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Sev.en Energy actively seeking western European targets, also interested in global opportunistic acquisitions

8 February 2019

Czech energy group Sev.en Energy is actively seeking western European targets and is also interested in opportunistic acquisitions in eastern Europe and globally, Executive Director Alan Svoboda said.

The company, which had 2017 revenues of EUR 686m and EBITDA of EUR 135m, wants to acquire conventional coal- and gas-generation plants, he said. But it is also interested in thermal coal and base metal assets in the mining industry and low-carbon technologies such as co-generation, biomass, clean-coal technologies and new energy-storage technologies, he added.

It is currently seriously looking two European and one US target, said Svoboda who is responsible for M&A and the international development.

Two more buys targeted this year

Sev.en Energy hopes to complete at least two more acquisitions this year, Svoboda said, noting that this ambition may go beyond the targets, which it is already in due diligence with. For example, it is interested in several gas generation assets in Italy and Spain expected to come up for sale this year, he said, without naming them.

Sev.en Energy announced its first foreign acquisition on 1 February. It bought a 50% stake in power generation company InterGen N.V., which has assets in the UK and Australia, from Canada’s Ontario Teachers’ Pension Plan (Ontario Teachers’). The terms were not disclosed. InterGen, which has a portfolio exceeding 4000MW and 300MW under construction, had USD 892m revenues in 2017, according to a report.

The acquisition could mark the start of a wider strategic partnership with China Huaneng Group and Guangdong Yudean Group, the Chinese energy companies that own the remainder of InterGen, Svoboda said. Following the entry of Sev.en, InterGen could not only sharpen its operational skills but also look to expand internationally along the Belt and Road, although plans are still at the early stages, he said. The Belt and Road initiative is a strategy by the Chinese government involving infrastructure development and investments in Europe, Asia and Africa.

Sev.en Energy has more than EUR 2bn available to spend on buys over the next two to three years, of which EUR 1bn is equity and the rest bank financing, Svoboda said. While the price of each asset depends on many factors such as the expected commodity margins and further investment required, the company is targeting deals in the several hundreds of millions of euros, he said.

This news service reported in June 2018 that Sev.en planned to acquire gas- and coal-related assets in Western Europe, quoting Svoboda. The company remains mainly interested in acquiring conventional power generation assets in the UK, Germany, Italy, Spain and the Benelux region, and in the United Kingdom, it is specifically interested in gas-fired plants, Svoboda said.

Widened scope

Since then, however, the company has widened its scope to consider other regions, while actively focusing on searching for targets in western Europe. For example, he said, it looked at Turkish power plant Adularya, whose construction was financed using a CZK 11.7bn loan from the Czech Export Bank and Czech state-owned insurer EGAP. The sale recently collapsed as no offers were received, under the terms published, as reported.
Over the past year Sev.en Energy has expanded its in-house M&A team from three people to more than 20 so that it can actively bid for several targets concurrently and cover many functions inhouse, he said. It scouts for targets internally but for due diligence uses external financial advisers, as well as external law firms, he said.

For the recent InterGen deal, Sev.en Energy was advised on the legal side by Dentons and in terms of financial due diligence, by Alvarez & Marsal.

Energy mix

The company announced last July that it had teamed up with Greek construction and energy group GEK Terna and planned to jointly bid for the Megalopoli and Meliti lignite mines, owned by Greek state-owned power company PPC.
Sev.en Energy also remains interested in acquisitions in the Czech Republic, Svoboda said.

Conventional energy sources still have an important role to play in the energy mix and will be needed to supplement growing green energy resources over the next 10 to 15 years, he said. Sev.en Energy aims to be a consolidator.

Seven Energy operates Vrsany and CSA lignite mines in the North Bohemia region and a thermal power station in Chvaletice, with total installed capacity of 820MW. The company has 3200 employees.

Seven Energy is owned by Czech businessman Pavel Tykac.
by Katka Krosnar in Prague

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