Gestamp mulls wind options after solar sale


July 27, 2015

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Last week, US private equity house KKR (Kohlberg Kravis Roberts) bought an 80% stake in the solar arm of Spanish firm Gestamp.

This deal valued Gestamp Solar at $1bn, and the 80% stake is set to be held by KKR’s $3.1bn fund, Global Infrastructure Investors II. The deal is set to complete this year subject to regulatory approval. Gestamp Solar is active in 18 countries and has 300MW of solar farms operational or in construction, with 2.2GW more planned.

This foray into the solar market is a significant move for KKR, which has been growing its investments in renewable energy.

But we wonder what this means for Gestamp’s wind division.

On the face of it, Gestamp Wind is an investment as attractive as its solar sibling. It is developing, building and running wind farms in Europe, North America, South America and Africa; it has 900MW in operation or under construction; and it is planning 1GW more.

And we know the parent company is looking at division’s future. Indeed, in the release on the solar deal, Gestamp Renewables president Jon Riberas fanned speculation by saying that the firm was continuing to “evaluate its options” for the wind arm.

Neither Gestamp nor KKR has said anything, but we think it would be strange if a deal had not been discussed.

We also know KKR is interested in wind. In October, it completed the acquisition of a one-third stake in Spanish utility Acciona’s international development arm Acciona Energia Internacional, which has a 2.3GW portfolio, mainly wind, in 14 countries. Its key markets include North America, Europe, Australia and Africa.

Buying a stake in Gestamp Wind would give it the chance to grow its portfolio even further.

And KKR has also talked highly of its new partner, as you would expect. Jesus Olmos, head of European infrastructure at KKR, said Gestamp had a “highly experienced and entrepreneurial management team, an outstanding track record of developing and constructing its own assets, and an attractive advanced portfolio”.

But such a deal is not without risk. KKR may feel that buying a big stake in another part of the Spanish firm would leave its $3.1bn fund too exposed to the fortunes of one company. It is a legitimate concern, particularly with the problems facing Spanish firms.

So, if there is no deal with KKR, what else could happen with Gestamp Wind?

One option would be to continue in its current form, but that looks unlikely. We think Gestamp Wind wants a deal so it can bring in the financial backing that would enable it to step up the scale and pace of its investment plans, and compete with global rivals.

If there is to be a deal then there will be other private equity firms interested, as well as US yieldcos and other big developers. Wind is ripe for consolidation, and we have seen Centerbridge Partners get involved this year by buying manufacturer Senvion.

Or perhaps it will sell a stake to US renewables giant SunEdison, which has done a series of significant deals this year.

But, whichever way this goes, we expect a deal in the next 12 months. Watch this space.

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