Spanish energy group Repsol is putting a 25% stake in its oil and gas exploration division on the market. U.S. fund EIG purchases it for $4.8 billion and builds up a war chest for renewables projects due to the transition of the energy industry to a lower-carbon future.
As Reuters reported earlier this year, the deal values the whole business at $19 billion including debt, and may conduct a U.S. stock market listing of a stake in the unit after 2026, according to Repsol's statement.
The process commenced with an unsolicited offer from EIG, Reuters said in June, increasing Repsol's shares to a 14-year high.
Moreover, shares grew up after an announcement on September 7 before declining 1.8% by 7:46 GMT. Nevertheless, they outperformed the European oil and gas index, which was down 2.3%.
The company's cash is backed by wind farms and renewably generated hydrogen, together with other European oil and gas companies facing pressure from shareholders and regulators to decrease their planet-warming carbon emissions.
Repsol will keep control of the so-called upstream unit and said the agreement would allow it to hasten its decarbonization drive, and that EIG was ready to invest with it in the future of upstream.
The group has kept the pledge to plow more than one-third of its investments by 2025 into low-carbon projects and guarantee its products send out no more carbon than can be consumed by natural sinks like forests, or systems like carbon capture, by 2050.
EIG, based in Washington DC, concentrates on private investments in energy and energy-related infrastructure. It led a consortium that spent $12.4 billion on a 49% stake in oil giant Saudi Aramco's pipelines business the previous year.
It is essential to notice, that Repsol's total market value has increased almost 30% this year after COVID-19 brought it crashing to multi-year lows, and is currently around 19.6 billion euros (US$19.4 billion).
Oil and gas firms' upstream divisions are complicated, and Repsol has been working to simplify a structure of more than 100 individual units.
Repsol plans to become a net zero emissions company by 2050 and achieves it through the 2021-2025 Strategic Plan, an ambitious roadmap that will enable it to progress successfully towards the multi-energy commitment to cover all of society's energy and mobility needs.
In all, this is possible thanks to a €19.3 billion investment, of which €6.5 billion will be mainly allocated to low-carbon initiatives.
It has disposed of stakes in exploration businesses in several countries and sold its Russian assets to Gazprom Neft in January.
Investment bank PJT Partners advised Repsol on the deal.
