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Equinor to Foray into Solar Power with Guanizul 2A Buyout

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Equinor ASA (EQNR - Free Report) and Martifer Renewables have inked an agreement to acquisition of a 50% interest in the Guanizul 2A (G2A) solar asset in Argentina. The other 50% is being purchased by Scatec Solar, a Norwegian independent solar power producer.

Located in the San Juan region of Argentina, the G2A asset is a 117 MW ready-to-build solar project. During the December 2017 RenovAr auction, held by CAMMESA — the Argentinian Electricity Regulatory Agency — the asset received a 20-year electricity offtake agreement (PPA) with a fixed price equivalent to ~50 USD/MWh.

The project, which has a potential to provide renewable energy to about 80,000 Argentine households, is expected to commence production toward the end of 2019. Final decision regarding the investment is expected by late 2018.

The capital expenditure for the project is estimated at $95 million. Of which, 40% funding will be done by Equinor and Scatec Solar (50% from each of the partners) and 60% from a construction bridge loan provided for the consortium by Equinor. This will take Equinor’s total financial exposure to $77 million. An appropriate refinancing of the loan via long-term third party project finance is being planned.

By 2025, Argentina aims to produce 20% of its electricity from renewable sources, which will make it the third largest alternative power market in Latin America. Over the last 18 months, about 1.5 GW of solar projects have been granted in two successive utility scale solar auctions.

In 2017, Equinor and Argentina’s leading energy company — YPF — entered into an agreement to jointly explore for hydrocarbons in the Bajodel Toro block in the Neuquén Basin. In November 2017, Equinor also won the Bajodel Toro Este exploration license and became the operator.

The latest acquisition is in sync with Equinor’s strategy to balance oil and gas portfolio with prospective renewable energy sources. The company has developed a substantial offshore wind portfolio with a capacity to provide more than1 million European homes with renewable energy. The 162 MW Apodi solar project in Brazil, where Equinor holds a stake of 43.75%, will come online at the end of 2018.

Price Performance

In the past three months, Equinor’s shares have gained 16.8% compared with the industry’s 8.6% rise.



 

Zacks Rank & Other Key Picks

Equinor currently sports a Zacks Rank #1 (Strong Buy).

A few other top-ranked players in the same sector are Occidental Petroleum Corp. (OXY - Free Report) , China Petroleum and Chemical Corp. (SNP - Free Report) and CVR Refining, LP (CVRR - Free Report) . These stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Occidental Petroleum is an international oil and gas exploration and production company. It pulled off an average positive earnings surprise of 30.2% in the last four quarters.

Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company delivered an average positive earnings surprise of 492.8% in the last four quarters.

Sugar Land, TX-based CVR Refining is an independent downstream energy partnership with refining and associated logistics properties in the Midcontinent United States. The company delivered an average positive earnings surprise of 7.05% in the last four quarters.

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