Brookfield Asset Management has agreed the initial stages of the take-private of Paris-listed renewable energy developer Neoen, in providing the company with an enterprise value of €6.1 billion.

The deal sees its Global Transition Fund II enter into exclusive negotiations to purchase a 53.3 percent shareholding in Neoen from shareholders Impala, the Fonds Stratégique de Participations (FSP), Cartusia and Xavier Barbaro at a price of €39.85 per share. Once agreed, it will file an offer for the remainder of the company at the same price, a 26.9 percent premium over the last closing price. The company’s enterprise value represents a 12.8x multiple on its 2023 EBITDA.

“It’s being done this way because we wanted to make sure that we acquired a controlling stake going in,” Ignacio Paz-Ares Aldanondo, managing partner in Brookfield’s Renewable Power & Transition group, explained to Infrastructure Investor.

Paz-Ares Aldanondo added that Brookfield had been monitoring the business since its IPO in 2018 and expressed admiration for the markets it operates in and the leadership team and believes now is the right time for it to partner with Brookfield.

“These businesses are so capital intensive and are growing at such a rapid pace, they need a lot of capital and [Neoen was] at an inflection point that, for going to the next stage of growth, needed a partner or sponsor that could really back them up in the right way with the capital to continue growing,” he said.

The deal is being supported by Singapore’s state-owned investment company Temasek, while €500 million is being provided by Brookfield’s listed partner Brookfield Renewable, it said in a statement.

Neoen, which develops solar, wind and battery storage projects, operates across 16 countries, although its largest markets are in its domestic France and Australia. It also has a significant presence in Finland and Sweden. Australia accounted for 47 percent of its assets, according to the group’s 2023 annual report, and in February it announced it had completed financing of a 1.5GW portfolio of eight wind, solar and battery assets, raising over A$1.1 billion ($730.4 million; €673.9 million) of debt.

Storing success

There will be little change on that front, with Paz-Ares Aldanondo expecting France and Australia to continue to be the drivers of growth under Brookfield’s ownership.

“France has very strong ambitions for renewables in terms of targets and that is supported by a very attractive regulatory scheme of feed-in tariffs backing up the new build-out of renewables,” he said.

Brookfield’s Global Transition Fund series has a storied history with Australia. It was rebuffed in attempts over the last couple of years to secure multi-billion dollar acquisitions of utilities AGL Energy and Origin Energy, having had plans to transform both companies’ carbon-intensive activities to more renewables-based.

“It’s a market that we know really well. We know how much renewables they need to deploy in order to decarbonise the grid and at the same time, we know the impact of that penetration and the imbalance it will create on the grid,” said Paz-Ares Aldanondo. “So, there’s a huge need for storage in Australia and Neoen is also really, really well-positioned to capture that storage opportunity because they’ve been the early mover in that technology, especially in Australia.”

In November 2017, Neoen and Tesla completed construction of the 150MW Hornsdale Power Reserve storage project in South Australia, the first large-scale battery storage site providing grid services in the world. It was built inside 100 days as part of a wager by Elon Musk with the state government. Last year, Neoen was awarded a contract for capacity services by the Australian Energy Market Operator for the 219MW Collie Battery Stage 1 in Western Australia, with commercial operations slated to begin in Q4 this year.

Overall, Neoen has a portfolio of 8.3GW, of which about 5GW is operational. About 71 percent of this is contracted by PPAs, with the remainder subject to merchant prices, according to the 2023 annual report.

“I think whenever we build new renewable projects, our first option is to contract them,” said Paz-Ares Aldanondo. “We see that the risk-return proposition in those contracts makes sense and we don’t intend to change that materially. Maybe it might change on the edges, but directionally, we should continue with the same strategy.”

Neoen will be the third deal from Brookfield’s Global Transition Fund II, with previous deals being the $600 million acquisition of UK developer Banks Renewables – renamed OnPath Energy – and an agreement to invest up to $845 million to develop a pipeline of wind and solar projects in India with Axis Energy. The fund secured a $10 billion first close in February ahead of a $17 billion target. It expects to hold a final close later this year, Brookfield’s chief financial officer Hadley Peer Marshall said in its Q1 2024 earnings call.