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Norwegian oil giant Statoil ASA (STO - Free Report) has inked an agreement to farm in the 40% share held by Scatec Solar in the construction ready 162 megawatt (MW) Apodi solar asset in Brazil. Scatec Solar is an independent solar power producer based in Norway.

Project Details

The project is expected to supply electricity to about 160,000 households. Both companies have also decided on an exclusive team that would enable them to develop prospective future solar projects in Brazil. Moreover, Statoil intends to purchase 50% share in the project execution company that would facilitate it to take part in constructing and leading solar projects.

Located in the municipality of Quixere, Ceara State in Brazil, the Apodi asset, has complete authorization with respect to network connection. In 2015, the asset was awarded a 20-year power purchase agreement (PPA) awarded at an auction organised by the Brazilian government. In 2017, it received an inflation adjusted offtake price equivalent to $104/MWh.

Project Financing

An acquisition price of $25 million will be paid by Statoil cumulatively for access to the Apodi solar asset and the project execution company. The construction of the solar plant is expected to commence in October 2017 and is scheduled to begin electricity supply towards the end of 2018. The project is estimated to have total capex of $215 million. The funding of the Apodi solar asset will be done by project financing and equity contribution in the ratio of 65% and 35%, respectively. Of this total, Statoil’s equity share will be about $30 million.

Project Shareholding

Consequent to this transaction, Scatec Solar holds a stake of 40% in Apodi solar asset, while ApodiPar holds the remaining 20%. Scatec Solar will lead the construction and operations phase for this project, while Statoil will be liable for providing personnel and services from Brazil as well as Norway.

Future of Solar Power

Solar has become a very popular source of power as it involves improved technology and lower costs. It is giving tough competition to conventional sources of energy. Over the last decade, Solar Photovoltaic (PV) has expanded globally at about 50% per year. This trend is estimated to continue.

Brazil has witnessed the solar power trend over the last few years, as it has awarded about 3GW of solar projects in three consecutive utility scale solar auctions. Further, it plans to award 7GW by 2024.

Statoil’s renewable projects

Statoil has a large portfolio of renewable energy. It has an offshore wind portfolio with a capacity of supplying to over 1 million homes with renewable energy. Statoil operated the Sheringham Shoal wind farm in the UK, which was brought online in 2012. Other projects include Statoil operated Dudgeon offshore wind farm in the U.K. and the world’s first floating offshore wind farm, Hywind Scotland – estimated to come online in 2017. In 2016, Statoil also purchased 50% of the Arkona offshore wind farm in Germany, which will start providing power in 2019.

Price Movement

Shares of Statoil have returned 22% compared with the industry’s increase of 10.5% over the last three months.



 

About Scatec Solar and ApodiPar

Norway-based solar power producer Scatec Solar currently has 322 MW of solar power plants in operation. Additionally, the company has a major pipeline of solar projects.

ApodiPar is a Brazilian syndicate comprising three investors.

Zacks Rank & Key Picks

Currently, Statoil carries a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector include First Solar Inc (FSLR - Free Report) , Lonestar Resources US Inc (LONE - Free Report) and Alliance Holdings GP LP (AHGP - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
First Solar designs, based in Tempe, AZ, manufactures and sells solar electric power modules using a proprietary thin-film semiconductor technology. The company delivered an average positive earnings surprise of 524.24% over the last four quarters.

Lonestar Resources is an oil and gas company, headquartered in Fort Worth,. The company delivered an average positive earnings surprise of 62.5% in the preceding quarter.

Alliance Holdings, headquartered in Tulsa, OK, is involved in producing and marketing coal. The firm delivered an average positive earnings surprise of 13.64% over the last four quarters.

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