October 8, 2010
There's a whole lot of wheeling and dealing going on in Italy lately.
With an extremely generous feed-in tariff (a form of solar subsidy) set to be ratcheted back at year's end, developers are racing to get their PV plants completed and hooked into the grid. SunPower (Nasdaq: SPWRA ) closed on the sale of a medium-sized plant to Etrion, while MEMC Electronic Materials (NYSE: WFR ) subsidiary SunEdison sold Europe's largest solar power plant, a 70-megawatt asset due to be completed this quarter, to private equity house First Reserve for roughly $385 million.
There are many more deals to come. BNP Paribas, for example, is looking to pick up around 100 MW worth of Italian solar plants in the weeks ahead. According to First Reserve's purchase price, that would total around $550 million.
For those intrigued by the prospect of investing in Italian solar power, you're in luck. Whereas most public solar companies are manufacturers and/or project integrators, Canadian-listed Etrion just operates solar power plants in Italy. The firm (controlled by the Lundin family, famous for its natural-resource investing savvy) says it should exit the year with almost 50 MW of operational solar plants, and project-level EBITDA of over $40 million.
With a current enterprise value of around $210 million, that's a 5 multiple to projected EBITDA -- smack in the middle of Mirant (NYSE: MIR ) and NRG Energy (NYSE: NRG ) . And keep in mind that the generous Italian tariff rate on Etrion's 2010 vintage solar plants is good for 20 years. Despite Etrion's small size, those locked-in rates could merit a higher valuation. This one warrants further investigation, for those with a predilection for merchant power producers.