New Renewables Deals - PwC · 2015. 6. 3. · by power utility companies were down significantly – from US$15.8bn in 2009 to US$3.0bn in 2010. Enel’s IPO of its Enel Green Power

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RenewablesDeals

2010 analysis and 2011 foresight

A look at global M&Aactivity in the renewablepower and energy efficiency sectors

Introduction 2

Report highlights 3

Deal totals: a busy sector 5

Deal makers: the 2010 players 9

Deal places: a focus on markets worldwide 13

Europe 15

North America 17

Asia Pacific 19

Looking ahead 21

Contacts 22

Contents

1 Renewables Deals 2010 analysis and 2011 foresight

Methodology and terminology

Renewables Deals includes analysis of all global renewable energy and cleantechnology M&A deal activity. We define renewable energy deals as those relating tothe following sectors: biofuels, biomass, geothermal, hydro, marine, solar and wind.Renewable energy deals relate to the acquisition of (i) operating projects involved inthe production of renewable energy and (ii) companies manufacturing equipment forthe renewables sector. We define clean technology deals as those relating to theacquisition of companies developing energy efficient products for renewable energyinfrastructure. We exclude deals relating to nuclear power assets and deals where onlya minority of the business’s activity is in renewables. This year, the analysis is based ontransactions from Clean Energy pipeline’s proprietary M&A database, provided byVenture Business Research. This covers both 2009 and 2010 data in this year’s edition.We note that other database providers have been used in previous years.

The main dataset in the report covers completed M&A deals only, and excludes InitialPublic Offerings (IPOs) and deals which are pending for regulatory, legal or financialreasons. A selection of top pending deals and top IPOs is included separately in thereport. The Asia Pacific region is deemed to include Australasia, except whereotherwise explicitly stated. Deal values are stated as the consideration valueannounced or reported including any assumption of debt and liabilities. Figures relateto the actual stake purchased and are not grossed up to 100%. The analysis alsoincludes deals with undisclosed value. Deals where the transaction value isundisclosed are assigned an average transaction value using a methodology derivedfrom Clean Energy pipeline’s proprietary M&A data.

IntroductionWelcome to the third edition of Renewables Deals, an annual review byPwC of deal-making in the renewable energy sector. It sits alongside itscompanion report – Power Deals – and, together, the two publicationsprovide a comprehensive look at trends and the outlook for M&A activityin the power utilities sector.

This report examines the rationalebehind the overall trends and the keyindividual deals in the renewableenergy sector. This year we haveexpanded our analysis to cover theincreasingly important field of energyefficiency as well as looking separatelyat important initial public offering(IPO) activity. We also highlight, in aseries of deal dialogues throughoutthe report, some of the critical issuesfor companies engaging in dealactivity within the sector, drawing onour global experience as an adviser toplayers in major deals in renewableenergy markets.

The renewables sector is proving abusy market for M&A. Deal-making isrunning at very high levels, albeit forsmaller values than in previous years.Apart from hydro, which has longbeen cost-competitive in themarketplace, the pattern of investmentand deals in renewables continues tobe strongly influenced by regulatoryincentives. There is an element oftaking stock as some governmentsreview the best way to balance thetriple objectives of affordability,security of supply and cleaner energyin a context of tighter public finances.

There is strong growth in a number ofsectors. We look at the gathering paceof activity in the solar powergeneration and energy efficiencysectors. We examine the changing mixof buyers and sellers as utilitycompanies move back from M&A toconcentrate on capital projectinvestment. We discuss the east-westbalance of power in the expandingwindpower market and the increasingglobalisation of companies in thissector. Looking forward, we see a busyyear ahead as some of these themesintensify and governments clarify anyadjustments of regulatory regimes tomatch their fiscal constraints.

Renewables Deals 2010 analysis and 2011 foresight 2

Manfred Wiegand Global Utilities Leader

Report highlights

A busy deal sector butsmaller values

The renewables sector is the focus oflively deal activity. The number of dealshas grown by two-thirds year-on-yearalthough total deal value is down by athird. Europe in particular, and the AsiaPacific region, led the trend towardsmore but smaller deals. In NorthAmerica total deal value was moreresilient. Indeed, North American targetvalue increased by US$3.9bn (43%)year-on-year while Europe went in theopposite direction with an US$18bn(58%) fall.


