Target Information

The deal involves the divestiture of Northleaf Capital Partners' majority interest in NCP Mula Solar (Spain), S.L. (“Mula”), a significant solar photovoltaic plant in Murcia, Spain, boasting a capacity of 494 MWp. Recognized as one of the largest operational solar plants in Europe, Mula operates under a highly contracted financial framework, supported by a long-term pay-as-produced power purchase agreement with an investment-grade counterparty. Additionally, the plant is backed by financing from top-tier banks, making it an attractive asset for investors.

Mula's location in Spain provides it with some of the highest solar irradiation levels in Europe, along with robust transmission infrastructure that supports potential future renewable energy developments. This strategic positioning enhances the plant's viability and value in the growing renewable energy sector.

Industry Overview in Spain

The renewable energy sector in Spain has witnessed rapid growth and innovation in recent years, driven primarily by governmental incentives aimed at reducing carbon emissions and transitioning towards sustainable energy sources. Spain's commitment to renewable energy is underscored by its ambitious targets to generate 74% of its electricity from renewables by 2030, positioning the country as a leader in the European clean energy landscape.

Solar energy, in particular, has become a focal point, with Spain benefiting from its geographic advantages that provide high levels of solar irradiation throughout the year. This has led to an influx of investment in solar projects, as both domestic and international investors recognize the potential for sustainable returns in this mature market.

The country's extensive solar capacity has also led to the development of supportive regulatory frameworks that promote stable financing conditions. High levels of energy yield combined with established market mechanisms have resulted in a favorable environment for solar projects, ensuring their financial sustainability amidst fluctuating energy prices.

Furthermore, the ongoing evolution of energy storage technologies and grid integration solutions contributes to the industry's resilience. Spain is enhancing its electrical infrastructure to accommodate increased renewable energy generation, creating further opportunities for growth and innovation in the sector.

Rationale Behind the Deal

The divestment of Mula represents a strategic decision by Northleaf Capital Partners, reflecting the successful execution of their value creation plan for the asset. Over the years, Northleaf has focused on optimizing Mula's operations while effectively positioning it for a successful exit. By divesting their interest, Northleaf can generate substantial cash proceeds for their investors and redeploy capital into new opportunities.

Additionally, this sale aligns with Northleaf’s broader strategy of selectively exiting core infrastructure assets that have demonstrated stable cash flows and strong yields, thus delivering attractive returns across market cycles.

Investor Information

Northleaf Capital Partners is a prominent global private markets investment firm managing over US$27 billion in commitments across private equity, private credit, and infrastructure. Their diverse portfolio is supported by a robust team of 275 professionals stationed in key financial hubs worldwide, including Toronto, Chicago, London, and Tokyo. Northleaf focuses on mid-market companies and assets, employing a disciplined approach to sourcing and managing investments.

Since acquiring a controlling interest in Mula in 2018, Northleaf has implemented strategies to enhance the plant's operational efficiency, culminating in a structured sale process that highlights their expertise in infrastructure investment. Their ability to identify and capitalize on lucrative opportunities is a testament to their strategic investment philosophy.

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The sale of Mula Solar represents a well-timed exit for Northleaf, capitalizing on the growing demand for renewable energy assets, particularly in Europe. This transaction underscores Northleaf’s adeptness in realizing value through operational excellence and strategic market positioning. Given the strong operational metrics and regulatory support for renewable projects in Spain, investing in Mula yielded significant returns, affirming Northleaf’s investment strategy.

Moreover, the decision to sell to China Three Gorges Corporation, a leader in clean energy, suggests confidence in Mula’s future potential to generate sustainable energy and financial returns. This transaction not only benefits Northleaf’s investor base but also aligns with global trends favoring the transition to renewable energy.

Overall, considering the strong operational fundamentals of Mula and the dynamic renewable energy landscape in Spain, this divestment is likely viewed as a successful endeavor. Northleaf's proactive management approach and strategic exit reinforce their reputation as a proficient investment firm in the infrastructure sector.

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