German energy giant RWE AG has agreed to pay about $6.8 billion for the renewable energy portfolio of Consolidated Edison Inc., which is abandoning plans to issue stock this year and has withdrawn its 2023 and 2024 guidance for equity raises.
RWE’s plan to buy Con Edison Clean Energy Businesses Inc. will add about 3 GW of operating capacity – 90% of it solar – to the company’s portfolio, which will grow to about 7.2 GW. The Con Edison team also has assembled development pipeline of more than 7 GW of capacity to go with RWE’s roughly 17 GW.
“The transaction we announced today will allow Con Edison to sharply focus on our core utility businesses and the investments needed to lead New York’s ambitious clean energy transition,” said Timothy Cawley, chairman and CEO of New York-based Con Edison. “RWE, in turn, is well positioned to accelerate the growth of renewable energy across the United States.”
In a statement, RWE CEO Markus Krebber called the United States one of the world’s most attractive and fastest-growing markets for renewables and noted that the acquisition is expected to generate about $600 million EBITDA in its first year.
“The combined development pipeline, one of the largest in the U.S., provides tremendous opportunities for sustainable and value accretive growth, backed by a strong financial position,” Krebber said. “Together, we will form a powerful RWE team, strongly committed to contribute to the global energy transition.”
The deal between Con Edison and RWE is expected to close in the first half of 2023 and is being partly financed by the Qatar Investment Authority, which is investing more than $2.4 billion in a convertible RWE bond that will, after conversion, give it a roughly 9% stake in the German company. When completed, RWE will become the fourth-largest renewable energy company in the country and the No. 2 operator of solar projects. The combined organizations, RWE executives said, will employ about 1,400 people, about 500 of them coming from Con Edison’s clean energy group.
Cawley and his team said they intend to continue to invest in Con Edison’s clean energy priorities, which include electrification, energy efficiency, electric vehicle infrastructure and battery storage. The company aims to have its grid delivering nothing but clean energy by 2040 and this summer said about 30% of its planned $15.7 billion in investments from 2022 to 2024 will go toward green projects.
Con Edison said earlier this year it planned to bring its renewables business to market. Other utilities, including American Electric Power Co., Duke Energy Corp. and Eversource Energy have announced similar plans in recent months as they look to line up the necessary capital to fund their energy transition plans.
Shares of Con Edison (Ticker: ED) rose more than 2% to $87.70 Oct. 3 on the news. Over the past six months, they are down nearly 10%, trimming the company’s market capitalization to about $31 billion. RWE shares (Ticker: RWE) also rose about 2% on word of its plans.
