Acciona Underweight: valuation is very tight, trading with multiples and elevated IRR

Acciona´s new desalination plant in Saudi Arabia will serve oil company Aramco

Santander Corporate & Investment | We have revised our valuation and forecasts for Acciona (ANA) (Underweight, TP 96.00) due to:

(1) the increase in the useful life of renewable assets from 35 to 50 years;

(2) a cut of 100 bp in the average WACC of its assets to 6.3%;

(3) The installation of 2,850 MW of new assets by 2025;

(4) the valuation at market prices of Nordex up to 14.27 euros/share, which adds 2.94 euros/share to our new Objective Price.

We maintain the recommendation of Underweight: (a) the valuation of Acciona is very tight; it is trading above our objective Price, with mutiples and elevated IRR, in our opinión, for its risk profile and growth; (b) the toughening of competition complicates the creation of value in its main business (terrestial wind energy is becoming a capital cost business, and long term forecasts for electricity prices are not encouraging either).