CDPQ Invests in Renewables Platform in Spain
Canadian pension fund manager Caisse de depot et placement du Quebec (CDPQ) will acquire a 216-MWp solar portfolio from Spanish firm Q-Energy, it said on Tuesday.
The photovoltaic (PV) portfolio, originally owned by Q-Energy III Fund, consists of 73 solar farms spread across Spain. CDPQ estimates that the assets are capable of generating more than 355,000 MWh annually, enough to meet the demand of over 115,000 households.
According to the announcement, Q-Energy will continue to manage the solar plants, carry out day-to-day operations, monitoring and maintenance.
The Royal Bank of Canada (TSE:RY) and law firm Cuatrecasas served as advisers for Q-Energy, while CDPQ was advised by BNP Paribas (EPA:BNP) and Watson Farley & Williams LLP.
The parties expect to finalise the transaction over the coming months.
The purchase will represent the first equity investment in Spain for the Canadian institutional investor. CDPQ said it seeks to create a new platform and add further renewable energy assets in the Iberian country.
Chief Investment Officer also reports that CDPQ expands into renewable energy infrastructure in Spain:
Global institutional investor Caisse de dépôt et placement du Québec (CDPQ) is expanding into renewable energy infrastructure in Spain with a purchase of solar assets.
The purchase of a portfolio of 73 solar power systems is the first equity infrastructure investment in Spain for the Quebec pension fund, renewable energy manager and investor Q-Energy said Tuesday. The assets bought through the Q-Energy III Fund will supply enough electricity to support more than 115,000 households.
“With this transaction, we are laying the foundation of our renewables platform in Spain, which will allow us to progressively increase our presence in this key renewable market and achieve CDPQ’s carbon intensity reduction targets,” CDPQ Executive Vice President and Head of Infrastructure Emmanuel Jaclot said in a statement.
Q-Energy, which started in 2007 and operates 150 renewable energy plants across Spain, Italy, and Germany, will continue to manage the assets for CDPQ.
CDPQ is one of the largest institutional investors in renewable energy with a 2050 carbon neutral target. Its other renewable investments include a $75 million reinvestment in Indian solar power producer Azure Power Global and a reinvestment into electric vehicle charging company AddÉnergie. The pension fund is also funding solar and wind farms in France, Mexico, and the United Kingdom.
The Quebec pension fund has about $21.2 billion, or about 8% of its $253 billion total portfolio in infrastructure assets. In the first half of 2020, CDPQ lost 2.3% in asset value, while its infrastructure allocation lost 1%. The pension fund said the infrastructure portfolio is showing some resilience despite exposure to the transport sector, which is hard hit from the pandemic.
The solar transaction is expected to close in the coming months. The Royal Bank of Canada and Cuatrecasas advised Q-Energy on the deal. BNP Paribas and Watson Farley & Williams counseled CDPQ.
CDPQ put out a press release on this deal:
Q-Energy, a global platform for investment and renewable energy management, today announced the sale of a portfolio of regulated photovoltaic solar assets to Caisse de dépôt et placement du Québec (CDPQ), a global institutional investor.
The portfolio is made up of 73 assets with a total capacity of 216 MWp located throughout Spain. These assets produce over 355,000 MWh annually, which is enough clean electricity to supply more than 115,000 households, or the equivalent consumption of cities such as Valladolid, Alicante or Córdoba in Spain.
This investment represents the first step in creating a new CDPQ platform in Spain, which will seek to aggregate further renewable assets. Following this transaction, Q-Energy will continue to provide comprehensive management of the assets, carrying out day-to-day operations, monitoring and maintenance of the 73 assets. The Q-Energy team currently manages more than 150 renewable energy plants across Spain, Italy and Germany, generating over 1,300 MW of power. On the investment side, Q-Energy has invested more than EUR 6 billion in the sector since 2007, in photovoltaic solar, concentrated solar power, and wind assets.
According to Iñigo Olaguibel, Founding Partner of Q-Energy: “This operation is in line with our wider strategy of continuous financial and operational optimization of renewable energy assets. Having CDPQ as the new owner of this portfolio is a clear example of their commitment to the renewable sector and to Spain, and is a great moment of pride for the Q-Energy team, which will continue to take care of the projects’ long-term management. At Q-Energy, we consider the sector as fundamental to ensuring a sustainable future for our society. We will continue to invest in the sector in the coming years through our new Q-Energy IV Fund, where we hope to invest another EUR 4 billion across different European geographies.”
