Clearway Energy Inc.'s equity value and extensive renewable generation backlog got a major boost when France's TotalEnergies SE agreed to acquire a 50% interest in parent Clearway Energy Group LLC from private equity giant Global Infrastructure Partners.
The transaction value of $35.10 per share for Clearway Energy, Inc., or CWEN, reflects a 7% premium off of the May 24 closing price, according to UBS analysts. As of the May 27 market close, CWEN's stock price had gained 10% since the transaction's announcement. TotalEnergies' units also rose during the same period, settling nearly 4% up from the May 24 close, though Cowen & Co. LLC analysts wrote May 25 that the deal's cash yield is "particularly unattractive."
Cowen agreed, however, that the transaction gives the French company "exposure to a large backlog of U.S. renewable power projects that it may be fully compensated for funding, de-risking its path towards 100 GW gross capacity by 2030."
Clearway has 7.7 GW of wind and solar assets in operation through Clearway Energy Inc., or CWEN, and a 25-GW pipeline of renewable and storage projects. CWEN takes on projects from Clearway Energy Group when they reach commercial operation. TotalEnergies has 8 GW of utility-scale solar capacity and 4 GW of offshore wind projects under development in the U.S. The deal gives Clearway the right of first offer for the French company's U.S. onshore renewable assets, according to a May 25 statement.
In exchange, Global Infrastructure Partners, or GIP, will receive $1.6 billion in cash and an approximately 50% stake in the TotalEnergies subsidiary that holds its 50.6% interest in SunPower Corp.
"The development pipeline that [TotalEnergies] brings to the table serves to further enhance an already-impressive Clearway Group backlog," analysts at energy investment bank Tudor Pickering Holt & Co. told clients May 25. "After the moderate YTD sell-off (-9%) in a rising rate environment, CWEN equity continues to screen attractively relative to peers with Total's investment serving to further extend the growth runway and associated dropdowns potentially serving as a use of proceeds for CWEN's remaining $450 million of dry powder from the [thermal asset] divestiture."
KKR & Co. Inc. agreed to acquire CWEN's thermal generation business for $1.9 billion in a deal announced in October 2021. CWEN President and CEO Christopher Sotos said May 5 on a first-quarter earnings call that the company plans to exercise patience deploying the remaining $450 million in proceeds.
"We have the flexibility of time and not needing to do something here in the next, you know, three to six months to kind of get the cash off our balance sheet," Sotos said.
So far in 2022, TotalEnergies has also agreed to buy Austin, Texas-based Core Solar LLC, which owns over 4 GW of solar and energy storage projects at different stages of development across the U.S. In February, TotalEnergies announced a deal to acquire EnBW Energie Baden-Württemberg AG subsidiary EnBW North America, after the German and French companies won a joint $795 million bid to construct a wind farm off the coast of New York.
Investing in Clearway Energy "perfectly fits with our strategy to make renewable electricity one of our main growth drivers," TotalEnergies Chairman and CEO Patrick Pouyanné said May 25.
The Clearway Energy transaction could also improve outlooks for other North American renewable generation developers like Atlantica Sustainable Infrastructure PLC, NextEra Energy Partners and sponsor NextEra Energy Inc. and Brookfield Renewable Partners LP, according to KeyBanc Capital Markets, due to further evidence that buyers are willing to pay a premium for portfolios under development.
Anna Duquiatan contributed to this article.
S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.