In 2017 the Spanish solar market has continued to stand out in Europe as one of the most attractive asset classes for institutional investors. A growing number of national and international investors continue to scout the southern European market for solar assets to add to their portfolios. This trend has been driven primarily by Spain-based investment funds that have been acquired by international multi-billion private equity funds, such as Vela Energy (acquired by JP Morgan´s Sonnedix) or T-Solar (acquired by I-Squared) just to name a few.
The widespread perception seems to be that the Spain is experiencing a tightening of the Equity IRRs demanded by investors. While it was not unusual in 2015 to find solar M&A deals in Spain well above 10% IRR, in 2017 most solar transactions have taken place at high single digit IRRs. To invest in Spain solar at 8-9% IRR has become the “New Normal”. Certainly, the proliferation of organized competitive sales processes has contributed to make the market more competitive. In 2017, we estimate a secondary sales market volume of approximately 125MW and a market size of about 0.6bn Euros. This would represent approximately about a 2-3% of the installed capacity.
Solar Portfolio Refinancing (Bonds, MARF)
This past year has been optimal for refinancing of solar portfolios in Spain. We have witnessed a number of remarkable transactions being refinanced with bonds. The Mercado Alternativo de Renta Fija (“MARF”) has been the market of choice for these transactions.
In the table above, we can observe two relevant factors: i) low cost of financing, and ii) 18-20 year long tenors. Thanks to the availability of competitive long term bond financing for big tickets, we are witnessing how the market continues to consolidate among a shorter number of owners and investors. In line with the improvement of the macro factors of the Spanish economy, it can be expected that the rating upgrade in 2018 could have further positive effects on these financing conditions.