Repsol already announced the IPO of its renewables area or an alliance with a third party in its Strategic Plan 2021/2025 presented on November 26th. The operation could be carried out in less than two years and it will always maintain control of the shareholders. With this operation, the company expects to raise at least 1.4 billion euros. This would mean valuing the division at around 3 billion euros. The flotation of Repsol’s renewables business would be one of the largest operations of the last decade.
Renewable generation will account for slightly more than 4 billion euros of the 5.5 billion euros that the group’s total investments in low carbon initiatives will represent. At the same time, the amount accounts for 30% of the 18.3 billion euros of Repsol’s investment plan over the next five years. This aims to accelerate its transformation into a ‘greener’ company by 2050.
The strategy of becoming a multi-energy company and its renewables division’s IPO is one of the reasons which has led Bankinter’s analysts recommending a Buy on the stock. This compares with a Neutral stance on the oil sector. In addition, the entry of a third party could help to boost the company’s growth in a strategic area.
“Repsol is carrying out an appropriate strategy to transform its business model and make it less dependent on the price of crude oil. It is healthy, well positioned in renewables and offers a high dividend yield (11.9%). Only for dynamic investors with a long-term time horizon.”
After the presentation of Repsol’s new strategic plan, the experts at Barclays raised Repsol’s target price from 7.5 to 9 euros, which means a potential revaluation of 9.5% versus last week’s closing price. Citi and Credit Suisse also set a T.P. of 9.5 euros, while HSBC is less optimistic and fixed a price of 8.7 euros.