Talks have been ongoing for some time, but the pace has picked up in recent weeks, the other source added. The exact size and structure of a deal remains under consideration, and there is no certainty that a transaction will ultimately be agreed, the sources said, adding that it requires approval by the company´s governing bodies.
EDPR, which has a market value of around 18.6 billion euros
($19.72 billion) can sell stock representing as much as 10% of
the company without needing to hold a rights offer for all
shareholders.
EDP Group and its subsidiary EDPR declined to comment. Energias de Portugal (EDP Group) , which will publish its 2022 results on Wednesday, holds 75% of EDPR and the two companies are led by the same CEO.
EDPR invested more than 5 billion euros in 2022 to accelerate the energy transition, almost doubling gross investment year-on-year.
EDPR's core earnings increased 23% to 2.16 million euros in 2022 and it's recurring net profit grew 2% to 671 million euros, meeting its 2023 targets one year ahead.
EDP Group will brief analysts on its strategy on Thursday, and analysts expect it to present more ambitious targets for renewable energies, such as wind, solar or hydrogen. Some have also speculated that EDPR may raise capital.
The group had previously committed to direct 24 billion euros to capex by 2025 to support the energy transition, whilst pledging to lower its debt to 3.2 times its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA). EDPR's proposal this week to replace its cash dividend for 2022 with shares could have an impact on how much financing the company needs to raise from investors. Majority shareholder EDP Group has voiced its preference to be paid in shares, capping the amount of EDPR's potential cash payout. Other European utilities have been looking at seeking external investment to power the so-called energy transition. Last October, the Qatar Investment Authority agreed to invest 2.43 billion euros in German energy company RWE to finance its "Growing Green" strategy, through a convertible bond that will transform into shares at a later date. ($1 = 0.9433 euros) (Reporting by Andres Gonzalez, Sergio Goncalves and Pablo Mayo Cerqueiro. Editing by Jane Merriman)
