On Monday, BofA Securities began coverage on Grenergy Renovables SA (GRE:SM), assigning a Buy rating and setting a price target of €52.00. The firm highlighted the company's significant undertaking with the Oasis de Atacama project, which is poised to become the largest Battery Energy Storage System (BESS) in South America and one of the largest globally.
The analyst from BofA Securities acknowledged the execution risks associated with Grenergy Renovables, a smaller company venturing into a project with a capital expenditure of $1.4 billion compared to its €0.8 billion market cap. Despite these challenges, the firm expressed confidence in the company's potential for rewarding outcomes.
Grenergy Renovables has established a solid reputation in Chile, and the revenue model for the Oasis de Atacama project is considered secure, bolstered by a hybrid Power Purchase Agreement (PPA) and capacity payments.
Moreover, the declining costs of batteries, particularly with quotes for a 2-hour system from China having halved within the current year, were cited as a factor that could contribute to additional gains. The analyst noted that these falling costs provide an opportunity for further upside for Grenergy.
The Oasis de Atacama project's first phase is on track to be operational before the end of the year. Financing for the project is expected to be finalized this summer, events that the analyst believes will solidify value that is not currently reflected in the company's stock price. The price objective set by BofA Securities suggests a substantial 71% upside potential from the current levels.
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