It’s a “reboot” for Con Ed, and a step toward “portfolio optimization” for Sempra.
Sempra will unload 981 megawatts of renewable energy and battery storage projects to a subsidiary of Consolidated Edison, in a deal announced Thursday.
The acquisition includes 379 megawatts of projects that Sempra Renewables and Consolidated Edison Development jointly own, plus 602 megawatts of Sempra-only assets. Con Ed’s getting it all — solar, solar-plus-storage projects and one wind facility — for just over $1.5 billion plus $576 million in non-recourse debt.
The move doesn’t come as a complete surprise, according to Wood Mackenzie Power & Renewables Director of Solar Research Cory Honeyman. Through the summer, “activist investors” had pressured Sempra to sell off its clean energy assets. Honeyman said Con Ed, as a joint owner on over one-third of the projects, seems a “natural fit” to take on the portfolio.
At the same time, though, Con Ed faces a great deal of competition in a widening renewables market.
“With so much cheap private equity capital in the market, it’s that much more impressive and surprising that Con Ed was able to win out in a seller’s market crowded with hundreds of investors actively bidding on utility-scale renewable assets,” Honeyman said. “It reboots Con Ed into the rankings of top utility-scale solar asset owners, at a time when the market has seen a flurry of new investors in the form of pension and infrastructure funds.”
In a presentation on the sale, Con Ed said it aligned with the company’s strategy to grow its renewables footprint. In addition to regulated utilities and transmission, Con Ed’s parent company envelops three clean energy businesses: Con Edison Development, Con Edison Energy and Con Edison Solutions. Those businesses have a renewables portfolio of 1,600 megawatts.
While the purchase pushes Con Ed to the top of utility asset owners, the sale could be a bad look for Sempra. Its investor-owned utility, San Diego Electric & Gas (SDG&E), has faced blowback over a plan to deliver 100 percent renewable energy to the city, which a third-party review said “raises more questions than it answers.” San Diego may turn to community-choice aggregation instead.
But Sempra’s getting pressure from all sides. In a June presentation, Sempra Investors Elliott Management and Bluescape Resources argued that the company, with its jumble of subsidiaries including SDG&E and its renewables business, had no coherent strategy.
“Sempra’s growth strategy relies on siphoning earnings and creditworthiness from its core California utilities and deploying that capital into various unrelated businesses with poor returns and results,” the presentation read.
Elliot and Bluescape said Sempra’s renewables portfolio is “attractive but non-core.”
In an announcement on the decision, Sempra called the acquisition “an important step forward in the portfolio optimization” the company announced in June. Sempra says that plan will help “sharpen the company’s strategic focus.”
The sale isn’t the first of its kind. In February, NRG spun off its renewable assets and Global Infrastructure Partners gobbled them up, soon going on to create Clearway Energy Group, now one of the U.S.’ largest energy developers, as a result of the acquisition of assets.
At the time, NRG said it was a “significant milestone” toward “optimizing our portfolio.” Con Ed said the sale is expected to close near the end of this year.