Hold Rating for Corporacion Acciona Energias Renovables SA Amid Financial Leverage Concerns and US Policy Uncertainty

In a report released today, Arthur Sitbon from Morgan Stanley downgraded Corporacion Acciona Energias Renovables SA (5BP – Research Report) to a Hold, with a price target of €19.00.

Arthur Sitbon has given his Hold rating due to a combination of factors affecting Corporacion Acciona Energias Renovables SA. The company’s financial leverage remains a concern, as its net financial debt, although appearing lower than expected, is primarily due to the exclusion of debt related to assets held for sale. This situation indicates that operating cash flows are insufficient to maintain the previously targeted growth pace. While the company has adopted a more disciplined capital allocation approach, its reliance on asset rotation strategy execution is critical, with significant proceeds needed to cover capital expenditure requirements and maintain an investment-grade credit rating.
Moreover, the path to reducing financial leverage is longer than initially anticipated, and while there is confidence in executing the asset rotation plan, it may result in more market dilution than expected. The company’s exposure to US policy uncertainty, particularly concerning battery projects and the lack of clarity on IRA reform, adds to the short-term risks. Despite outperforming its peers over the last year, these factors contribute to the Hold rating, as they present potential challenges to short-term performance.