EDP launches buy-back offer for its renewables subsidiary

PORTUGAL: Energy multinational EDP has launched a bid to buy back the 22.5% of its renewables subsidiary EDPR traded on the Lisbon stock market using proceeds from the €2.59 billion sale of its Spanish Naturgas gas distribution business.

EDPR's portfolio covers the Americas and Europe

EDP is offering shareholders €6.80/share, a 10.5% premium on the €6.15 volume-weighted average price over the last six months.

If the offer succeeds in lifting EDP's EDPR stake beyond 90% the renewables business will be delisted from the stock market, the company said.

The principal reasons for the portfolio reshuffle are EDPR's "low stock market liquidity" and "suboptimal capital structure" along with a desire to concentrate on the group's core renewables business, the company told investors.

In 2008, when EDPR was floated, the parent company raised €1.566 billion from the sale of 22% of the stock at €8 per share. Recovering 100% of EDPR's shareholding at €6.80 per share would cost €1.33 billion.

The move is both "very opportunistic and very smart, " Felipe Echevarria, utilities analyst with Banco Sabadell, told Windpower Monthly.

The €2.59 billion sale price agreed for Naturgas is a multiple of almost 16 of the Spanish company's EBITDA and "now is a good moment to buy" EDPR stock, taking advantage of the current low price of EDPR's shares which were rising before the US presidential elections, Echevarria added.

It follows the trend set by other big energy companies such as Iberdola, which bought back its renewables subsidiary at a profit in 2011 and is now investing almost exclusively in renewables, he said.

EDPR shareholders will, however, seek to obtain a higher price because "now is not a good moment to sell," according to Echevarria.

The US government's energy policy "will not affect EDPR, which has guaranteed MWs in the US, because Trump will not introduce retroactive changes", added Echevarria.