Iberdrola seals a strategic alliance with GIC to expand transmission grids in Brazil
Iberdrola is making steady progress on its 2023-2025 Strategic Plan. The company has signed a strategic agreement with GIC, one of the world's leading institutional investors, for the development of transmission grids in Brazil for 2.4 billion Brazilian reals -430 million euros-, as reported today to the Spanish National Securities Market Commission (CNMV).
Both companies will co-invest in transmission operating assets (Jalapão, Santa Luzia, Dourados, Atibaia, Biguaçu, Sobral, Narandiba and Rio Formoso), which have a total of 1,865 km of transmission lines and an annual return of 430 million Brazilian reals - some 77 million euros¹ - with an average concession term of 25 years. Iberdrola, through its subsidiary in Brazil, will hold a 50% stake in the company, valued at 1,200 million Brazilian reals (EUR 215 million1). The transaction was carried out at a multiple of 13 times EBITDA.
Iberdrola and GIC have also signed a framework agreement to jointly participate in future tenders for electricity transmission assets in Brazil, including the auction scheduled for 30 June 2023. GIC thus becomes a preferred partner for assets under construction and upcoming auctions.
The alliance includes the right to acquire a 50% stake in other assets under construction and operation (Itabapoana, Guanabara, Vale do Itajaí, Lagoa dos Patos, Morro do Chapéu, Estreito, Alto do Parnaíba, Paraíso and Potiguar Sul), covering 6,279 km. The total annual remuneration of these assets is equivalent to approximately 1.3 billion Brazilian reals (approximately 233 million euros1).
Once the transaction is completed, Iberdrola's subsidiary in Brazil, Neoenergia, will no longer consolidate for accounting purposes the debt of the operating assets, which are considered within the scope of the transaction.
GIC is a leading global investment firm established in 1981 to secure Singapore's financial future. As the manager of Singapore's foreign exchange reserves, GIC takes a disciplined, long-term investment approach and is committed to investing in critical solutions to accelerate the energy transition.
Iberdrola's Brazilian subsidiary will have a financial investor with a unique international reputation, enabling the company to consolidate its strong commitment to growth in the transportation sector in Brazil.
This transaction is part of Iberdrola's non-core asset rotation programme, which has already been 100% completed to support Iberdrola's record EUR 47 billion investment plan.
As part of its investment plan, approximately EUR 27 billion will be allocated to electricity grids globally, increasing the value of the grid assets managed by the company to EUR 56 billion over the next three years. In addition, some 17 billion euros will be allocated to the renewables business, where it plans to increase its portfolio by more than 12,000 MW of renewables.
In recent months, the energy group has closed several long-term alliances to boost the decarbonisation of the economy:
- Iberdrola recently signed an agreement to sell more than 8,400 MW of combined cycle gas plants in Mexico for $6 billion.
- Last month, Iberdrola and MAPFRE advanced their strategic alliance by adding 100 new MW through a joint venture, which already has 450 MW.
- Iberdrola and bp also signed a strategic alliance in March to deploy 11,700 fast charging points in Spain and Portugal.
- Earlier this year, Iberdrola and Norges Bank Investment Management signed an alliance to co-invest in 1,265 MW of new renewable capacity in Spain.
- In addition, a few months ago Iberdrola signed an alliance with Energy Infrastructure Partners to co-invest in the Wikinger offshore wind farm and boost its offshore wind portfolio.
Iberdrola operates in Brazil through its subsidiary Neoenergia, a leading company in Brazilian grids with more than 710,000 kilometres of power lines. It controls five distribution companies in 18 states plus the country's federal district and is a renewable energy giant, with 5,200 megawatts installed, 90% of which are green.
Iberdrola's Brazilian subsidiary has already established itself as an energy benchmark in Brazil: it has a portfolio of 16 million customers. The company has a workforce of more than 15,000 people and generates indirect employment that amounts to more than 28,000 jobs. Neoenergia began operating in 1997, but took a giant leap forward in 2017, when it merged with Elektro, also owned by Iberdrola. It made its debut on the stock market through an Initial Public Offering (IPO) on 1 July 2019 on the Novo Mercado B3 segment of the Brazilian Stock Exchange.
¹ Calculated on the basis of a R$/EUR exchange rate on 24 April 2023, as published by the European Central Bank, of 1 euro to 5.5788 Brazilian reals
