Alternative investment specialist Aquila Capital has agreed with Energias de Portugal SA (EDP) to acquire a portfolio of 21 small hydropower plants in northern and central Portugal with a total capacity of about 100 MW.
This latest transaction follows Aquila Capital’s first investment in Portugal’s renewable infrastructure, which was the acquisition of a PV portfolio with a capacity of 170 MWp at the end of 2017, according to a press release.
EDP announced it was selling its EDP Small Hydro SA subsidiary in a deal valued at US$187.2 million. EDP said the sale was part of its strategy to sell non-core operations in Portugal.
The new hydropower portfolio consists of 14 run-of-river units and seven reservoir plants. It is diversified across 10 river systems and all plants have been in operation for several years. About half of the portfolio’s annual energy production stems from plants with attached reservoirs, whose importance and economic potential is increasing as the share of renewable energy grows steadily. The assets also benefit from attractive feed-in tariffs financed by end consumers, improving the predictability of investors’ returns, Aquila Capital says.
“Portugal’s renewable energy market is grossly underestimated by general opinion and investors alike,” said Roman Rosslenbroich, co-founder and chief executive officer of Aquila Capital. “The country is highly attractive to our investors for several reasons, including the predictability provided by feed-in tariffs, the stability of the binational energy market and the absence of currency risks. In particular, Portuguese hydropower is an ideal addition to our institutional investors’ portfolios because it offers diversification both regionally and by asset class.”
Dr. Tor Syverud, head of investment management hydropower at Aquila Capital, said, “This new portfolio, representing about 25% of Portuguese small-scale hydropower plants, can benefit from potential savings identified through our in-house expertise. To achieve synergies for our institutional investors, we plan further expansions on the Iberian market while following our active asset management approach.”
With more than 100 plants in Norway, Aquila Capital is the largest independent operator of small-scale hydropower plants in Europe, according to a press release.
EDP also just released its financial results for the first nine months of 2018, saying net income fell by 74% due to an extraordinary provision for alleged overcompensation of contractual equilibrium maintenance cost agreements. In a release, the company said in Portugal, “the improvement in hydroelectric conditions was not sufficient to mitigate the strong impact of regulatory cuts in Portugal, which have affected both the production segment … and the distribution segment.” By contrast, in Spain, increased hydroelectric production led to a rise in earnings before interest, taxes, depreciation and amortization (or EBITDA).
Speaking of small hydro, the POWER-GEN International event taking place next month in Orlando, Fla., U.S., features a session on the topic as part of the Hydropower Trends and Innovation track. Learn more here.