Iberdrola has signed an agreement with Singaporean sovereign wealth fund GIC to develop eight transmission networks in Brazil for a sum of BRL2.4bn (€430m).
Both companies expect to jointly invest in transmission lines that span 1,865km and have an average concession term of 25 years.
The operational transmission assets include Santa Luzia, Dourados, Jalapão, Atibaia, Biguaçu, Sobral, Narandiba, and Río Formoso. These represent an annual profitability of nearly €77m.
Through Neoenergia, its subsidiary in Brazil, Iberdrola will own a stake of 50% in the transmission holding company to be formed for holding the assets. GIC will acquire the remaining 50% stake for €215m.
Besides, Iberdrola and GIC have forged a framework agreement for jointly taking part in future tenders for electricity transmission assets in Brazil. This includes an auction scheduled for 30 June 2023.
According to the Spanish utility, GIC has become a preferred partner for assets under construction and upcoming auctions.
The partnership between the firms also includes the right to purchase half of the ownership stake in other assets under construction and operation by Neoenergia.
The 6,279km long transmission assets are Guanabara, Vale do Itajaí, Itabapoana, Lagoa dos Patos, Morro do Chapéu, Alto do Parnaíba, Estreito, Paraíso, and Potiguar Sul.
The total annual return on these assets is estimated to be around €233m.
GIC infrastructure chief investment officer Ang Eng Seng said: “GIC is pleased to invest in Brazil’s growing power transmission market, an essential part of decarbonisation and electrification efforts in the country.
“We look forward to working alongside Neoenergia’s strong management team and leveraging their deep knowledge and local capabilities to build on the platform’s considerable growth opportunities over the long term.”
The deal is subject to preceding conditions like approval of governmental authorities and certain third parties, following which, it is anticipated to close in the latter half of this year.
Upon the completion of the operation, Neoenergia is expected to discontinue consolidating the debt of the operational assets included within the scope of the transaction.
The Spanish company said that with this transaction it fulfilled the non-core asset rotation target to support the company’s €47bn investment plan.
Iberdrola stated: “As part of its investment plan, approximately 27 billion euros will be allocated to electricity grids worldwide, increasing the value of the company’s network assets to 56 billion euros over the next three years.
“In addition, some 17 billion euros will be allocated to the renewables business, in which it plans to increase its portfolio by more than 12,000MW of renewable energy.”
Earlier this month, Iberdrola signed a memorandum of understanding (MoU) with Mexico Infrastructure Partners to sell some combined-cycle gas turbine (CCGT) and wind assets with a combined capacity of 8.54GW in Mexico to the latter in a deal worth around $6bn.
