Clean Energy Pipeline’s latest statistics on European Renewable Energy M&A from 2009 through 2014 reveal a robust and growing market, dominated, particularly since 2012, by activity in Northern Europe, and an increasing frequency of portfolio or corporate transactions rather than single asset deals.
Over the past six years Northern European countries – led by Germany, France, Ireland and the UK, followed by Sweden, Poland and Italy – have dominated renewable energy infrastructure M&A deals.
The market has become more focussed on multi-asset deals or corporate investments. Single asset transactions ranged widely from 8% to 36% of the value of all transactions (excluding off-shore wind). Small value projects (typically 10-25 MW) are increasingly sharing the market with deals marked by larger diversified portfolio investments (100-150 MW+).
Part of deal value growth is the appearance of a new “sweet spot” for transactions in the $20 to $100 million range, where the frequency of such transactions has increased steadily over time. Prior to 2012, this segment was typically only a third of total transactions, but since the start of 2012 it has trended towards 40-50%. We perceive this to be down to an overall increase in assets cumulatively built in the sector coupled with normal industry consolidation.
In practice as more capital is required to hold the installed capacity base of a growing renewable generation market, it is natural for assets to move from undercapitalised developers to aggregators and then “destination owners” such as pension funds and other long term holders.
Of course, the M&A numbers exclude project financings or equity investments by the asset owners into their own projects and therefore they do not reflect the material investment being made in construction in this period. These statistics also show total financial value, not MW capacity. Larger portfolios often have assets in a variety of stages, including pre-construction and development, leading to increased investment activity post-M&A. As a result, the final equity investment into corporates is often understated as statistics focus on purchase price rather than total spend over time. For this reason, corporate transactions have significant latent value-add and growth potential for the buyer.
Wind transactions have increased in number relative to solar, especially since 2012, mainly due to the compression of operating margins in solar. Furthermore, there are new technology entrants into the market. Clean Energy Pipeline’s figures show the sector is presenting new opportunities in the field of renewable “enabler” infrastructure and related businesses. These include a number of generation technologies as well as grid distribution-related “enablers” – such as peaking infrastructure, energy storage and demand response technologies. The intermittent nature of renewables means that the demand for grid smoothing in various forms looks set to increase.
While the market has matured significantly in recent years, Clean Energy Pipeline’s figures indicate there is no let-up in the rate of M&A in the renewables industry, a trend creating strong opportunity in the years to come.