Solar power plant andenergy efficiency sectorscome of age

Solar deal volume is rivalling wind, eachwith just under a third share of allrenewables deals, as momentum behindthe sector gathers pace. A series of solartechnology and operational asset dealsreflects the growing role of solar powerplants. Energy efficiency is also becominga deal hot spot. The number of energyefficiency deals grew 225% year-on-yearand total value was up 63%. Two-thirds(65%) of worldwide energy efficiency dealvalue is in North America where efficiencyis second only to wind in total value terms.


IPOs flow as Chinese gear up for growth

Chinese renewables companies arelooking at major expansion with a seriesof IPOs on the Hong Kong stock exchangein 2010 and more planned in 2011.Chinese wind turbine companies Sinoveland Xinjiang Goldwind will provideformidable competition for westernmanufacturers such as Vestas, Gamesa, GE and Siemens. The IPO proceeds willenable them to expand their pipelines aswell as strengthen R&D to compete inglobal markets for the next generation of 6 MW+ turbines. Elsewhere in the windsector, the days of independent operatorslook increasingly numbered as operatorssuch as Clipper Windpower get taken overby large multinational companies.

Utility companies take a back seat

We predicted in last year’s report thatutility companies, who have been thebiggest buyers of renewables assets in thepast, might rein back purchases in the faceof massive capital investment challenges.This has proved to be the case. Purchasesby power utility companies were downsignificantly – from US$15.8bn in 2009 toUS$3.0bn in 2010. Enel’s IPO of its EnelGreen Power unit was the biggest 2010utilities deal but, in an interesting reversal,Iberdrola announced in March 2011 that itintended to delist Iberdrola Renovables bybuying back the 20% stake that it floatedin 2007. Valuation is not the only motivehere. The move was followed by anannouncement that Iberdrola is alsogaining investment from a division ofQatar’s sovereign wealth fund and forminga strategic partnership in a move that willchange the balance of large investorinterests in the company.


This reflects a greater focus on smallerdeals to fill technology gaps and more roll-out deals as completed projects are sold tofinancial owners. Utility companies reinedback purchases in the face of massivecapital investment challenges. There wererelatively few big portfolio additions.Purchases by power utility companies weredown significantly – from US$15.8bn in2009 to US$3.0bn in 2010 (see figure 4).Power utilities, and other investors, willalso be taking stock of regulatory reviewsin some European countries includingSpain, Germany, Italy and the UK.

From a low base, the biggest sector growthcame in the field of energy efficiencywhere deal numbers rose 225% and totaldeal value was up 63% year-on-year. Welook at this activity in more detail later inthis section. We also examine thedynamics behind the biggest deals in our‘Deal Makers’ section.

Behind the deal totals lay a number ofthemes, reflecting significant change in theindustry. We examine these on thefollowing pages.

More deals for smaller values. 2010 was a busy year forrenewables deal-making with the number of deals rising by two-thirds year-on-year, from 319 in 2009 to 530 in 2010 (figure 1).But this was accompanied by a big fall in total value, fromUS$48.8bn to US$33.4bn. Just over a third - US$5.7bn - of thisUS$15.4bn fall in value can be attributed to two fairlyexceptional large European sales by Endesa and E.ON in 2009that boosted that year’s total.

Deal totals: a busy sector

A year-on-year US$12.5bn fall inhydropower deal value was a major factorin the lower deal value transacted in thesector. There were a number of large dealsfor hydro assets in 2009 but this was notrepeated to the same extent in 2010.Instead, hydro followed the trend in therest of the sector with a larger number ofsmall deals (figure 3). Only two hydrodeals feature in the top ten deals (figure 7).

It was in the wind and solar power sectorsthat the pattern of more deals for smallervalues was most evident. These continue tobe the largest sectors in terms of thevolume of deals. The number of deals rosedramatically – by 58% in wind and 48% insolar – but total values were down, by 24%in wind and 20% in solar (figure 3).Investors, developers and operators wereextremely busy but the typical deal sizewas smaller.

