European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

Price Range Set for Acciona Renewables Spin-Off

Event-Driven

On 18 February <a href="https://www.smartkarma.com/entities/acciona-sa" target="_blank" data-smartkarma-citation="entities:21248:1" rel="noopener">Acciona SA (ANA SM)</a> announced it would list 25% of its renewables subsidiary, Acciona Energías Renovables, and would retain control.
On 7 June, the Spanish Securities and Markets Commission (CNMV) approved the registration document for the IPO, exclusively aimed at institutional investors.
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The IPO consists of a secondary offering by parent company Acciona SA and will serve as a preliminary step for Acciona Energias Renovables' admission to trading on the Spanish Continuous Market.
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Press sources point to a value between €10 bn and €12 bn, the largest IPO in the Spanish market since <a href="https://www.smartkarma.com/entities/aena-sa" target="_blank" data-smartkarma-citation="entities:21244:1" rel="noopener">Aena SA (AENA SM)</a> in 2015. Acciona plans to place around 25% of the capital (30% if the green shoe is added), for which it could raise between €2.5 and €3 bn.
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The objective is to have the shares listed on the last week of June.
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According to Acciona, the rationale of the spin-off is:
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financing its ambitious growth plans in renewables: the IPO will allow to accelerate growth goals. The pre-IPO target was to reach 15,000MW in 2024 from 10,700MW in 2020. Now this target is improved to 20,000MW in 2025. Acciona Energías Renovables, as a pure renewables operator, will seek to maximize its growth potential, with an unrestricted balance sheet with access to a more efficient cost of capital. 
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Acciona will crystallize the value in the group's fastest growing subsidiary. This subsidiary represents 75% of the group's EBITDA, but Acciona receives little recognition for its renewables business and the high proportion of profits these assets now generate.
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I calculate Acciona's fair value by using a DCF (Capital IQ consensus, WACC 5.5%, g 1.5%). I add the value of subsidiaries and apply a 15% holding discount.
Fair value is €172.4/share, 25% upside, although planned growth acceleration for Acciona Energías Renovables, should allow further upward revisions in the parent company target prices.
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Acciona's shares trade at 10.3x EV/Fwd EBITDA, below 16.1x at which <a href="https://www.smartkarma.com/entities/orsted-a-s" target="_blank" data-smartkarma-citation="entities:24765:1" rel="noopener">Orsted A/S (ORSTED DC)</a> trades.
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The valuation of Acciona Energías Renovables includes some €4 bn of financial debt, over 4x EBITDA. Assuming a cautious 20% discount on Orsted, or 13.0x EBITDA, Acciona Energías Renovables would be valued at €12,000 mn euros, 87% of the current market of the entire group.
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Assuming Acciona nets €3 bn, half of the IPO proceeds, €1.5 bn, together with another €1.5 bn from the syndicated loan (see background section), will significantly lower the net debt (and the WACC) of Acciona parent, thus triggering a re-rating of the shares.
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Recommendation long ANA SM, TP €172.4, with possibility of further upside.

On 18 February Acciona SA (ANA SM) announced it would list 25% of its renewables subsidiary, Acciona Energías Renovables, and would retain control.
On 7 June, the Spanish Securities and Markets Commission (CNMV) approved the registration document for the IPO, exclusively aimed at institutional investors.


The IPO consists of a secondary offering by parent company Acciona SA and will serve as a preliminary step for Acciona Energias Renovables' admission to trading on the Spanish Continuous Market.


Press sources point to a value between €10 bn and €12 bn, the largest IPO in the Spanish market since Aena SA (AENA SM) in 2015. Acciona plans to place around 25% of the capital (30% if the green shoe is added), for which it could raise between €2.5 and €3 bn.


The objective is to have the shares listed on the last week of June.


According to Acciona, the rationale of the spin-off is:


financing its ambitious growth plans in renewables: the IPO will allow to accelerate growth goals. The pre-IPO target was to reach 15,000MW in 2024 from 10,700MW in 2020. Now this target is improved to 20,000MW in 2025. Acciona Energías Renovables, as a pure renewables operator, will seek to maximize its growth potential, with an unrestricted balance sheet with access to a more efficient cost of capital. 


Acciona will crystallize the value in the group's fastest growing subsidiary. This subsidiary represents 75% of the group's EBITDA, but Acciona receives little recognition for its renewables business and the high proportion of profits these assets now generate.


I calculate Acciona's fair value by using a DCF (Capital IQ consensus, WACC 5.5%, g 1.5%). I add the value of subsidiaries and apply a 15% holding discount.
Fair value is €172.4/share, 25% upside, although planned growth acceleration for Acciona Energías Renovables, should allow further upward revisions in the parent company target prices.


Acciona's shares trade at 10.3x EV/Fwd EBITDA, below 16.1x at which Orsted A/S (ORSTED DC) trades.


The valuation of Acciona Energías Renovables includes some €4 bn of financial debt, over 4x EBITDA. Assuming a cautious 20% discount on Orsted, or 13.0x EBITDA, Acciona Energías Renovables would be valued at €12,000 mn euros, 87% of the current market of the entire group.


Assuming Acciona nets €3 bn, half of the IPO proceeds, €1.5 bn, together with another €1.5 bn from the syndicated loan (see background section), will significantly lower the net debt (and the WACC) of Acciona parent, thus triggering a re-rating of the shares.


Recommendation long ANA SM, TP €172.4, with possibility of further upside.

Acciona SA

Spin-Off of Acciona Renewables