* Terra Firma to sell 332 megawatt solar portfolio in one block
* RTR equity could be worth around 1 bln euros
* Enel-F2i joint venture seen as a possible front runner
By Stephen Jewkes and Pamela Barbaglia
MILAN/LONDON – Private equity investor Terra Firma is gearing up to launch a $1.2 billion sale of its Italian solar-power assets, a deal that could pave the way for more consolidation in European solar energy, sources said.
The sale of RTR Rete Rinnovabile should kick off in January and its solar farms, scattered across 132 locations, will be sold as one block, the sources said.
If successful, the deal will be Italy’s largest solar energy sale in a fragmented industry under pressure to consolidate with the end of generous state subsidies.
The London-based buyout fund has been working with advisers for the past nine months to prepare RTR for a sale, the sources said, adding RTR wants to fetch about 1 billion euros.
The Rome-based business has already drawn interest from several bidders, the sources said.
EF Solare Italia, a 341 MW joint venture between Italy’s biggest utility Enel and infrastructure fund F2i, is seen as a possible front runner because of its size and industry focus, the sources said.
A combination of RTR and EF Solare Italia would create an Italian solar powerhouse, raising pressure on smaller players to join forces to compete in an industry hit hard by Rome’s decision to cut back on incentives to reduce power bills.
Falling government support, a challenging financial outlook and increasing competition has led to a sharp reduction in new utility-size solar plants in Italy but has triggered record levels of M&A in a sector set to grow.
Rome said this month it wanted green energy sources to account for 28 percent of overall energy consumption by 2030 from 17.5 percent in 2015.
“Enel-F2i is the natural buyer but lots of people will take a look, it’s a big portfolio, it will be a crowded process,” one of the sources said.
Earlier this year Terra Firma hired UniCredit, JPMorgan and Jefferies to work on the deal which could value RTR’s equity at between 1.0-1.2 billion euros, the sources said.
The process has been in stop-and-go mode for several months due to disagreements on whether the portfolio should be broken up or sold in one piece, but consensus has now been reached to offload assets en bloc, the sources said.
A series of investment funds including Quercus and Tages have expressed interest, a second source said, adding Italian renewable company Erg was also eying the asset.
“Canadian pension funds and Chinese investors are also expected to take part,” the first source said.
Terra Firma, Quercus, Erg and Tages all declined to comment. Enel’s renewable energy chief told Reuters earlier this year EF Solare would be looking at the assets.
In 2016 RTR posted revenues of 146 million euros and core earnings of 120 million euros. Its overall debt at the end of the year was around 900 million euros.
The business includes a wide range of plants Terra Firma has bought since 2011 from companies such as Italian power grid operator Terna, Erg and France’s EDF.
“The earlier plants benefit from subsidies and so are more appealing than later ones,” one of the sources said.
Cash-rich EF Solare, which runs 92 plants with 341 MW, is front runner because of the size of the portfolio but returns could be a stumbling block. F2i, partly owned by state lender CDP, has a historic return on its assets of around 12 percent.
“A big refinancing operation will also be needed to accompany the sale and that could also limit the field,” one of the sources said. ($1 = 0.8454 euros)