How TotalEnergies Turned a 2017 Option Into Full Control of Total Eren

In 2017 Total bought 23% of a young French renewables developer for $281 million and took an option to control it after five years. In July 2023, TotalEnergies used that path to buy the remaining 70.8% of Total Eren. The business it bought in 2023 was a very different size from the one it first backed, and so was the price.

Key takeaways

• TotalEnergies announced on 25 July 2023 that it would acquire the remaining 70.8% of Total Eren, taking its ownership of the renewables producer to 100%.
• Enerdatics calculates the enterprise value of the 70.8% stake at $2.98 billion, based on the $4.2 billion enterprise value of the whole business reported by TotalEnergies, and TotalEnergies' net investment at $1.66 billion.
• Total Eren had about 3.5 GW of operating solar, wind, hydroelectric and storage capacity, plus a 10 GW pipeline across 30 countries, of which 1.2 GW was nearing completion or under construction.
• In 2017 Total paid $281 million for a 23% stake in the company, then called EREN Renewable Energy, which had about 650 MW in operation or under construction, and secured the option to take control after five years.
• TotalEnergies expected the integration of Total Eren to add about $177.4 million to its EBITDA and about $443.6 million to its cash flow from operations in 2024.

How did a minority stake become a full takeover?

It was built into the first deal. When Total subscribed for 23% of EREN Renewable Energy in 2017, the agreement gave it the possibility of taking over control after five years. The company was renamed Total Eren on completion of that first investment.

The 2017 money was a capital increase, not a payment to existing shareholders. It was meant to fund the developer's growth, and the company set itself a goal of more than 3 GW of installed capacity within five years. By 2023 it had about 3.5 GW operating.

So the 2023 deal was the second half of a plan that started six years earlier. TotalEnergies helped fund the growth as a minority investor, then bought out the other shareholders once the platform was built. Earlier investors included Bpifrance, Next World Group, Tikehau Capital and Peugeot Invest, which bought into the company in 2015 for $218.9 million.

What did TotalEnergies get for $2.98 billion?

It got a global developer with operating assets on several continents and a large pipeline. Total Eren's biggest operating positions were in India with 657 MW, Portugal and Indonesia with 500 MW each, Greece with 350 MW, Brazil with 300 MW, Australia with 256.5 MW and Ukraine with 245.7 MW.

The individual assets are mostly contracted. The 256.5 MW Kiamal solar farm in Australia sells power to Origin Energy, Alinta Energy, Flow Power, Mars Australia and Zero Emission Water. The 190 MW Santa Isabel solar farm in Chile has a 15-year PPA with Colbun, and the 92.3 MW Terra Santa wind farm in Brazil has a 20-year PPA with Cemig GT. A PPA, or power purchase agreement, is a long-term contract to sell a plant's output at an agreed price.

TotalEnergies said it would use Total Eren's 2 GW of assets in Portugal, Greece, Australia and Brazil to strengthen its power strategy. It also gains Total Eren's development teams in markets such as India, Argentina, Kazakhstan and Uzbekistan, which are folded into TotalEnergies' renewables business unit.

Green hydrogen sits alongside the deal rather than inside it. Total Eren's hydrogen projects in North Africa, Latin America and Australia move into a new partnership called TEH2, owned 80% by TotalEnergies and 20% by EREN.

How does the price compare with the 2017 entry?

It is much higher, for a much larger business. Total's $281 million for 23% in 2017 implied about $1.22 billion for the whole company, when it had about 650 MW built or building. The 2023 deal valued the business at $4.2 billion. The two figures are not measured the same way, because the first is an equity subscription and the second an enterprise value that includes debt, but the direction is clear.

Earnings tell the same story. Total Eren's sales rose from $57.6 million in 2015 to $598.94 million, as reported by its investors in July 2023. On TotalEnergies' own guidance, the $4.2 billion enterprise value is about 24 times the expected $177.4 million EBITDA uplift. That is a full price for a business still weighted toward growth.

Enerdatics' data shows the same premium against other platforms. Enerdatics records eight corporate takeovers of multi-technology renewables platforms worth $500 million or more in 2023. Antin's $1.44 billion takeover of Opdenergy covered 8,431 MW, about $0.17 million per MW. ENGIE and Meridiam's $1 billion purchase of BTE Renewables covered 5,500 MW, about $0.18 million per MW. KKR's $769 million for about 61% of Greenvolt implies roughly $1.26 billion for the whole company across 8,093 MW, about $0.16 million per MW. Total Eren's $4.2 billion across about 13.5 GW of operating and pipeline capacity works out at about $0.31 million per MW once the 70.8% stake is grossed up to 100%. Measured on the stake alone, the figure would look like $0.22 million per MW, which understates it.

The likely reason for the gap is the operating base. About a quarter of Total Eren's capacity was already producing power, a higher share than at Antin's Opdenergy takeover, where most of the 8.4 GW was still in development.

What does the deal signal for oil majors in renewables?

It signals that one way for a major to build a power business is to back a developer early and buy it later. TotalEnergies paid a premium in 2023, but it had six years as a shareholder, watching the assets and teams, before committing $1.66 billion of net investment.

It also shows how large corporate deals were financed. Enerdatics estimates the transaction was funded through a combination of cash on hand and debt, based on TotalEnergies' cash position of $27.98 billion and borrowings of $2.9 billion as of 31 March 2023. A buyer of that size does not need outside equity to take out minority holders.

The deal belongs to a wider 2023 wave of platform sales, including the BTE Renewables sale to ENGIE and Meridiam. TotalEnergies has kept using platform structures since, such as its Asia renewable platform with Masdar.

Societe Generale and Flack & Cie acted as financial advisers to Eren Groupe, with White & Case as its legal adviser. BDGS Associes advised TotalEnergies on legal terms.

Frequently asked questions

How much did TotalEnergies pay for Total Eren?Enerdatics calculates the enterprise value of the 70.8% stake at $2.98 billion, based on a $4.2 billion enterprise value for 100% of the business reported by TotalEnergies. TotalEnergies put its net investment at $1.66 billion.

When did Total first invest in Total Eren?Total acquired a 23% stake in EREN Renewable Energy for $281 million in September 2017, with an option to take control after five years. The company was renamed Total Eren when that investment completed.

How large was Total Eren at the time of the takeover?Total Eren had about 3.5 GW of operating solar, wind, hydroelectric and storage capacity and a pipeline of about 10 GW in 30 countries, with 1.2 GW nearing completion or under construction.

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