RWE (RWEG.DE), the largest power producer in Germany, has agreed to pay $6.8 billion for Con Edison’s (ED.N) Clean Energy Businesses, roughly doubling RWE’s renewable portfolios in the United States, the second-largest renewables market in the world.
A unit of the Qatar Investment Authority will get a convertible bond of $2.43 billion from RWE, which will make the QIA a 9.1% shareholder in RWE and help finance the purchase.
Con Edison announced that it would not proceed with its intentions to offer up to $850 million in new stocks this year and would not be providing equity guidance for the following two years.
It claimed that the agreement will let it concentrate on its primary utility business plus New York’s transition to sustainable energy.
The deal will virtually treble RWE’s U.S. renewable energy portfolio to over 7 gigawatts (GW) and expand its pipeline of the regional project by 7 GW to over 24 GW.
According to presentation slides, solar will make up 40% of the U.S. portfolio belonging to RWE, after the acquisition, up from its current 3% share.
The takeover of Con Edison CEB and future green expansion will be financed using equity capital measures, according to RWE Chief Executive Markus Krebber.
In a statement issued late on Saturday, Krebber noted that he was pleased that QIA was supporting RWE’s plans for accelerated growth with their capital investment.
The transaction, which is anticipated to be completed within the upcoming half at the front of 2023, will elevate RWE to the fourth-largest position in the U.S. market for renewable energy, an important step in the company’s green expansion. NextEra (NEE.N), the market leader with roughly 58 GW of producing capacity, will continue to hold the top spot.
RWE’s growth in the US coincides with Germany dealing with the effects of a total stoppage of the Russian gas supply, which has already prompted the nationalisation of its lesser rival Uniper (UN01.DE).
Enkraft Capital, an activist energy fund that owns 0.15% of RWE, criticised RWE for spending 7 billion euros on a well-thought M&A deal in the United States while Germany was experiencing its worst energy crisis ever.
However, Mansoor bin Ebrahim Al-Mahmoud, CEO of QIA, stated that his company was honoured to support RWE’s efforts to lead the world in renewable energy.
The investment by QIA strengthens Qatar’s ties to the biggest economy in Europe, which already include holdings in Porsche, Deutsche Bank (DBKGn.DE.), and Volkswagen (VOWG_p.DE).
The acquisition, which is the largest for RWE since the division of its former company Innogy was announced in 2018, will immediately increase RWE’s core earnings (EBITDA) by $600 million annually.
It comes almost a year after RWE detailed its global plan for renewable energy, which calls for gross investments of 49 billion euros ($50 billion) by 2030, of which 15 billion are targeted for the United States.
Latham & Watkins and Barclays offered Con Edison with assistance on the transaction.
RWE also declared its intention to pay a 0.90 euro dividend per share in 2022.
Meanwhile, the supply chain issue put a wedge on many production units. It had to subdue while several economies tried to backtrack to a pre-pandemic state, but it still persists, since external but direct pressures like historic-high inflation, the invasion of Ukraine, and more influenced the present manufacturing industry greatly.
Nonetheless, the affected economies hope that the first earnings season of 2023 is better than its predecessors.