Norwegian multinational energy company Equinor has recently entered into a significant agreement with Denham Capital to acquire Rio Energy, a prominent onshore renewables company in Brazil. The deal involves the acquisition of selected assets and the team, while Denham Capital will retain certain assets. Through this acquisition, Equinor solidifies its position as a versatile energy company in the Brazilian market.
Equinor's executive vice president for renewables, Pål Eitrheim, expressed enthusiasm about the acquisition, emphasizing that it would enable the company to assume a leading role in Brazil's swiftly expanding renewables sector. The move is expected to accelerate production and cash flow, providing Equinor with a robust platform for future growth. Additionally, the acquisition grants Equinor access to new capabilities and an attractive project pipeline.
The transaction aligns with Equinor's strategic focus on growing its onshore renewables business in select markets by acquiring local companies boasting high-quality teams and project portfolios. Veronica Coelho, Equinor's country manager for Brazil, highlighted that the addition of Rio Energy to their portfolio will bolster the company's ability to further develop its renewable energy assets in the country. The move aligns with Brazil's ambitions to foster a diverse energy mix, as Equinor already possesses a substantial oil and gas portfolio in the region.
Following the completion of the acquisition and the retention of certain assets by Denham Capital, Equinor will hold a 100% stake in Rio Energy, with the current management team and approximately 140 employees remaining in place. The acquired portfolio comprises the 0.2 GW Serra da Babilonia 1 onshore wind farm, situated in the north-eastern state of Bahia, a 0.6 GW pre-construction solar PV portfolio, and an additional project pipeline of about 1.2 GW, encompassing onshore wind and solar projects.
Rio Energy is set to become a fully owned subsidiary of Equinor, and its existing management team will continue to oversee the development of the current portfolio. Equinor anticipates that the acquired project portfolio will yield returns at the high end of the expected range of 4%-8% real base project return for renewables projects, factoring in the acquisition price.
Equinor plans to manage the produced power in the Brazilian power market through its energy trading house, Danske Commodities (DC). To support its operations in the country, DC has recently established a trading office in São Paulo.
Brazil's power market is the largest in South America and is projected to experience significant demand growth and expansion of the deregulated market. Equinor's senior vice president for onshore and markets within renewables, Olav Kolbeinstveit, explained that by building a power portfolio in Brazil managed by DC, the company can enhance value uplift in line with its market-driven power producer strategy.
The completion of the transaction is subject to obtaining relevant regulatory approvals. With Equinor's strategic acquisition of Rio Energy, the company takes a momentous step towards reinforcing its presence in Brazil's burgeoning renewable energy landscape.
