Grenergy Renewables has presented the results for the first semester, highlighting the start-up of both projects that will remain in operation and sold to third parties. It reaches an operating capacity of 578MW (+12MW) and 802MW under construction (+141MW). Despite the important investments, the capital increase carried out in June improves the NFD/EBITDA ratios to 5.6x (6.2x 1Q22).
Sales grew by 30.1% compared to the same period last year thanks to the revenue mix between plants sold to third parties (D&C) and the contribution of the plants started up in recent quarters. In its goal of becoming an IPP, energy sales gain weight within the revenue mix, up to 24%. We expect this trend to continue upwards. Eduardo Imedio, Renta 4 analystin a report.
Capacity in operation and under construction amounts to 1,380MW. “On a negative note, the Backlog decreased to 748MW (811MW in the first quarter), mainly due to delays in obtaining the Environmental Impact Statement for certain projects in Spain.” On the contrary, the phase of identified opportunities increases “significantly”, reaching a total pipeline of 13 GW. “We remember that in our assessment we did not contemplate any project of this phase due to the early stage of maturity”, points out the Renta 4 expert.
PPAs are being negotiated for the Ayora (172MW) and Tabernas (300MW) projects, prices between 40 and 45 euros. They have renegotiated the Belinchón PPA (150MW) from 30-35 euros to 40-45 euros, also obtaining a first year as a merchant.
Strong investments and higher than expected working capital (capex -63 million and change in WK -49 million in the semester) raise the NFD to 270 million euros (5.6x EBITDA). Despite the increase in the NFD, the NFD EBITDA ratio has improved from 6.2x in the previous quarter due to the capital increase (90 million) carried out last June. The management team has commented that expansion covers all cash needs until the end of 2024, so they would not need additional funds to meet the goal of 3.5 GW installed in 2024.
On the other hand, the company is exploring the sale of minority stakes in some projects. “Even though we don’t have a breakdown of the sales prices they expect to fetch, asset turnover occurs in a market situation that has enormously raised the value of energy assets”, believes Imedio. “This rotation would suppose a clear crystallization of value. We expect more details in the next quarter.”
Grenergy expects to provide the first details regarding the entry into Germany in the first quarter of 2023. The entry into this market was announced last June, with the goal of reaching a pipeline of 3 GW before 2025. Germany is called to to be the largest photovoltaic market in Europe (215 GW in 2030).
Finally, the company commented on a significant increase in financing costs for new plants (4.5 – 5% Europe, 5.5 – 6% in LatAm). On the other hand, Capex per MW continues to decline, thanks to the drop in logistics costs, although it still does not reach 2020 levels.
“We believe that Grenergy’s results have been, in general, positive”, summarizes the Renta 4 expert. The company has sufficient financing to execute the strategic plan (3.5 GW 2025). Despite the delay in certain projects and a level of capex that has not returned to normal, we believe that the current IRRs of the projects are even more attractive than in the past, as a result of higher electricity prices in the short and long term. (PPA 10 years increase from 30-35 euros to 40-45 euros).
“We maintain a new positive view of the value, with recommendation of ‘overweight’ and target price of 45.6 euros per share”, concludes Renta 4. Taking yesterday’s closing price of 31.20 euros in the Continuous Market as a reference, this represents an upward potential for the value of 46%.
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