Renewables M&As up as market confidence returns

Merger and Acquisitions in green technology and energy efficiency are beginning to recover after market confidence was knocked by the global downturn, according to PricewaterCoopers' (PwC), leading commentators to speculate that oil prices and recent events are driving green technology.

Ronan O’Reagan, direct of renewables and cleantech at PwC said: “The recent return to $100+ priced oil and the reaction to the nuclear tragedy in Japan should provide some support to valuations and act as a timely reminder to governments that a shift to a low carbon economy is not only about its environmental commitment, but also about security of supply.”

While global volumes of transactions in the sector were up, overall values were down $15.4 billion compared to 2009. Energy efficiency deals also trebled in volume to represent over $3 billion, overtaking last years’ dominant market segment, hydropower.

Despite the increase in deals by two thirds year-on-year, the overall values have declined by a third.

More but smaller deals have become the trend, partly due to sellers’ lowering their price expectations, and partly due to greater stability in the economy, according to PwC.

O’Reagan said: “Strong confidence has come back to the market after financing issues caused the sector real problems in 2008 and 2009. In addition, in 2010 buyers and sellers expectations are more realistic, which has supported higher deal volumes.”

In Europe, the UK and Germany account for one third of market activity, and regulatory uncertainty clouds the confidence to deal. This is partly down to regulatory reviews in the region, including a review into Feed In Tariffs in the UK and announcements in Spain, Germany and Italy to cut back solar subsidies.

Solar deal volume is, however, still rivalling wind, each having a just below a third of all renewable deals. Energy efficiency has become the new deal hot spot. The number of energy efficiency deals grew 225% year-on-year and total value of the deals is up 63% in contrast to a fall in other sectors.

This new market has been dominated by the US, who account for two-thirds of the worldwide energy efficiency deal value. This has allowed the US deal market to bounce mark to equal European transactions.

It is thought this focus in efficiency reflects both the potential for energy savings per capita and renewed regulatory interest, such as US building codes aimed at delivering a 30% energy saving in new builds.

Also in the US, as well as in France, nuclear power generators and engineering firms have moved some focus onto renewables in the wind and solar sectors, bringing the companies into the renewables market.

The largest deals globally were dominated by the flow of renewables flotations, including the $3.4 billion spin off of Enel’s green energy arm, and Chinese transactions, raising valuable capital for reinvestment in product and market development.

 

Image: Chauncey Davis 818 | flickr