Greenalia – BME:GRN

10-10-20

Company Background

Greenalia is an Independent Power Producer (IPP) of renewable energy (Wind, Solar and Biomass) based in Galicia (Spain). It has a biomass plant (50MW) and three wind farms (24MW) operative, nine wind farms in construction (50MW) and other 1’891 MW with network connection already granted (660 MW Solar + 1’311MW Wind).

Market Cap = €328MM

Business

The way that Greenalia makes money is quite simple. It owns the assets and sells the electricity that the assets generate. Greenalia can sell it via PPA (fixed price for 10-15 years) or merchant (poll price).

It is a high capital-intensive business as Greenalia needs large amounts of money to build the assets. However, the cash flows are very stable for 25-30 years once the asset is operating. 

Table

Description automatically generated
(Data GVC Gaesco 2019)
Biomass

Greenalia inaugurated its first Biomass plant (Curtis – 50MW) in March-20. It has another four projects to develop in the future. Nevertheless, building a biomass plant needs the guarantee of selling the electricity at a high electricity price, it usually only happens when the company win an auction, so future projects will be conditioned to this point.

Wind

Greenalia has four big projects (Eolo I, II, III and IV). Currently, Eolo I is being built, and so far three parks are operating. Greenalia already reached an agreement for the debt to build the other six parks for the Eolo I project. They are under construction, and the forecast is to finish them in the 1H21.

After that, they will continue with the other three projects. The initial date of completion is 2021, 2022 and 2023, respectively. However, they will probably be delayed.

All the onshore wind projects are located in Galicia (Spain), which is one of the best locations in the Iberian peninsula thanks to the powerful wind there.

Apart from its initial plan, Greenalia has reported that it is planning to build five offshore wind farms (250 MW total) in the Canary Islands. It was reported in September-20, and there is no more information about it yet.

In my opinion, its wind farms (onshore and offshore) are the main advantage that Greenalia has against its competitors, which are more focused on Solar energy. Wind energy is a more efficient power source than Solar.

Solar

There are two solar projects (Sunrise I and II) that are forecasted to be operative in 2022 and 2023 respectively. These projects are located in Extremadura.

Expansion plan

Greenalia wants to reach €100MM EBITDA and 1GW in 5 years (2019-2023) as part of its 1-5-100 plan. 

My personal view is that they have managed to get a significant MW of network connection, but the construction part is taking more than initially planned. Therefore, it is going to be challenging to reach that milestone in the period they targeted.

Last July, The former CEO of Inditex bought a 5% Greenalia stake at a 10% premium to become a member of the board.

Debt

Greenalia is financing all these projects with a huge amount of debt, so the debt repayments and percentage of interest play an important role when doing the valuation of the company. The create SPV for each project and do project finance to build the facilities.

Conclusion

Greenalia is an exciting company in a sector which is in favour of regulation and public opinion as an alternative to fossil fuels. Consequently, there are huge expectations regarding the company. One interesting difference between this company and others in the sector, it is that Greenalia owns the assets, which guarantee the company a continuous cash flow for the 25-30 years that the company is operating.

There will be ups and downs in the road, but Greenalia has everything in favour to continue growing and creating value for its shareholders in the next 10-20 years.

Annex