By Christoph Steitz and Thomas Escritt
FRANKFURT (Reuters) -Germany's largest power producer RWE has agreed to buy Con Edison's Clean Energy Businesses for $6.8 billion, nearly doubling RWE's renewables portfolio in the United States, the world's second-biggest renewables market.
The purchase will be partly funded by RWE issuing a $2.43 billion convertible bond to a Qatar Investment Authority unit, through which the QIA will become a 9.1% shareholder in RWE.
Con Edison said it was scrapping plans to issue up to $850 million in new shares this year and withdrawing equity guidance for the next two years. It said the deal would allow it to focus on its core utility business and New York's clean energy shift.
The transaction will nearly double RWE's U.S. renewables portfolio to more than 7 gigawatts (GW) and grow its regional project pipeline by 7 GW to more than 24 GW.
After the takeover, solar will account for 40% of RWE's U.S. portfolio, up from 3% now, presentation slides showed.
"Our equity capital measure is the basis for financing the acquisition of Con Edison CEB and of the additional green growth in the years to come," RWE Chief Executive Markus Krebber said.
"I am delighted that QIA is supporting RWE’s accelerated growth ambitions with their capital commitment," Krebber added in a statement released late on Saturday.
The deal, which is expected to close in the first half of 2023, will make RWE the fourth-largest renewables player in the U.S. market, which plays a key role in its green expansion, though still far behind largest player NextEra, which has some 58 GW of generating capacity.
U.S. EXPANSION
RWE's expansion in the United States comes as Germany is battling the impact of a complete halt in Russian gas supplies, which has already triggered the nationalisation of its smaller competitor Uniper.
Activist energy fund Enkraft Capital, which owns 0.15% of RWE, said it was "incomprehensible" how RWE could spend 7 billion euros on an M&A deal in the U.S. "amidst the biggest energy crisis Germany has ever seen".
But QIA CEO Mansoor bin Ebrahim Al-Mahmoud said it was proud to support RWE's efforts to become a global renewables leader.
QIA's investment expands Qatar's relationship with Europe's largest economy, which already includes stakes in Volkswagen (ETR:VOWG_p), Deutsche Bank (ETR:DBKGn) and Porsche.
The deal, the biggest for RWE since the break-up of former division Innogy announced in 2018, will be earnings accretive right away, giving RWE additional core earnings (EBITDA) of $600 million a year.
It comes nearly a year after RWE fleshed out its global renewables roadmap, which includes 50 billion euros ($49 billion) of gross investments by 2030, with 15 billion earmarked for the United States.
Con Edison CEO Timothy Cawley said RWE was "well-positioned to accelerate the growth of renewable energy across the United States."
Con Edison was advised on the deal by Barclays (LON:BARC) and Latham and Watkins.
RWE also confirmed plans to pay a dividend of 0.90 euro per share for 2022.