Figure 1: All renewables deals by value (US$bn) and number of deals

2009 2010 Change in 2010Number Value Number Value % number % value

319 US$48.8bn 530 US$33.4bn 66% (32%)


Figure 3: Renewables deals total deal value and percentage share by sector (Deal numbers shown in parenthesis)

2010 (US$33,416m)2009 (US$48,799m)

Hydro (US$16,114m) 33% (14)

Wind (US$13,171m) 27% (101)

Solar (US$11,536m) 24% (99)

Biofuels (US$3,985m) 8% (39)

Energy efficiency (US$2,324m) 5% (28)

Biomass (US$1,001m) 2% (24)

Geothermal (US$668m) 1% (14)

Hydro (US$3,573m) 11% (33)

Wind (US$10,057m) 30% (160)

Solar (US$9,176m) 27% (146)

Biofuels (US$4,055m) 12% (40)

Energy efficiency (US$3,798m) 11% (91)

Biomass (US$2,214m) 7% (46)

Geothermal (US$542m) 2% (14)

Technology and engineering entrantsWe are seeing engineering, technology andchemicals companies stepping up theirpresence in the renewables value chain,either by diversifying and entering themarket for the first time or bystrengthening and extending existingpositions. In one of the top ten deals of2010, for example, chemicals companyChina Bluestar acquired Norwegian makerof solar-grade silicon Elkem (see ‘DealMakers’ section for more details).

On the technology front, Sharp’s US$305mpurchase of US company Recurrent Energyexpands its photovoltaic (PV) footprint.Sharp has long had a solar manufacturingpresence but the deal extends itsoperations from developing and producingsolar panels to developing and marketingpower generation plants. This also reflectssolar PV manufacturers’ increasing need tosecure distribution through in-housedevelopment - a well-established strategyof turbine manufacturers in the windsector. The timing of the move comes asthe roll-out of larger-scale solar generationgains momentum.

Nuclear and renewables interplayPower engineering companies with longtrack-records as suppliers in the generationsector are establishing and extending theirpresence in renewables. The interplaybetween the nuclear and renewablessectors came into particular focus in 2010as nuclear companies saw the opportunityto develop their carbon-free offering.French nuclear engineering companyAreva, for example, made its first moveinto the solar power market with theUS$200m purchase of US company Ausra,a developer of solar thermal powertechnology.

The Areva purchase comes in anticipationof a growing market for the construction ofconcentrated solar power plants. It followsmoves by other engineering groups such asSiemens who bought Israel’s Solel, amanufacturer of solar thermal systems, in2009. In the US, the interface between thenuclear and renewables sectors was alsothe territory for a major landmark dealwith nuclear generator Exelon’s first moveinto renewables through the purchase ofJohn Deere Renewables (see later ‘DealMakers’ section). The nuclear emergencyin Japan, which is just unfolding as we goto print, could prompt furtherdiversification by nuclear companies intorenewables.

6.3

15.4 15.8

11.3 98

142

117

173

10.5

6.45.1

11.5

Figure 2: Quarterly tracking of deals – 2009 and 2010

By value (US$bn) By number

50

100

150

200

8097

47

95

Q4Q3Q2Q1

5

10

15

20

Q4Q3Q2Q1 Q4Q3Q2Q1 Q4Q3Q2Q1

2009 2010 2009 2010


Solar power plant growthAlongside the entry of power andtechnology companies, companies in thesolar power industry have started toconsolidate and strengthen their globalpresence. For example, US companySunPower bought European power plantdeveloper SunRay Renewable Energy forUS$277m. SunPower has already beenvery active in solar power plantdevelopment in Italy and the purchase ofSunRay gives it added capacity and apipeline of developments in Europe andthe Middle East.

Italy has been a hotspot for solarinvestment, in response to an attractivesubsidy regime and in November 2010 sawEurope’s largest single-operatingphotovoltaic solar power plant go live. The70 megawatt (MW) photovoltaic powerplant is near the town of Rovigo in northeast Italy and was developed by UScompany SunEdison.

In an arrangement typical of solar powerplant financing, the power plant wasacquired by financial investors post-development, in this case energy privateequity and infrastructure investment firmFirst Reserve.

In May 2010, First Reserve and SunEdisonannounced the creation of a joint venturefor the acquisition of SunEdison's PVprojects. The US$362m Rovigo deal wasthe first of what is expected to be a seriesof transactions as projects are completed.

Private equity (PE) investment in thesector has also followed the scent of Italy’sfeed-in tariffs. In one of the largest dealsannounced in 2010, UK PE firm TerraFirma paid US$933m for solar photovoltaicdeveloper Rete Rinnovabile from Terna,the Italian grid operator. Rete Rinnovabileis targeting total capacity of 150 MW bythe time of completion of the deal on 31March 2011.

But, in a move that has unsettled investors,the Italian government announced inMarch 2011 that the existing solar powerincentives, which were originally intendedto run until 2013, will apply only tophotovoltaic plants that connect to the gridby the end of May 2011. A new supportscheme is to be introduced for solar plantsthat connect to the grid after June 1 2011.This is expected to set an annual cap onthe cumulative capacity eligible forincentives.

