commitment to exceed 100GW and produce 1 million tonnes of green hydrogen by 2030 in just over five years could lead to insufficient due diligence and overpayments in transactions to meet this ambitious target.
Additionally, shifts in market conditions add another layer of uncertainty; the renewable energy sector falls under the volatile commodities market, which remains sensitive to geopolitical events. For example, Russia’s previous invasion of Ukraine in February 2022 resulted in a fall in electricity prices from record highs; the continuous war has led to ongoing instability in the market, which led to reports of returns falling in recent years.
Finally, it is worth noting that while the acquisition involves Saeta’s renewable assets, Canadian private equity group, Brookfield Renewable Partners is set to retain 350MW of concentrated solar power assets, where Masdar will need to navigate conflicts of interest that could arise.