Mitsubishi HC Capital has bought a fifth of European Energy, the Danish developer behind one of the largest pipelines in European renewables. Divide the price by that pipeline and the deal looks almost free. Divide it by the company's earnings and it looks like one of the richest corporate valuations in Europe. Both readings use the same numbers.
Key takeaways
- Mitsubishi HC Capital (MHCC) announced on 19 January 2024 that it had agreed to acquire a 20 percent stake in Danish renewables developer European Energy for a purchase price of $761.5 million.
- Enerdatics calculates the enterprise value of MHCC's 20 percent stake in European Energy at $1.01 billion, based on the purchase price and European Energy's net debt of $1.2 billion on a 100 percent basis as of 30 September 2023.
- MHCC is subscribing to 72 million new European Energy shares and buying 3 million existing shares from major shareholders Knud Erik Andersen, Mikael D. Pedersen and Jens-Peter Zink, so about 96 percent of the shares it acquires are newly issued.
- European Energy reported revenue of $446.08 million and EBITDA of $189.05 million for the 12 months to 31 December 2023, against a development pipeline of more than 60.2 GW across 28 countries.
- The MHCC investment in European Energy completed in April 2024, making European Energy an equity-method affiliate of Mitsubishi HC Capital.
Is $0.02 million per MW really the price of European Energy?
No. That figure is what happens when a company valuation is divided by a development pipeline, and it says almost nothing about what MHCC paid.
European Energy reports a pipeline of more than 60.2 GW. Of that, only about 900 MW is operating and about 900 MW is under construction. Around 33 GW sits in development, 3 GW in structuring and roughly 24 GW in screening, the earliest stage, where a site has been identified but little has been secured. Leap records the transaction against 62,000 MW, which is why its value per MW comes out at $0.02 million.
A pipeline is an option on future projects, not a set of assets. Many screening-stage megawatts never get built. A per-MW figure built on them flatters the buyer and should never be compared with the price of an operating wind or solar farm. Measured against the roughly 1.8 GW that is operating or under construction, the same enterprise value works out at closer to $2.8 million per MW. Neither figure is the right yardstick, because this is a company deal. Companies are valued on earnings.
What multiple did Mitsubishi HC Capital actually pay?
On earnings, MHCC paid a full price. The arithmetic starts with grossing up the stake.
A $1.01 billion enterprise value for 20 percent implies about $5.05 billion for the whole company. European Energy's EBITDA for 2023 was $189.05 million. That puts the deal at roughly 26.7 times EBITDA. On revenue of $446.08 million, it is about 11.3 times revenue.
Grossing up matters here in the same way it matters for minority stakes in single projects. Comparing a 20 percent consideration with the earnings of the whole company would understate the multiple by a factor of five and make an expensive deal look cheap.
The multiple reflects what MHCC was buying. It was not buying a stream of contracted cash flows from operating assets. It was buying a developer whose earnings depend on selling projects, and whose value depends on how much of a very large pipeline it can convert. That is why the multiple sits well above what an investor would pay for a portfolio of operating farms.
Where does Mitsubishi HC Capital's money actually go?
Almost all of it goes into the company. Of the 75 million shares MHCC is acquiring, 72 million are new shares issued by European Energy. Only 3 million come from three major shareholders.
This is the detail that changes the character of the deal. A secondary sale pays existing owners and leaves the company's balance sheet unchanged. A primary subscription is new equity for the business. In practice MHCC is funding European Energy's growth rather than buying out its existing shareholders.
That fits the way European Energy says it runs its business. Its model relies on reducing risk in stages, with large financial commitments only made at final investment decision, once land, permits, fixed-price supply contracts, offtake and financing are in place. It then has several ways to recycle capital: selling project rights, forward sales, partnerships and sales of operating projects. Leap has tracked examples of both ends of that model, from the sale of fully permitted project rights in Italy to sales of operating solar farms in the UK. Equity from MHCC funds the stretch in between, when projects need capital before they can be sold.
Enerdatics' data shows how far this deal sits from its peers. Across European corporate transactions announced in 2023 and 2024, Enerdatics records 15 with a disclosed EV/EBITDA multiple. The median is 14.8 times and the upper quartile is 17.8 times. At about 26.7 times, MHCC's entry into European Energy is nearly twice the median. On revenue the gap is similar: the median revenue multiple across 20 European corporate deals with one disclosed is 6.8 times, and the highest is 11.3 times, the level this deal implies.
What does the deal signal for European renewables developers?
It signals that strategic capital from outside Europe will pay a premium for a platform with breadth, not just for megawatts. European Energy's revenue between 2020 and 2022 came 36 percent from Denmark, 32 percent from Northern Europe, 21 percent from Southern Europe and 11 percent from Central Europe. For a buyer whose stated aim is to take its Environment and Energy business global, that spread is the asset.
It also signals interest in what sits beyond wind and solar. European Energy is building the Kasso e-methanol plant in Denmark, which Leap describes as the world's largest e-methanol plant, and sold a 49 percent stake in it to Mitsui in July 2023. Its pipeline includes 4.5 GW of power-to-X projects, meaning projects that turn renewable electricity into hydrogen or fuels such as e-methanol. Leap notes that this focus aligns with MHCC's goal of promoting a decarbonised society. Japanese capital has now entered European Energy twice in six months, once at asset level and once at company level.
Finally, it shows the limits of per-MW thinking for platform deals. Anyone benchmarking developer valuations on pipeline size will find European Energy looks extraordinarily cheap. Anyone benchmarking on earnings will find it expensive. The question MHCC has effectively answered is how much of that 60 GW it expects to become earnings. At this multiple, it expects a lot.
Frequently asked questions
How much did Mitsubishi HC Capital pay for its stake in European Energy? Mitsubishi HC Capital agreed a purchase price of $761.5 million for 20 percent of European Energy. Including its share of net debt, Enerdatics calculates the enterprise value of the stake at $1.01 billion.
What EBITDA multiple does the European Energy deal imply? Grossed up to 100 percent, the enterprise value is about $5.05 billion, or roughly 26.7 times European Energy's 2023 EBITDA of $189.05 million.
Has the Mitsubishi HC Capital and European Energy deal closed? Yes. The transaction completed in April 2024, and European Energy became an equity-method affiliate of Mitsubishi HC Capital.
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