Recent Surge in Green M&A Deals

Merger and acquistion (M&A) activity within the renewable energy sector surged to an increase of over 70 percent throughout 2010 on the 260 deals completed in 2009. According to KPMG’s annual review of M&A deals in the sector, this trend has continued in 2011, with a record 141 renewable deals totaling $11.2 billion in value announced in the first quarter of 2011. Iberdrola’s pending 20 percent stake bid for Iberdrola Renovables SA is the biggest deal of the year at €2.6 billion ($3.74 billion), followed by Electricité de France SA’s €1.5 billion ($2.16 billion) bid for EDF Energies Nouvelles SA (50 percent stake).

Andy Cox, energy partner at KPMG UK, commented: “The renewable M&A market has really picked up in 2011, with a substantial jump in global activity which looks set to continue. In particular, our survey [based on a survey of 500 senior executives] has shown that deals in the $50 million-$0.5 billion bracket are likely to see the greatest increase whilst, overall, higher competition for targets is expected to push up global valuations driven by better financing conditions, a post-Fukushima reinvigoration of sentiment and soaring oil prices as well as some new acquirers, including Asian manufacturers and, potentially, pension funds.”

The review revealed that the majority of respondents expected the global renewable energy market to be driven by new investors from China and North America. Interestingly, a heavy bias towards local investment was also revealed, with more than double the number of Asian respondents intending to invest in China and India rather than in European countries.

The research also highlighted the ongoing importance of government incentives and stimuli, which continue to be big draws, particularly in Western Europe.

Continued Cox: “M&A activity continues to build and although still a challenging financing environment, capital is freeing up for renewable investment. Soaring oil prices have emphasised the importance of the long-term hedge offered by renewables, yet the de-coupling with gas prices has stalled investment in key markets. We should not underestimate the increasingly important role of renewables in the low carbon agenda as the energy sector positions for future demand growth in the difficult context of carbon reduction targets and the uncertainty around nuclear programmes.”


Last year the number of completed M&A deals increased by over 70 percent, fuelled by a boom in sub-$500 million transactions. Despite this dramatic jump, the majority of respondents believe that the number of sub-$500 million deals will increase even further during the next 18 months.

These predictions are supported by a record number of announced deals in the first quarter of 2011. The more than 140 deals announced in the first quarter of 2011 compare with a quarterly average of 96 announced deals totalling $5.5 billion per quarter throughout 2010. All in all, 2011 looks set to be another buoyant year for M&A.

Dr Marcus Felsner of Rödl & Partner Nuremberg said: “The renewables industry has established itself as a major pillar of global economic growth. Given the dynamic of events earlier this year, the commercial, political and social drive for fossil fuel independence has only further empowered investors, big and small. High transaction activity in this promising sector – both in developed and emerging markets – is poised to continue well into the future.”


Cross-border investment is not going to plug domestic funding gaps without a step change. This will come as a disappointment to many debt-laden European countries, which were counting on a bailout from the Asia-Pacific region. The survey data is unequivocal in demonstrating clear regional investment biases. North American respondents show a strong local tendency with an overwhelming focus on the U.S. (86 percent) ahead of China (40 percent), India (30 percent), the UK (21 percent) and Germany (17 percent). Asian and European investors are more internationally inclined but still have a clear preference for investing domestically or regionally.

With countries increasingly dependent on their incumbent regional investor base, the importance of incentivising home-grown investors is becoming increasingly important. Accordingly, debates concerning effective government policies and stimulus are unlikely to end soon.

Despite cuts to renewable feed-in tariffs in some of Europe’s leading renewable energy markets over the course of 2010, government incentives remain an essential driver for M&A. Indeed survey respondents planning to invest in Italy (41 percent), the UK (38 percent) and Germany (29 percent) cited government incentives as their primary motivation above any other factor. In contrast market demand is the most prevalent M&A driver in many non-European countries such as the US (41 percent), China (46 percent) and India (46 percent).

Government incentives are currently affecting M&A on two fronts. On the one hand, cuts to feed-in tariffs (FiTs) are decreasing the attractiveness of renewable energy assets from the buyers’ perspective. On the other hand, in extreme cases, such as Spain which announced retroactive cuts late last year, harsh incentive cuts are actually triggering disposals with asset owners readjusting portfolios in light of reduced returns. This has had a negative impact on valuations, particularly in the solar sector – total solar M&A transaction values decreased 16% year-on-year in 2010.

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