Biofuels In the biofuels sector, oil and gascompanies have been making significantethanol investments in their search todiversify transport fuel sources. We discussthe largest deal of 2010 – Royal DutchShell’s US$1.6bn partnership with Cosan –in the Deal Makers section. It was notalone. The Shell initiative followed anearlier 2008 investment in biofuels by BPwhen it created Tropical BioEnergia alongwith two Brazilian agribusiness and sugarand ethanol companies. As we go to printin March 2011, BP has announced afurther investment in the Brazilian ethanolsector with the purchase of a US$680m83% share of bioethanol and sugarproducer Companhia Nacional de Acucar eAlcool (CNAA). Earlier in 2011 Petrobras,Brazil’s national oil company, was reportedto be considering a stake in a local ethanolproducer but, at the time of writing, thereports have not been confirmed.Transport accounts for around 21% of allcarbon dioxide emissions and the potentialfor ethanol as an alternative fuel isimmense.

Figure 4: Renewables deals by acquirer type – 2009-2010

2009 2010Number Value (US$m) % number % value Number Value (US$m) % number % value

Alternative energy 70 13,654 35% 32% 79 7,341 40% 31%

Diversified 22 2,672 11% 6% 31 4,119 16% 18%

*Financial 45 6,184 23% 15% 42 5,111 21% 22%

Other 32 3,953 16% 9% 28 3,901 14% 17%

Utility 31 15,771 16% 37% 20 3,013 10% 13%

Total 200 42,234 100% 100% 200 23,485 100% 100%

*Financial includes infrastructure and private equity fundsNote: based on the largest 200 deals by value, representing over 70% of total deal value in 2010


Energy efficiencyEnergy efficiency is an important growtharea for a diverse range of companies inconstruction, engineering, technology andother sectors. Moves to make theconstruction of buildings more energyefficient, gain power managementefficiencies through a convergence ofenergy and communications technology,and develop smart grids are all spurringactivity. Energy efficiency transactionsdoubled their value share of all renewablesdeals between 2009 and 2010 (see figure3), accounting for US$3.8bn of deals out ofthe US$33.4bn total of all deals.

Energy efficiency is a growth sectoraround the world but particularly in NorthAmerica, where the energy savingspotential is among the biggest in theworld. Reflecting this, the majority ofenergy efficiency deals are NorthAmerican, with a total value of US$2.5bnin the region comprising around two thirds(65%) of worldwide energy efficiency dealvalue. The largest energy efficiency dealwas the US$300m purchase of energymanagement service provider The LincGroup by facility services company ABM.The deal comes as new building codes thataim to deliver a 30% energy saving frombuildings are being introduced in the US.

Energy efficiency deals are often forsmaller values or undisclosed sums. In anexample of the latter, French glass andbuilding materials company Saint-Gobainacquired 50% of US company SageElectrochromics. Activated by a low-voltage current, electrochromic glassadapts its light and heat transmission –and so its tint – to the level of sunlight andthe building’s ambient temperature,without hindering external visibility. Itsignificantly reduces the amount of energyconsumed for air conditioning, heatingand lighting. Saint-Gobain and Sage intendto build the world's first large-scaleelectrochromic glass plant in Minnesota,US.

IPO flow There has been a strong flow of IPOs in therenewables sector, dominated by Chinesecompanies going public on the Hong Kongexchange but also, in 2010, the US$3.4bnflotation of Italian power company Enel’sgreen energy arm, Enel Green Power. ThisIPO flow is not included in our main dealtotals data but we look at the biggest IPOsseparately in figure 5 and discuss the Eneland the Chinese deals in the ‘deal makers’and Asia Pacific sections.

2010 review…

…Smaller independent companies are slowly being squeezedout of the wind turbine market as big players, such as GE,Siemens and Vestas, compete globally. In 2010, ClipperWindpower was bought by UTC. The centre of gravity of thesector is also tilting between east and west. In an iconic move,Vestas announced the closure of some production facilities inits homeland of Denmark. A few months later it opened awind technology R&D centre in Beijing to spearheadinnovation in wind technology. The centre builds on Vestas’already-established manufacturing, sourcing and salesoperations in China...

2011 view…

…Both the east-west centre of gravity and the future of smallerindependent wind turbine companies will be affected bydevelopments following the IPOs of Chinese turbine manufacturersGoldwind and Sinovel. The sector will be watching to see the extentto which the IPO proceeds will be used for international expansion.Acquisition of independent companies could be a route to expansionin a sector where the costs of transporting large components inhibitthe ability to use a single manufacturing hub.


