Greenvolt

Introduction

Greenvolt is a renewable energy company based in Lisbon which did its IPO last 15th July 2021. It was the renewable division of Altri group, a Portuguese industrial conglomerated based in Porto. 

Greenvolt main business is the generation of power via its biomass plants. Greenvolt has 98MW of biomass installed in Portugal plus the 51% interest in a 41.8 MW biomass plant next to London (Tilbury). However, before listing in the stock market, it acquired V-Ridium, an experimented Polish Solar and Wind developer with a significant pipeline in Poland and Greece (among other European countries) to enter in these two technologies.

Moreover, Greenvolt has also another division, decentralised generation, to produce energy through solar panels for individuals / SMEs.

Greenvolt market cap at the moment of this writing is €740MM, having an enterprise value of €1bn. It has just entered in the PSI-20, the main index of Portugal, last 20th September.

Business Model

Greenvolt plans to leverage its stable and predictable cash flows from its biomass plants and expand into other technologies such as Wind and Solar. Currently, around 70% of its revenues come from Portugal. This figure is expected to diminish in the coming years as they plan to develop solar and wind farms in other European countries, mainly Poland and Greece, but it also has projects to grow in Romania, Bulgaria, Italy and France.

Greenvolt has a 3 GW pipeline in Europe of solar and wind projects. Around one third of the pipeline is B2O and the rest is expected to be sold once is built (B2S). Over the next 2-3 years, it is going to be focused on Poland and Greece as the pipeline is more mature in these countries where the power supply is scarce and the prices are high.

Greenvolt Biomass plants

Example of B2S economics

Greenvolt also seeks to increase its MW of Biomass, taking advantage of opportunities in Portugal and Europe. Moreover, it is launching a decentralized energy segment (solar panels for individuals to produce its own energy at home/SME). It has acquired 70% of Profit Energy and 42% of Prefecta Energia.

Greenvolt Assets

Greenvolt has six operating biomass plants, five of them in Portugal and another one in the UK

Biomass plants in Portugal are remunerated based on a Feed in Tariff (FiT) for the first 25 years of operations (ranging from €115/MWh to €131/MWh). This FiT can be extended 15 additional years as they have just done with Mortagua

The Tilbury plant also has a subsidy on top of the power price. This subsidy is 1.4ROC at GBP 50.6/MWh, increasing 3.5% every year. In a normal year, the price of the electricity is slightly higher in the UK than in Portugal. However, this year, the prices are so high that the Tilbury plant is expected to make in the 2H21 80% of the EBITDA it made in 2020.

Greenvolt has not any Wind or Solar farm operative at this moment. However, they are building 50 MW in Poland, and it is expected to take the FiD of more projects in the coming months.The following table illustrated the expected CoDs in the next year

Greenvolt Business Plan

Greenvolt 2021-2025 plan forecast 1,054 MW owned and in operation by 2025. It expects to source this CAPEX with a mix of funds obtained in the IPO, cash flows from operations, debt and gains from the sale of 2700 MW (B2S) on its pipeline.

Greenvolt 2025 plan

2025’s plan is very aggressive from our point of view. We consider that Greenvolt would need around €2000MM to fund its expansion. From this amount, €750MM would be for B2O projects, €1000MM to project development (B2S) and the rest for debt service & working capital.

We estimate that €300MM could come from operations, €200-300MM from the sale of assets, €150MM from IPO proceeds and the rest from new debt (€>1000MM). This amount of debt is huge compared to the current position of the company, so we expect the plan to be completed in more than 5 years.

* Greenvolt plans to iniciate the construction of 109MW (Solar) in 2021

Biomass

  • Recent acquisition of Tilbury
  • Expand the capacity of Rodao (from 11.8 to 13.3 MW)
  • Develop Constancia II (5MW)
  • Develop an additional 20 MW plant in Portugal
  • Acquire distressed biomass power plants in Europe (medium term)

Wind

  • Greenvolt started to build 2 wind farms (50 MWs) last August in Poland (Wolka Dorynska and Podlasek). The expected CoD is at the end of 2022. Prices are fixed by action near €50/MWh

Solar

  • Greenvolt has 62MW Ready to Build in Portugal (Tabua and UPPs) which are expected to commence operation in May-June 2022

Greenvolt Economics

Biomass plants are taking advantage of the high electricity prices, specially Tilbury plant which is expected to report +50% EBITDA compared to 2020.

Poland is a country which needs to transition from coal depending power to renewables. Consequently, there is a massive opportunity here in the coming decade, and V-Ridium is well positioned to take advantage of it. Moreover, power prices are higher than in Spain or Portugal. The last auction where V-Ridium obtained 50MW was in the range of €45-50 (current exchange rates).

(Company guidance EBITDA CAGR is 40% for the period 2020-2025)

Investment Risks

  • No extension of Portuguese biomass plant’s regulated life
  • Unfavourable evolution of raw materials
  • Lower than expected returns for renewable projects
  • Unfavourable regulation regarding its main activities in its core markets

 Conclusion

We like the business model of Greenvolt as it generates predictable cash flows from its biomass activities and use it to expand its business into other high margin technologies and promising countries. In our opinion, the acquisition of V-Ridium gives Greenvolt presence and expertise in the most interesting market in Europe for the next decade. Moreover, V-Ridium also had a significant pipeline of projects in different stages in other European countries with a significant upside. Moreover, the recent acquisition of Tilbury arrived in a moment of record high power prices in the UK. This will help to fund the expansion in the short term.

After going up more than 50% since its IPO, Greenvolt is close to our initial target price (€6.8). Consequently, maybe there is not a huge opportunity in the short term, but if it can deliver at least 60% of the MW forecasted in its 2025 plan, we believe that it can become a compounder in the next years.

We will include a PDF version of this analysis on the newsletter this weekend

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