High Valuations for European Wind Power Generators
Iberdrola (MCE: IBE) announced yesterday the price range for its IPO of its renewable electricity generation assets, scheduled for December 13th. The Wall Street Journal (among others) reported that Iberdrola had established a price of € 22.4 to 29.6 billion, with the final price to be announced December 11th (see Show Me The Money, WSJ Online, November 20, 2007). Once spun off, the new company, to be called Iberdrola Renovables (Spanish for renewables), will become the world’s largest renewable power company.
Iberdrola’s renewables business achieved revenues of € 695.6 million in 2006. Assuming the assets to be spun off match those in the current Renewables business, the announced price would establish a value for the new company that was approximately 32 times 2006 earnings. At this level, the Wall Street Journal comments that the new company, which accounts for less than 1% of U.S. electricity generation, would be worth more than such utilities as Duke Energy or the FPL Group.
Iberdrola isn’t the only utility to see gold when it looks at renewable energy. Earlier this month, the Europe’s Suez Group (EPA: SZE) outbid 30 other groups for the right to purchase 50% of the wind power company Compagnie du Vent (see High Winds Make Some Energy Investors Giddy, Financial Times, November 13th, 2007).
When first announced, it was reported that Suez had offered to pay about € 325 million, placing a value of € 750 million on the company, or 65 times its 2006 revenues (€ 11.3 million) (see High Winds Make Some Energy Investors Giddy, Financial Times, November 13th, 2007). A more recent report indicated that the final agreed price was € 321 million for 50.1% of the company, still a hefty 57 times 2006 earnings (see Suez Acquires Majority Stake in Compagnie du Vent, Energy Business Review, November 19th, 2007).
Valuations like these suggest there is more than a bit of froth in the market for wind power assets in Europe and I’m sure there are some that are wishing it would cross the water to affect North American wind power generators. For example, applied to Canadian Hydro Developers (TSX: KHD), an independent wind power developer and operator, 30 times 2006 revenues would almost double its current share price to $12.09 (currently $6.20). They can but dream.