GIP in $3.8bn deal spree for Italo and NRG’s renewables business

The transport and renewables acquisitions are being made through the manager’s record-breaking $15.8bn third infrastructure fund.

Global Infrastructure Partners has capped a busy week by agreeing to a combined $3.8 billion of acquisitions across the transportation and renewables sectors from its record-breaking $15.8 billion third infrastructure fund.

In the larger of the two deals, the firm will pay €1.98 billion for Italian high-speed rail operator Italo. The transaction, initiated earlier this week, saw GIP increase its original offer for Italo by €80 million.

The improved bid was made following a meeting yesterday between Italo’s board of directors, during which it considered GIP’s initial €1.9 billion proposal against a previously planned IPO of between 35 percent and 40 percent of the company.

The offer was increased to an equity value of €1.94 billion, in addition to €30 million in dividends the current shareholders were set to receive and a further €10 million in costs incurred by the cancelled listing, which was expected to be completed this month. A clause allowing Italo’s current owners to reinvest up to a maximum of 25 percent of the proceeds on the same terms remains as part of the new deal.

The eventual decision to accept GIP’s offer is likely to disappoint the Italian government, which, hours before the Italo board was scheduled to meet, publicly came down in favour of the listing option. A joint statement by Carlo Calenda, the minister of economic development, and Pier Carlo Padoan, the minister of economy and finance, hailed the progress made by Italo since its founding in 2006 and said a listing “would represent the perfect crowning of a success story”.

Italo’s shareholders include founders Diego Della Valle, Gianni Punzo, Giuseppe Sciarrone and ex-Ferrari chairman Luca di Montezemolo, as well as banking group Intesa Sanpaolo. It became Italy’s first private high-speed rail operator in 2012 and was designed to compete with state-owned counterpart Trenitalia. Last year, Italo recorded a 15.3 percent increase in passengers to 12.8 million and posted €155.7 million of EBITDA and a €33.8 million net profit.

The two parties must enter into the purchase agreement by 11th February, after which it will enter into the regulatory approval stage before closing.

NRG Energy

In addition to Italo, GIP agreed to pay $1.375 billion for NRG Energy’s US renewable energy business, amid a flurry of market activity surrounding yieldco assets.

The sale of NRG Yield had been expected since last July, when parent company NRG unveiled its “transformation plan” aimed at reducing $13 billion of debt and raising $4 billion in revenue through asset liquidation. GIP agreed to buy a 46 percent controlling stake in NRG Yield and fully acquire the firm’s renewables operation and maintenance and development businesses.

NRG Yield, which manages a 5.1GW portfolio of operating wind, solar and natural gas projects, has a market capitalisation of $3.2 billion. Its operations and maintenance business operates 2.4GW of renewable power, and its development business has a 6.4GW pipeline of projects across the US.

“We view each of the three acquired businesses […] as highly complementary and well positioned to capitalise on the increasing demand for low cost, clean energy,” said Adebayo Ogunlesi, GIP chairman.

GIP will keep NRG Yield a publicly traded company. It will also provide backstop financing for NRG Yield’s previously agreed purchases of the 154MW Buckthorn Solar Project and the 527MW Carlsbad Energy Center.

In a separate deal with Cleco Corp, NRG agreed to sell a coal and gas generation portfolio for $1 billion as part of its reorganisation.

The deal faces regulatory approval before it closes, which is expected in the second half of this year.

NRG Yield is the US’s largest yieldco by portfolio size. On Wednesday, TerraForm Power, a yieldco owned by Brookfield Asset Management, made a $1.2 billion offer to buy the whole of Saeta Yield, the Spanish renewables vehicle that is 48 percent owned by GIP and ACS. On Tuesday, Swiss fund manager Capital Dynamics agreed to purchase 8point3 Energy Partners from two US solar developers in a deal with an enterprise value of $1.7 billion.

Jordan Stutts contributed reporting to this story.