A total of 591 renewable energy M&A deals valued at US$51.2bn were announced during 2011, a significant increase on the 431 deals announced in 2010.
This is according to KPMG’s annual review of M&A activity within the renewable energy sector, which takes a look at the changes and trends in the sector to provide insight on where the market is heading. This report is based on a survey of 500 senior executives from across the global energy industry and in-depth interviews with key organisations involved with the renewables energy sector.
150 M&A transactions totaling US$9bn were announced in Q1 2012, a slight increase from the US$8.75bn value of 150 transactions in Q4 2011.
Outbound Asian M&A increased by more than 50 per cent from 2010, with 29 acquisitions announced totaling $2.1bn of assets acquired outside Asia in 2011. In line with this, over 40 per cent of survey respondents believe than new investors and acquirers in renewable energy are most likely to come from China. The USA continues to be the most attractive market for renewable energy M&A and investment with over 46 per cent of corporates and investors surveyed planning to target the USA during the next 18 months despite the severe policy uncertainty.
Corporates and investors are targeting solar PV (27 per cent), biomass (21 per cent) and onshore wind (18 per cent), whilst debt providers’ principal investment focus is on onshore wind (56 per cent), solar PV (46 per cent) and hydro (26 per cent).
There was a 39 per cent decrease in renewable energy project finance to US$33.4bn in Q4 2011, compared with the previous quarter; 13 per cent below the quarterly average during the last three years;
A number of utilities companies have been divesting non-core assets in the renewables sector; a trend which KPMG sees continuing in the near term, alongside a limit on their investing in new deals. Their focus is expected to remain on offshore wind investment where the scale of projects are more akin to their traditional generation assets;
Renewable energy generation costs continue to fall significantly in 2011 to the extent that the industry in now talking about when rather than if, grid parity will be reached; and 70 per cent of respondents indicated that it is now harder to secure debt financing to fund acquisitions of renewable projects and companies than 12 months ago; however, the majority of respondents (85 per cent) expect renewable energy deal flow to remain robust in the next five years.
