Enel Hands Peru to Actis' Niagara for 'Higher Growth Potential' Markets

Enel has agreed to sell its Peruvian generation business to Niagara Energy, a company controlled by Actis, in a deal Leap values at $1.87 billion. For Enel it is an exit from a market it has operated in since 2007. For Actis it is a fleet of hydro dams, thermal plants, a wind farm and a solar plant, one of them in service since 1938. The price looks low against the capacity. Whether it is low depends on which capacity you count.

Key takeaways

• Enel signed an agreement on 22 November 2023 to sell its stakes in Enel Generation Peru and Compania Energetica Veracruz to Niagara Energy, a Peruvian company controlled by Actis, in a transaction Leap values at $1,869 million. The deal completed on 7 May 2024.
• Niagara Energy is acquiring Enel Peru's 66.50 percent and Enel Americas' 20.46 percent of Enel Generation Peru, plus Enel Peru's 100 percent of Compania Energetica Veracruz, which is developing the 635 MW Veracruz hydro plant on the Maranon River.
• Enerdatics values Enel's Peruvian generation business at about $2.1 billion on a 100 percent basis, against $556.3 million of revenue and $271.3 million of EBITDA for the 12 months to 30 June 2023, which implies an enterprise value of roughly 7.7 times EBITDA.
• Enel Generation Peru had 1,646.95 MW of effective power and sold 8,860 GWh of energy as of December 2022, with 48.3 percent of effective power from hydroelectric plants and 51.7 percent from thermal plants.
• Enel expects the sale of its Peruvian generation business to reduce consolidated net debt by about $1.7 billion across 2023 and 2024 and to add about $65 million to reported Group net income in 2024.

Why is Enel selling a profitable business?

Because it has decided where it wants to grow, and Peru is not on the list. Enel's 2023 to 2025 strategic plan, presented on 22 November 2022, set out an intention to exit the Peruvian market. Exactly a year later it signed this sale. The Group is repositioning towards Italy, Spain, the United States, Brazil, Chile and Colombia, which it describes as countries with higher growth potential.

Debt is the other half of the reason. A sale that removes about $1.7 billion of net debt from the Group's balance sheet frees capacity for investment in the markets Enel has chosen to keep. Peru is one of several such disposals. Enel sold 416 MW of operating solar in Chile to Sonnedix in the same year, covered in Enerdatics' analysis of Sonnedix's $550 million Chilean solar purchase from Enel.

The business was also reshaped before it was sold. In October 2022, Enel Generation Peru announced a potential merger with Enel Green Power Peru, and the two signed a merger agreement in April 2023. Enel Generation Peru absorbed the renewables company and its subsidiaries Marcona and Los Pinos. The merger valued Enel Generation at $1.84 billion and Enel Green Power Peru at $472 million.

What does Actis get for the money?

A mixed fleet, most of it old. The hydro plants include the 278 MW Huinco plant, operating since 1964, the 137 MW Matucana plant from 1971 and the 82 MW Callahuanca plant from 1938. Three thermal plants add 851.5 MW. The renewables are newer: the 144.5 MW Rubi solar plant and the 132.3 MW Wayra I wind farm both began operating in 2018, and the 177 MW Wayra Extension is under construction. Across the portfolio, the weighted average operational life is 26.7 years.

Much of the output is contracted. Wayra I and Rubi sell under 20-year PPAs with Peru's Ministry of Energy and Mining. Clemesi and the Wayra Extension sell under 12-year PPAs with SIDERPERU, a steelmaker. A PPA is a long-term contract to sell electricity at agreed terms. Enerdatics understands that the hydro plants also sell their energy under long-term utility PPAs.

Then there is Veracruz, a 635 MW hydro development sold in full in the same transaction. It gives Niagara Energy a large development option alongside the operating fleet.

Is $0.65 million per MW cheap?

Only if every megawatt is counted the same way. Leap's structured value of $1,869 million divided by the 2,858.39 MW across the linked assets gives about $0.65 million per MW. That capacity includes the Veracruz development and the Wayra Extension under construction, neither of which earns revenue yet. Against Enel Generation Peru's 1,646.95 MW of effective power, the same figure is about $1.13 million per MW.

An earnings multiple is a cleaner measure for a business like this. EBITDA is earnings before interest, tax, depreciation and amortisation, a rough proxy for operating cash flow. Enerdatics' $2.1 billion valuation of the whole business sits at about 7.7 times its trailing EBITDA of $271.3 million. That is a utility-style multiple for a fleet with old hydro assets, thermal exposure and long-term contracts.

Leap's narrative also gives a lower figure. Enerdatics calculates the enterprise value for the transacted stakes at about $1.8 billion, with total consideration for the equity at about $1.4 billion. The structured deal value of $1,869 million is the figure used here.

Enerdatics records nine M&A transactions in Peru announced from 2022 to 2024. Only three carry a disclosed value, and the Enel deal accounts for about $1.87 billion of the $2.06 billion total. The other two are small: ENGIE paid $60 million for a 76.8 MW operating wind portfolio from Grenergy and Sinia in October 2023, about $0.78 million per MW, and Luz del Sur paid $133 million for Sojitz Arcus Investment, with 44.32 MW of solar, in March 2023. The Enel sale is the only transaction in the set large enough to set a price for a national generation fleet.

What does the deal signal for Peru's power market?

It signals a change of owner type. A European utility with a global footprint is handing a national fleet to a private investment fund operating through a local vehicle. Actis has built and sold renewable platforms in emerging markets before, as in Enerdatics' analysis of the sale of Actis' BTE Renewables to ENGIE and Meridiam. If Actis follows the same playbook in Peru, Veracruz and the Wayra Extension are the obvious places to add value before an exit.

Other strategic players are still investing in Peru's renewables. ENGIE has continued to invest in the country, including through International Finance Corporation funding covered in Enerdatics' report on ENGIE's $600 million IFC investment in Peru.

The deal took the full route to close. Niagara Energy had to launch a full takeover bid for Enel Generation Peru once conditions were met, and on 21 March 2024 it offered about $0.47 per share, valid for 20 days. Closing had also required approval from Peru's antitrust authority, and the transaction completed on 7 May 2024. Milbank acted as legal adviser to Actis.

Frequently asked questions

Who bought Enel's business in Peru? Niagara Energy, a Peruvian company controlled by the global investment fund Actis, agreed on 22 November 2023 to buy Enel's stakes in Enel Generation Peru and Compania Energetica Veracruz. The deal completed on 7 May 2024.

How much was the Enel Peru deal worth? Leap values the transaction at $1,869 million. Enerdatics values the business at about $2.1 billion on a 100 percent basis and calculates total consideration for the equity stakes at about $1.4 billion.

What assets does Enel Generation Peru own? It had 1,646.95 MW of effective power as of December 2022, including the Huinco, Matucana and Callahuanca hydro plants, three thermal plants totalling 851.5 MW, the 144.5 MW Rubi solar plant and the 132.3 MW Wayra I wind farm, with the 177 MW Wayra Extension under construction.

Ready to get deal-ready answers in seconds? Try Enerdatics Leap AI and access verified intelligence across M&A, financings, PPAs, projects, and energy market developments through natural language.