EDP sells hydro plants in $2.4 billion deal and delivers profit warning

LISBON (Reuters) - Portugal's largest utility EDP EDP.LS said on Thursday it has agreed a multi-billion euro deal to sell six hydro power plants in the Douro river basin, to a consortium led by France's Engie ENGIE.PA.

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The deal is expected to boost EDP’s coffers as it faces a hit to profits from the country’s move to greener energy.

Portugal was the first country to commit to carbon neutrality by 2050 and has said all coal plants must be closed by 2023. This, along with factors such as lower gas prices, will take 300 million euros off EDP’s reported net profit this year, and 200 million euros in 2020, the company said on Thursday.

“The acceleration of the energy transition process over the past year led to a material deterioration of the operating outlook for coal plants in the Iberian market,” it said.

EDP said the 2.2 billion euros ($2.4 billion) hydro plants deal is expected to be completed by the second half of 2020. The consortium includes Engie ENGIE.PA with a 40% stake, Credit Agricole Assurances and Mirova-Natixis Group.

"This transaction aims to optimize our portfolio, decreasing our exposure to concentrated hydro volatility and merchant prices, reinforcing the low business risk profile and improving financial leverage," EDP EDP.LS said in a statement.

Engie’s CEO Isabelle Kocher told journalists the deal will help the firm surpass its target of adding 9 GW renewables generation capacity over the period 2019 – 2021 and enable them “to go further in proposing Green Power Purchasing Agreements to enterprise clients,” she said.

Engie said the acquisition will have a net debt impact of 650 million euros.

EDP will retain its leading position in Portugal in hydro power generation capacity with 5.1 GW.

EDP’s chief financial officer Miguel Stilwell said the transaction was done with a higher than expected enterprise multiple of 14.4 times, a commonly used metric for estimating the value of a business.

EDP chief executive Antonio Mexia said that the disposals should lead to net debt being lower than 3.2 times EBIDTA in 2020, compared to 4.0 times in 2018.

EDP has said it plans to sell 2 billion euros of assets in Iberia, as well as raising 4 billion euros via an asset rotation program until 2022 to fund its renewable energy expansion.

Engie and EDP said in March they would invest 15 billion euros with the aim of becoming the world's number two offshore wind developer after Denmark's Orsted ORSTED.CO.

In October, EDP posted a steep 55% rise in nine-month net profit, boosted by renewable energy and a strong performance of its Brazilian unit, netting 460 million euros in the period.

Shares in EDP closed 1.62% higher at 3.84 euros.

Reporting by Sergio Goncalves and Andrei Khalip, additional reporting by Bate Felix in Paris; Writing by Andrei Khalip and Catarina Demony; Editing by Alexander Smith and Elaine Hardcastle