Enel S.p.A. has announced the sale of an 80% interest in a portfolio of eight wind and solar plants for a total of $1.35 billion. The purchaser is a joint venture by CKD Infraestructura México S.A. de C.V. (“CKD IM”), the investment vehicle of the leading Mexican pension funds, and Canadian institutional investor Caisse de dépôt et placement du Québec (“CDPQ”).

Realising value

Enel will continue as operator of the 1,712 megawatt (“MW”) portfolio of three solar and five wind power plants. This model, dubbed Build, Sell and Operate (“BSO”), allows Enel to realise the value of its projects early in the development process. The plants have a current operational capacity of 429 MW, while a further 1,283 MW is under construction, yet through this deal Enel has already reduced its consolidated net debt by approximately USD $1.9 billion. Through this model, as well as reducing risk and debt, Enel is able to create capacity for additional projects and spur growth.

Structure of the deal

Enel holds the plants through its Mexican renewable subsidiary, Enel Green Power Mexico S. de R.L. de C.V. To facilitate the sale, a trust was created under Mexican law with the two buyers as beneficiaries. The trust holds an 80% shareholding in HoldCo, a shell company created for this purpose with a total value of $2.6 billion, which in turn holds 8 individual Special Purpose Vehicles (“SPVs”). Each SPV holds one of the plants included in the deal. The deal is expected to close by the end of 2017, subject to regulatory approval. From 2020, Enel will be able to transfer additional assets to HoldCo, which could in turn increase its shareholding.

Outlook

CKD IM and CDPQ, who were represented in this deal by CMS Mexico, have noted that investing in the growing Mexican renewables market is particularly attractive in light of the Mexican government’s goal for 40% of electricity to be generated from renewable sources by 2035. This is the partnership’s first renewable energy project since the creation of investment platform in 2015, following investments in road and telecommunication infrastructure. The geographically diverse five wind and three solar projects are spread across six Mexican states. High-value investments in Mexico’s renewables market such as these demonstrate market faith in the country’s continued growth and in the bright future of the Mexican renewables market.