Energy

Macquarie flags next major ‘green project’ acquisition

Tue 08 Mar 22, 7:01pm (AEST)
Solar Panels - Low angle view of technician walks with investor through field of solar panels

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Key Points

  • Management reaffirmed plans to move to 100% renewable energy by 2025
  • Morgan Stanley expects 45% earnings growth in FY22
  • Macquarie’s share price has pulled back significantly early November 2021

Brokers’ suspicions that Macquarie Group (ASX: MQG) was back on the acquisition trail proved to be correct, but today’s announcement has taken the market by surprise.

While some brokers suspected Macquarie was eyeballing the wealth management arm of Westpac - allegedly worth $1bn – the investment bank today announced that its subsidiary Macquarie Asset Management is leading a consortium deal for France-based global solar group Reden.

Reden, which is owned by independent private equity firm InfraVia is active across eight countries, with more than 750MW in operation and a sizable maturing pipeline.

Solar transformation

Commenting on the agreement, InfraVia founder and CEO Vincent Levita said:

"We have provided the group (Reden) with a comprehensive set of resources that have paved the way for Reden Solar's transformation into a fully integrated platform and a leading European independent solar power producer.”

"The group is now focused on large and stable high growth markets, with a strong track-record and a sizable pipeline. We are convinced that this Macquarie-led consortium will continue the development of Reden Solar with the management team."

The completion of this transaction remains subject to regulatory and antitrust approvals.

EUR2.5bn transaction

The Macquarie consortium, which also includes UK-based investment firm British Columbia Investment Management Corporation (BCI) and Germany's MEAG Munich Ergo Asset Management GmbH, has invested EUR2.5bn in the transaction, which is scheduled to be completed in the third quarter of 2022.

Macquarie Asset Management's stake in Reden Solar will be purchased on behalf of institutional investors through the Macquarie Global Infrastructure Fund and the Macquarie Green Investment Group Renewable Energy Fund 2 (MGIG), which raised EUR1.6bn in February 2021.

Macquarie’s latest acquisition is line with the group’s plans to increase its Environmental, Social and Governance (ESG) ESG profile through continued investment in green projects.

100% renewables by 2025

Macquarie Group has invested or disposed of around EUR40bn in green energy deals since 2010 and has more than 50GW of green energy projects under development, construction and operation around the world.

Earlier this year, management reaffirmed plans to move to 100% renewable energy by 2025.

While Macquarie is AA-rated by one of the world’s largest ESG research houses, earlier this year Morningstar highlighted ESG risks regarding the quality of the financial products and services the group offers.

What brokers think

Macquarie’s share price pulled back significantly since trading over $200 a share late in 2021.

Based on the brokers that cover Macquarie (as reported on by FN Arena) the group is currently trading on 25.3% upside to the current price.

Citi notes Macquarie's trading outpaced the broker's positive expectations in volatile energy markets. The broker interprets management's upgraded guidance from in-line to materially higher to mean 30% growth, and retains Buy rating and target price of $226.00 (09/02/22).

Given the group's guidance that commodity pricing volatility should be beneficial, Morgan Stanley expects 45% earnings growth in FY22. The broker maintains an Overweight rating and the target price increases to $242.00 from $235.00.

Having concluded that earnings may be approaching peak levels, Credit Suisse retains a Neutral rating with the target price rising to $210 from $195.

Consensus on Macquarie Group is Moderate Buy.

Based on Morningstar’s value of $179.40, the stock appears fairly valued.

 

 

 

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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