“This first equity infrastructure investment in Spain is a milestone in the deployment of CDPQ’s long-term European infrastructure strategy,” said Emmanuel Jaclot, Executive Vice President and Head of Infrastructure at CDPQ. “With this transaction, we are laying the foundation of our renewables platform in Spain, which will allow us to progressively increase our presence in this key renewable market and achieve CDPQ’s carbon intensity reduction targets.”
This portfolio of assets was previously owned by the Q-Energy III Fund, which launched in 2018. In just two years this fund has been fully invested and is now in the process of divesting. The closing of this transaction will be finalized over the coming months. Q-Energy has been advised on this transaction by Royal Bank of Canada and Cuatrecasas, and CDPQ was advised by BNP Paribas and Watson Farley & Williams.
So, Emmanuel Jaclot and his infrastructure team are at it again, this time striking a deal to carry out CDPQ's first infrastructure equity investment in Spain with the purchase of solar assets from Q-Energy’s Q-Energy III Fund.
The way this deal was struck is interesting. CDPQ likely (not for sure) invested in Q-Energy's Q-Energy III Fund and then made a bid for assets when Q-Energy started divesting to realize gains for itself and its investors and focus on its Q-Energy IV
Fund (EUR 4 billion across different European geographies).
By making this bid on assets in a maturing fund, CDPQ is making a direct investment in these solar assets but it's wisely teaming with Q-Energy which will continue to operate these assets and most likely has a minority stake in this new renewables platform (to ensure alignment of interests).
This renewables platform is targeting Spain but Q-Energy also invests in Italy and Germany.
I looked into Q-Energy to find out more about them:
Over the last decade, Q-Energy has been facilitating investors’ access to real assets in the renewable energy sector in order to participate in and promote the transition to a low carbon economy.
Currently, Q-Energy team of over 60 professionals manage these two asset platforms with more than 80 renewable generating facilities in Spain and Italy.
Q-Energy has founded two renewable energy vehicles: Q-Energy I (FRV) and Q-Energy II (Vela Energy).
Q-Energy provides full-scope investment, financing and asset management capabilities, with its exhaustive operational processes and best-in-class IT systems.
Q-Energy has invested over €3bn debt and equity into the sector globally, has developed over 2GW of solar PV and CSP assets in the main international markets.
Financial details on this deal were not provided so I had to do some digging.
In September, Q-Energy acquired renewables firm Torresol, which owns three solar thermal plants with a combined capacity of 120 MW in southern Spain.
Torresol was formerly owned by Spanish group SENER and Masdar – a subsidiary of Mubadala, the sovereign wealth fund of Abu Dhabi.
Back in 2010, Masdar and SENER's joint venture Torresol Energy secured US$760 million loan for Valle 1 and Valle 2 thermal solar plants:
Torresol Energy, a joint venture between Masdar, a wholly-owned subsidiary of the Mubadala Development Company, and SENER, a leading international multidiscipline engineering company, with offices in Abu Dhabi, has secured US$760 million project finance loans for the construction of its twin Concentrated Solar Power (CSP) plants - Valle 1 and Valle 2 - in Andalucía, Spain. The total investment value for the two plants is US$1bn.
Work on the two 50 MW Concentrated Solar Power (CSP) plants began in March 2009 and is the first time that twin thermo solar plants have been built simultaneously. Both plants incorporate energy solutions developed by SENER, including molten salt thermal storage capacity of up to 7.5 hours. This means that the state-of-the-art plants will be capable of generating electricity at night and through periods of poor sunlight, enabling a continuous supply of electricity and overcoming intermittency, one of the drawbacks of some renewable technologies.
Valle 1 & 2, together with the Gemasolar Central Tower Plant (17MW / 110GWh per year), which was project financed in November 2008 and continues to progress construction as expected, represents a total investment by Torresol Energy of $1.4bn across 3 CSP projects over the past 12 months.
Talking on the announcement Enrique Sendagorta, Chairman of Torresol Energy, said: “We are very proud that Valle 1 and Valle 2 solar plants secured this important financial support, which allows us to continue on schedule with our strategic plans”.
