Rüdiger Dany, CEO of NEPI Rockcastle - Europe’s third-largest listed retail real estate company with a €6.9bn portfolio - has spoken passionately about the potential for the group’s new energy strategy, which is getting analysts excited.
In an interview with PropertyEU, NEPI Rockcastle’s CEO explained how the company agreed its energy strategy in 2022 and rolled out photovoltaic panels across its Romania shopping centre assets in 2023. That green energy is now supplying 25% of its tenants and the centres' energy.
The returns on investment in the production and sale of renewable energy to tenants has proved to be on average around double the returns of investing in the underlying retail real estate in Romania. With that success, the company has already approved another €25 mln under the investment programme earmarked for its other territories outside Romania.
The target strategy is to lower the group’s C02 emissions dramatically, said Dany. But his ultimate investment thesis and ambition is much larger than one might imagine: it could radically improve the bottom line.
He believes in the fulness of time a total investment of €200 mln - €220 mln in photovoltaic energy production across the entire platform could yield additional EBITDA of as much as €50 mln per year from energy sales, achieving break-even in 4 years and then becoming an accretive profit centre in its right thereafter.
Incredibly, it is his belief, the energy production division of NEPI Rockcastle could eventually yield higher profits than from its core retail real estate activities as a whole, which currently produce close to €500 mln of annual income.
It is a bold view that analysts are backing, he reveals. It will also have other large owners of real estate sitting up paying attention as the boundaries between real estate investment activity and green energy production begin to blur.
NEPI Rockcastle is the largest owner, operator and developer of shopping centres in Central and Eastern Europe and a member of the European Council of Shopping Places, the US Green Building Council, and the European Public Real Estate Association (EPRA).
It is understood that should the ambitious plan be signed off by the company’s investment committee and board, the estimated €200 mln of total investment would be executed in phases with the geographic roll-out sequence decided upon.
NEPI Rockcastle is currently the retail property market leader in Romania and Poland – its two largest markets – and has assets in Bulgaria, Hungary and Slovakia, as well as having shopping centres in Croatia, the Czech Republic, Lithuania and Serbia.
According to a previous statement, the company’s growth is being propelled by a €650 mln development programme, accompanied by accretive acquisitions, with two major assets – Forum Gdansk Shopping Centre in Gdansk and Copernicus Shopping Centre in Torun, both in Poland – purchased in 2022.
The core real estate business is proving solid amid ‘resilient’ economic growth and rising household consumption in CEE outpacing Western European countries. This is driving consumers through NEPI Rockcastle’s shopping centre doors, and attracting growing numbers of international retailers, as well as local companies, seeking space within its largest portfolios in Romania and Poland and seven other regional markets.
This in turn is driving energy demand.
Energy strategy
Romania, where NEPI Rockcastle has executed its energy strategy first, accounts for around 36% of the group’s NAV. The European Union is currently funding programmes in such countries, although NEPI Rockcastle has made its Romania green energy investment out of its own financial resources.
Solar panels can be placed on the roofs of its centres but also over its carparks. At its latest development to open, Promenada Craiova in Romania, it has one of the largest carpark PV installations in the country which together with solar panels on the building’s roofs, generates around 70% of the energy required by tenants during peak conditions. According to the company’s annual report, the firm also buys green energy where it needs to, which helps keep its carbon footprint down.
Dany explains there are three possibilities to further develop its energy strategy to reach its target of net zero by 2030. One includes locating sites, connecting to the grid, and obtaining relevant permits before selling the energy on. Second, an investor can buy “pre-developed fields” where installation and permits are already obtained. Third, an investor can buy a fully functioning site.
Energy prices have been volatile in Europe and soared at the outset of the Ukraine/Russia conflict, but Dany’s future profitability figures use a base case scenario looking back at energy prices over 10 years during which period there has been much less fluctuation.
And the company also needs to take into account all the various ‘not insurmountable’ national green energy and building regulations, including those such as weight load issues on roofs, which need to carefully take into consideration factors including things like increased weight due to snow.
