ENERGO-PRO acquires ten hydropower plants in Spain from Sixth Street

ENERGO-PRO, a.s. an independent power producer based in the Czech Republic, is expanding its operations to Galicia, Spain. ENERGO-PRO has completed the acquisition of 100% of the share capital in Xallas Electricidad y Aleaciones, S.A.U. ("Xeal") and Feroe Ventures & Investments S.L.U. ("Feroe") from Sixth Street, a leading global investment firm. This is one of the largest Czech investments in Spain. To finance the transaction, ENERGO-PRO has obtained a EUR 300 million bridge loan from J.P. Morgan and Goldman Sachs.              

Xeal operates ten hydropower plants with a total capacity of 167 MW and two ferroalloy plants. Feroe has applied for the grant of a concession for a new pumped-storage plant with a planned capacity of 400 MW.

In 2022, the target group companies generated 386 GWh of electricity and recorded revenues of EUR 185 million, and EBITDA of EUR 45 million.

ENERGO-PRO has been specializing in hydropower generation for almost 30 years. The company owns and operates 34 hydropower plants in Bulgaria, Georgia and Türkiye with a total installed capacity of 859 MW. It is also active in Latin America and is currently constructing a new hydropower plant in Colombia. The group operates electricity distribution networks in Bulgaria and Georgia, serving more than 2.5 million customers. It is a major employer with more than 9,000 employees.

Companies affiliated to ENERGO-PRO also own and operate two greenfield hydropower plants in Türkiye: Alpaslan II and Karakurt with a total installed capacity of 377 MW, as well as two hydropower plants in the Czech Republic. The group’s total installed capacity exceeds 1,248 MW. The industrial pillar of the group is the leading manufacturer of hydropower electro mechanical equipment for hydropower plants, Litostroj Group.

"The acquisition of hydropower plants in Galicia is part of the diversification of our activities which aims to spread macroeconomic and geopolitical risks. For the first time, we are targeting one of the largest electricity markets in the eurozone which we consider to be promising in terms of our strategic focus," said Petr Milev, Chief Executive Officer of ENERGO-PRO Group.

At the same time, the volume of sales denominated in euros will increase which correlates positively with ENERGO-PRO's capital structure. Part of the acquisition financing debt is denominated in euros. The Prague-based group is entering the eurozone market, with Spain's credit rating higher than that of Bulgaria, Georgia and Türkiye, where ENERGO-PRO has most of its assets.

 

Since Sixth Street’s acquisition of the assets in 2019, significant investments were made to improve operational efficiency, update equipment, and enhance both safety and production capacity across the hydro assets and ferroalloy facilities.

“We are proud to have been a responsible steward of these assets along with our local operating partner at Ithaka, and we are pleased to see them on to a highly qualified, long-term owner with the history and expertise of Energo-Pro,” said Richard Sberlati, Partner at Sixth Street. 

Sixth Street is a global investment firm with over $70 billion in assets under management. The firm’s Infrastructure team forms capital partnerships at scale with institutions operating infrastructure, energy transition, and renewable assets and has invested in over 6GW of renewable power since its founding.

Galicia, in the north-western part of Spain, is the rainiest region of the country. With an annual rainfall of more than 2,100 litres per square metre, it offers favourable conditions for operating hydropower plants. Nine of Xeal's ten hydropower plants are located on the Xallas River. "Our goal is to diversify our portfolio of hydropower plants also in terms of hydrology. ENERGO-PRO will be less dependent on the hydrology of the countries around the Black Sea," adds Petr Milev.

Thanks to four dams and a cascade system, the hydropower plant operator will be able perfectly to exploit the potential of the Xallas River, to optimize revenue and power generation according to the needs of the transmission system, and to offer support services, the need for which will grow with a larger share of variable renewables in the grid.

Xeal is thus also a major player in the market of support services for the transmission system operator Red Eléctrica de España which is responsible for grid stability in times of fluctuating photovoltaic and wind generation.

According to the relevant concession agreement, all power plants on the Xallas River will remain in operation until at least 2060. The importance of existing water resources is reinforced by the fact that no new dams are planned to be developed in Spain.

The acquisition in Spain also includes two plants for the production of ferroalloys, which are used in the metallurgical and metalworking industries, and that currently operate under a long-term offtake contract. Final customers of the ferroalloy business are main steelmakers in Spain and Europe.

 

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Crédit Agricole CIB, Gómez-Acebo & Pombo and E&Y have acted as financial, legal and accounting & tax advisors, respectively, to ENERGO-PRO.

Lazard and Pérez-Llorca acted as financial and legal advisors, respectively, to Sixth Street.

 

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