Norway-based solar developer Scatec Solar announced on 16 October the signing of a binding agreement with Norfund, the Norwegian Investment Fund for developing countries, to acquire SN Power, a leading international hydropower developer and independent power producer. The deal highlights growing recognition of the role that hydropower can play in the integration of variable renewable energy as part of the clean energy transition and its complementarity with solar PV.
The acquisition of 100 per cent of the shares of the state-owned hydropower firm for a total equity value of US$ 1.17 billion will see Scatec Solar transform itself into a global renewables company, with a unique and complementary portfolio of assets, geographical footprint and capabilities, as well as a large project pipeline across solar, hydro, wind and storage, it said in a press statement. “Hydropower and solar PV are complementary technologies, resulting in new project opportunities, for instance floating solar on hydro reservoirs. With this transaction we see great potential in broader project origination and geographical expansion into growth markets in South East Asia and Sub-Sahara Africa. SN Power adds scale and significant cash flow from operating plants and will raise stakeholder value; benefiting customers, employees, shareholders, business partners and the societies in which we operate,” said Raymond Carlsen, CEO of Scatec Solar.
The combined company to be known as Scatec will have 3.3 GW of gross capacity in operation and under construction in 14 countries, which, when fully commissioned in early 2021, will generate an estimated average annual production of 4.1 TWh. The transaction includes SN Power’s portfolio of hydropower assets in the Philippines, Laos and Uganda with a total gross capacity of 1.4 GW (net 0.5 GW) and gross median production of 6.1 TWh (net 1.8 TWh). SN Power also has a project pipeline totalling 2.5 GW mainly across Asia and Sub-Saharan Africa. Scatec Solar will further accelerate growth and have a combined project pipeline of 9.5 GW across solar, hydro, wind and storage, it said. As part of the transaction, Norfund and Scatec Solar will establish a new joint venture to manage and develop SN Power’s Sub-Saharan Africa hydro assets and pipeline. Scatec Solar will be the operator and hold 51 per cent in the joint venture. Norfund will retain a 49 per cent stake.
Scatec Solar noted that the acquisition provided compelling strategic benefits including most notably technological and geographical diversification, which would further enhance cash flow resilience and increase optionality with respect to profitable growth. Hydropower with “inherently attractive characteristics including storage, perpetual asset life, and low operational risk and gearing” would further diversify the group’s cash flows and strengthen Scatec Solar’s ability to accelerate further growth while the new group would be able to leverage Scatec Solar’s long-standing emerging markets’ expertise within project development and Engineering, Procurement and Construction (EPC) to accelerate growth. Scatec Solar and SN Power are also a strong cultural fit, it noted. Rooted in Norway’s industrial tradition, both companies have a track record of being “ambitious front-runners in green energy in emerging markets, while adhering to the highest standards in environmental and social governance”. “With SN Power, Scatec Solar will strengthen its position as a partner for governments and communities that are seeking economic growth,” it said. “The company will also be more relevant for corporate customers seeking cleaner and more affordable energy and for shareholders who wish to position themselves in the renewable energy space”. The deal, which is conditional upon regulatory and local competition approvals, is set to be completed in the first half of 2021, until when the companies will continue to operate as separate entities.