Amancio Ortega finds a vein in renewables to maintain the investment pulse in Spain

January had not yet ended when Roberto Cibeira, CEO of Pontegadea, made a comment that generated murmurs in the Madrid auditorium where he was participating in a real estate forum. “If we find something that fits our criteria, of course we will invest in Spain because we would have liked to invest more,” said the top executive of the group that manages the assets of Amancio Ortega, the largest fortune in Spain. Cibeira was referring to the context of falling real estate prices with which 2023 was inaugurated, an opportunity for a company like the one he directs, with the mandate to invest hundreds of millions a year to obtain profitability and with buildings spread across a dozen countries with a value that exceeds 18,000 million. But with just over a month left until the exercise is completed, the largest operation that Pontegadea has undertaken this year in Spain (and throughout the world) has nothing to do with brick. Last week the purchase of 49% of a renewable energy megaportfolio in which Repsol will maintain 51% was announced. In exchange he has paid 363 million.

Amancio Ortega’s latest purchase is neither an occurrence nor a surprise. In reality, it is consistent with the investment behavior that Pontegadea has had in Spain in recent times. “It is another commitment to diversification, with a reference partner who, furthermore, is not new,” the firm’s market analysis team indicates. In fact, the purchase is very reminiscent of the one that marked the group’s debut in renewable infrastructure: in 2021 it acquired part of a wind farm for 245 million. The percentage and the seller were the same as now. Two years later, and adding another acquisition (again from Repsol) of a photovoltaic park, Pontegadea highlights that its clean energy portfolio already exceeds 1,000 megawatts (MW) of capacity.

The company seems to feel comfortable in that sector. Its largest industrial stake—one of the two legs of the group, along with real estate investments—continues to be Inditex, the textile giant founded by Amancio Ortega and which has made him one of the richest men on the planet (his fortune is currently estimated at more than 86,000 million euros, according to Forbes). But it also owns minority percentages in Enagás Renovables, the electricity networks of Spain (Redeia) and Portugal (REN), as well as in Telxius, a telecommunications tower company that it shares with Telefónica.

In short, for years the positions of Ortega’s investment arm have been increasing in companies with a common denominator: they are all related to some type of infrastructure and have reference partners who are in charge of day-to-day management. “Pontegadea’s philosophy is to continue creating economic wealth, not through direct attention to the user, but with stable long-term services,” summarized in the Galician firm. Avoiding providing direct services is a way to avoid a potential reputational crisis for Inditex or one of its brands with global implementation (Zara, Massimo Dutti or Bershka, among others) in the event of any setback.

It is a strategy that is somewhat reminiscent of the one it follows in what is its main source of activity. Pontegadea owns dozens of properties that it leases, mostly offices whose maintenance is entrusted to third parties. Real estate assets represent more than four-fifths of its investment portfolio. However, while its presence in the world of renewables has not stopped growing in recent years, we have to go back to 2016 to remember the last flashy real estate purchase it made in Spain. It was the Cepsa Tower, one of the skyscrapers that define the northern skyline of the capital, and the outlay rose to 490 million, according to figures published at the time.

Growth potential

Buying a block almost 250 meters high in Madrid or taking, as now, a stake in twelve wind farms and two photovoltaic plants that are spread throughout Spain seem like very different things. But everything responds to the need to look for investments in markets where Pontegadea sees growth potential, that adjust to its return expectations and that also allow the assets to be maintained for a long time. The logic is different from that of investment funds, which have deadlines to then sell and recover your bet. The mandate for Ortega’s assets is clear: buy, buy and buy. And it is because its main source of income, which is the dividends it receives annually for the 59.29% stake it has in Inditex (translated: 2,217 million in this year alone), would lose meaning (also a lot of value in a situation like the current inflationary crisis) if they remained immobile.

This leads Pontegadea to invest astronomical figures year after year. So far in 2023, it exceeds 1,000 million. Few operations reach the market without going through the analysis table of the firm based in A Coruña. But very few fit the characteristics described above and the size you need to maintain such a volume of business. Especially for a company, another house brand, that has a relatively modest staff: it does not reach a hundred people despite being present in 10 countries. As a result, it does not seem that the Spanish real estate market has offered in recent years the opportunities that one of the largest is looking for. family offices (as companies that manage large family assets are known in financial slang) in the world.

The situation contrasts strikingly with what is happening on the other side of the Atlantic. In recent years, Pontegadea has had intense activity in the American real estate market, light years away from any other due to the figures used. There, Ortega’s company is home to large technology companies, whose offices it buys to rent, and in 2022 it carried out the largest operation in its history: 905 million dollars (then practically in parity with the euro) to acquire seven logistics centers that They provide service to distribution giants such as Amazon or Nestlé. And it has also purchased, last year and this year, large blocks of semi-luxury rental homes, both in New York and Chicago.

All this makes the United States Pontegadea’s first market by investment volume, thanks to assets that, ultimately, seem difficult to find elsewhere. But Ortega also seems to have found with renewables the solution to continue maintaining Spain, the country of origin of his business empire, as the second largest market for the group. At the end of the day, Cibeira discreetly warned it in the talk he gave in Madrid eleven months ago: “We will also have our eye on the infrastructure.”

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