Smart Energy Finances: E.ON anticipates Q4 profit hit after nine-month growth

November 10, 2023 Editor

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This week’s Smart Energy Finances looks at an expected hit to Q4 retail profits for E.ON despite significant earning and investments over the first nine months of the financial year.

Meanwhile, US-based substation equipment manufacturer Systems Control has been sold by Comvest Partners to Hubbell Incorporated, UK flexibility provider Statera Energy has been acquired by a Swedish equity infrastructure fund and $550 million debt and tax equity financing has been announced for US battery projects.

E.ON forecasts Q4 profit hit

Electric utility E.ON has announced its expectations of a “significant hit” to Q4 profits for their customer solutions business, a result of implementing previously-induced price reductions for their millions of electricity and gas customers, according to E.ON’s chief finance officer Marc Spieker in their Q3 financial results.

Said Spieker: “We expect the pass-through of lower wholesale prices and other effects to have a significant negative impact on our earnings in the customer solutions business in the fourth quarter.”

According to the utility company, their full-year earnings guidance reflect a potential deterioration in the energy market environment in the fourth quarter.

The main reasons for this are increased market volatility due to uncertainties on the global supply and demand side as well as tense geopolitics.

The Q4 hit is anticipated despite significant growth across E.ON businesses from the first three quarters of the year.

In the customer solutions business, adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) rose by around €1.6 billion ($1.7 billion) to €3 billion ($3.2 billion).

According to the company, stabilisation of price levels on the wholesale markets contributed to the positive earnings performance compared with the prior-year period, which was heavily burdened by very high energy prices.

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In their energy networks business, adjusted EBITDA increased by almost €800 million ($853.5 million) to €4.9 billion ($5.2 billion).

In Germany in particular, the “recovery in the energy market environment led to significant temporary relief, which will be passed on to customers through network charges in the coming years” stated the company.

Additionally, E.ON continued to expand its investments in both energy networks and sustainable customer solutions, significantly increasing them compared with the same period last year.

In the first nine months, investments amounted to more than €3.9 billion ($4.2 billion), representing a rise of 40%.

‘Mission critical’ substation solution manufacturer switches hands

Comvest Partners, a middle-market private investment firm, will sell Systems Control to Hubbell Incorporated, a manufacturer of utility and electrical solutions, for $1.1 billion in cash.

Systems Control has been a portfolio company in Comvest’s private equity strategy since 2018. The transaction is expected to close by the end of the year.

Founded in 1962 and headquartered in Iron Mountain, Michigan, Systems Control is a leading manufacturer of substation control and relay panels as well as turnkey substation control building solutions for the electric transmission and distribution industry.

According to Comvest in a release, the company’s offerings are “mission-critical to grid reliability, enabling utility customers to protect and control substation infrastructure while detecting faults and controlling the flow of electricity.”

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“This successful outcome highlights Comvest’s expertise in helping companies achieve their growth objectives as well as our investment leadership in the infrastructure services space. We are excited for (Systems Control’s) future as part of Hubbell,” stated Maneesh Chawla, a managing partner at Comvest, in a release.

Harris Williams LLC and Lincoln International LLC are serving as financial advisors to Systems Control, and McDermott Will & Emery LLP is serving as legal advisor.

Morgan Stanley & Co. LLC is serving as financial advisor to Hubbell, and Wachtell, Lipton, Rosen & Katz is serving as legal advisor.

Sweden’s EQT to acquire UK flexibility provider Statera Energy

EQT Infrastructure VI fund, owned by private equity company EQT Partners, has agreed to acquire Statera Energy Limited from InfraRed Capital Partners.

Established in 2015 and headquartered in London, Statera is a prominent player in the UK’s battery storage and flexible energy sector, providing generation capacity from tech such as pumped hydro and green hydrogen to assist with balancing the power grid.

With the acquisition, EQT Infrastructure will support the Statera management team and platform by providing access to growth capital to accelerate the deployment of flexible generation across the UK.

The transaction is subject to customary conditions and approvals. It is expected to close around the end of the year.

DC Advisory served as financial advisor and Simpson Thacher & Bartlett LLP as legal advisor to EQT Infrastructure.

With this transaction, EQT Infrastructure VI is expected to be 20 – 25% invested, based on the target fund size.

Statera has 1GW of flexible generation in operation and under construction, enough to power around 750,000 homes, and a total project pipeline of over 16GW, with plans to deliver 7.5GW of flexibility assets by 2030.

$550 million debt and tax equity financing for US battery projects

Aypa Power, a Blackstone portfolio company and an independent power producer (IPP), has closed a $550 million portfolio debt and tax equity financing with First Citizens Bank & Trust Company, Nomura Securities International, Inc., National Bank of Canada and MUFG Bank, LTD. serving as lenders.

The loan supports both Aypa’s Cald project, a 100MW/400MWh standalone battery storage project in urban Los Angeles, California, which secured a long-term tolling agreement with San Diego Gas & Electric, and the Borden County project, a 150MW/300MWh battery storage project in Texas.

Both projects are under construction and set to commence commercial operations in 2024, bolstering grid reliability and stability within their respective regions.

Louise Pesce, managing director of project finance at MUFG, which is also serving as Administrative Agent on the transaction, commented on the financing in a release, stating how both battery projects “will be essential components in enhancing the reliability and effectiveness of renewable energy systems in California and Texas.”

US Bancorp Impact Finance served as the portfolio’s tax equity investor.

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