Apollo Acquires Half of Texas Solar and Battery Portfolio

In a significant move towards renewable energy investment, Apollo Global Management Inc. (NYSE: APLO) has announced that it will acquire a 50% stake in a portfolio of solar and battery energy storage projects located in Texas from TotalEnergies (EPA: TOT). This deal is noteworthy, considering Apollo's recent market capitalization of nearly $98 billion and year-to-date returns of 88%.

The portfolio involved in the acquisition consists of approximately 2 gigawatts (GW) of energy assets within the Electric Reliability Council of Texas (ERCOT) market. This includes three solar projects that collectively generate 1.7 GW and two battery storage facilities with a total capacity of 300 megawatts (MW). Apollo has demonstrated solid financial health, with annual revenues exceeding $31 billion and a favorable gross profit margin nearing 40%, enabling it to pursue such substantial investments.

Details of the Acquisition

TotalEnergies will retain the remaining 50% of the portfolio and continue to manage the projects known as Danish Fields, Cottonwood, and Hill Solar I. Brad Fierstein, a partner at Apollo, remarked on the significance of this agreement, stating that the investment aligns with their Clean Transition strategy, emphasizing their focus on acquiring a well-structured and sizeable renewable asset portfolio.

Apollo has been actively investing in the energy transition, with its managed funds allocating around $40 billion to energy and sustainability initiatives over the last five years. The firm has set ambitious targets, aiming to invest $50 billion in clean energy projects by 2027, and potentially exceeding $100 billion by 2030.

Expected Closing and Future Plans

The completion of this transaction is subject to usual closing conditions and is anticipated to conclude in the fourth quarter of 2024. Apollo, known for its diverse asset management capabilities, manages approximately $733 billion in assets as of September 30, 2024. The firm’s continual expansion into the renewable energy sector reflects its commitment to sustainable investment practices.

Apollo's stock is trading near its 52-week high of $176.75, indicating robust market momentum. Analysts using InvestingPro data highlight the potential for further growth, suggesting that Apollo's stock may not have reached its full fair value yet. For those interested in investment strategies and market insights on Apollo, detailed analysis and additional ProTips are available through various investment research platforms.

Market Reactions

Following the announcement of this acquisition, analysts have responded positively. Apollo's recent third-quarter performance included record Fee Related Earnings (FRE) of $531 million, strong spread-related earnings (SRE) of $856 million, and an adjusted net income of $1.1 billion. This performance has prompted investment firms like TD Cowen to maintain a Buy rating on Apollo's stock, while BMO Capital Markets increased their price target from $138 to $157.

Other firms, such as Keefe, Bruyette & Woods, have similarly adjusted their targets, indicating strong confidence in Apollo’s business performance. Piper Sandler has even initiated coverage on Apollo with an Overweight rating, setting a price target of $188 based on the company’s strategic planning and goals.

Looking Ahead

The leadership team at Apollo appears stable, which has alleviated concerns regarding potential transitions within the company. This stability, along with Apollo’s strategic direction, is expected to remain uninterrupted. As developments unfold, such as the recent nomination of Scott Bessent for the role of US Treasury Secretary, stakeholders will be keenly monitoring how it may impact companies like Apollo in the financial sector.

Apollo, Texas, Investment