“With a combined production of 340 GWh per annum, which equates to the clean and safe energy for over 80,000 homes and a saving of 90,000 tons of CO2 emissions every year, Valle 1 and 2 will be leaders in the delivery of concentrated solar power and a major contribution to the region’s power supply. A significant feature of these plants will be their ability to produce electricity at night and at times of poor sunlight, which is obviously an important consideration for consumers who require and demand uninterrupted electricity supplies,” he added.
Dr. Sultan Ahmed Al Jaber, CEO, Masdar, said: “The CSP projects currently under construction in Spain will introduce and test new technologies, which will help promote CSP as an economically competitive and viable alternative to traditional power sources. Through Torresol Energy, we are actively promoting the development and operation of large-scale CSP plants throughout the world and hope to implement additional projects across Southern Europe, North Africa, the Middle East and the Southwest United States”.
The construction of the new plants will have additional benefits for Spain, such as an estimated 3,200 new direct employment opportunities during the two year construction period – with a further 150 specialised professionals required to manage operations after completion.
The assets bought through the Q-Energy III Fund will supply enough electricity to support more than 115,000 households. It gives you an idea of how much these assets are worth, roughly USD $1.5 to $2 billion by my best "guesstimate", if not more (I have no clue what CDPQ paid for these assets).
How much did CDPQ and Q-Energy finance through equity and how much through debt? Nobody knows but these details are important when valuing infrastructure assets and I wish they provided them.
All I can tell you for sure is CDPQ is building out its renewables platform in Spain, a country that is taking sustainable energy to the next level. This is a long-term platform, one that will provide great cash flows over many years.
In fact, I often lamented that if only Greece followed Spain and Portugal's lead into renewables, the country would have been much better off.
[Note to CDPQ and Q-Energy: I can put you in touch with the right people in Greece to expand your renewable energy platform there in a scalable way.]
By the way, CDPQ isn't the only behemoth Canadian pension fund to go green. CPP Investments is also ramping up its green investments:
The Canada Pension Plan Investment Board (CPP Investments) has doubled down on its investments in green energy.
The investment manager more than doubled its investments in global renewable energy companies to $6.6 billion in the year ended June 30, according to CPP Investments’ latest report on sustainable investing.
The dive into renewables included significant investments in Alberta’s Enbridge Inc. and Brazil’s Votorantim Energia.
“CPP Investments’ exposure to renewables is aligned with our belief that the energy evolution provides opportunities for attractive long-term, risk-adjusted returns,” the investment manager stated in the report.
In the report, CPP Investments outlined its expectations of the companies it invests in, including that they disclose environmental, social and governance (ESG) risks.
The investment manager added that it supports companies aligning their ESG reporting with the recommendations made by the Sustainability Accounting Standards Board and the Financial Stability Board’s Task Force on Climate-related Financial Disclosures.
“We believe that by fully considering ESG risks and opportunities, we become better investors and are able to enhance returns and reduce risk for the fund’s more than 20 million contributors and beneficiaries,” Mark Machin, president and CEO of CPP Investments, said in a release.
No doubt, CPP Investments, CDPQ and other large Canadian pensions take ESG risks very seriously but environmental groups just can't cut them some slack, spreading lies and misinformation.
Lastly, don't look now but there's a full blown solar melt-up going on in the stock market:
I don't know what to make of it except it's probably a combination of people betting on a Biden win (positive for renewables), way too much liquidity adding to speculative fervor and millennials and Robinhoodies falling in love with renewable energy stocks now that they've gotten whiplash investing in Tesla.
My gut is telling me now is a good time to enter a pairs trade -- Short TAN/ Long XLE -- to basically short this latest move in renewable energy shares and go long traditional energy but it's probably too soon (keep an eye on this trade, if Trump pulls off another upset, it will make you a killing).
Below, renewables are on the rise in Spain, with the country hoping to source nearly 75 per cent of its electricity from green energy by 2030. With solar expected to play an increasingly important role in the energy mix, Macquarie Asset Management's Tom van Rijsewijk explains the growing opportunity in Spain’s solar infrastructure debt market.
Also,James Sibony, CEO of Esparity Solar, discusses the European solar energy market, particularly in Spain. He explains how Spain is at the forefront of a global trend towards profitable renewables and how regulations can be improved to help address speculation and bring more storage online.