In the US, the US$900m purchase of JohnDeere Renewables by nuclear powergenerator Exelon has significance in theevolution of windpower and its integrationinto mainstream power generation. JohnDeere Renewables’ roots lie in its parentcompany’s farm machinery business andthe development of early windpower usingsmall-scale farm turbines. It has grown toinclude 36 completed projects in eightstates with an operational capacity of 735MW. About 75% of its output is sold underlong-term power purchase agreements butExelon will also gain access toapproximately 1,400 MW of new windprojects that are in various stages ofdevelopment, including 230 MW inadvanced stages of development.

Exelon has long been a proponent ofnuclear power as a low carbon option butthe deal is its first move into owning andoperating wind projects. It gives thecompany more options for future growthgiven the lack of momentum in US nuclearpower development. Elsewhere in the US,another large power generation company,NRG Energy, also expanded its renewableportfolio (see North America section).

The largest deals of 2010 were dominated by a flow ofrenewables flotations (see figure 5). The largest was Italiancompany Enel’s US$3.4bn spin off of its green energy arm. Butthe bulk of IPO deal flow involved Chinese renewable powercompanies, with flotations on the Hong Kong stock exchangewhich we discuss in the later Asia Pacific section. China alsofeatured in the largest solar deal, China National Bluestar’sUS$2.1bn move for Elkem, a Norwegian manufacturer of solar-grade silicon. This deal remained pending at the year end.

Deal makers: the 2010 players

The Shell/Cosan transaction is the firststep in a joint venture. The two companiessay that the alliance will enable them toestablish a scalable and profitable positionin sustainable biofuels – one of thesolutions to take carbon out of thetransport fuels sector over the next twentyyears – by building a competitive positionin the most efficient ethanol producingcountry in the world and by exploringopportunities to produce and sell ethanoland sugar globally.

No. Value of Date Company Country Exchange Market Type of transaction announced sector purchase(US$m)

Figure 5: Top five renewable energy IPOs – 2010

3,402

1,053

643

426

352

28 Oct 10

08 Oct 10

17 Dec 10

13 Oct 10

22 Nov 10

Enel Green Power Spa

Xinjiang Goldwind Science & TechnologyCo. Ltd

China Datang Corporation RenewablePower Co. Ltd

China Suntien Green Energy Corp.

Shanghai Chaon Solar EnergyScience & Technology Co. Ltd

Italy

China

China

China

China

Milan Stock Exchange

Hong Kong Stock Exchange



Shenzhen Stock Exchange

Diversified

Wind

Diversified

Wind

Solar

1

2

3

4

5

Operational

Technology

Operational

Operational

Technology

The list of completed deals was headed bytwo highly significant deals – Royal DutchShell’s US$1.6bn deal with Brazilianethanol producer Cosan and US powergenerator Exelon’s entry into windpowerwith the US$900m purchase of John DeereRenewables (figure 7). Both dealsrepresented landmarks of different kindsin the biofuels and wind sectors. Shell’sUS$1.6bn alliance with Cosan is a majormove in the quest by petrochemicalcompanies to take carbon out of transportfuels.


In Europe, Enel’s flotation of Enel GreenPower came as it sought to reduce debtfollowing its acquisition of Spanish powerutility company Endesa in 2009. The EnelGreen Power flotation was oversubscribedbut was priced towards the bottom of analready lowered price range. Thedivestment of renewable energy arms hasbeen a key trend among power companies,most notably following the flotation ofSpain-based Iberdrola Renovables in late2007. Since then, however, the investmentclimate for renewables and the IPOenvironment in general has become moreuncertain. Iberdrola Renovables shareshave more than halved since flotation and,as we note in the ‘highlights’ section, theparent company plans a 2011 buy-back ofthe 20% of shares it does not already ownin Iberdrola Renovables.

Also in Europe, Norwegian metalscompany Elkem was the seller in twosignificant 2010 deals. At the beginning ofthe year, it completed the US$742m sale ofsome of its hydropower plants to statepower companies. Norwegian legislationrequires that power plants that are morethan one-third owned by private ownersmust be returned to the state at no costafter 60 years, necessitating the sale ofsuch assets before the deadline forreversion.

No. Value of Date Target name Target Acquirer name Acquirer Market Type of transaction announced nation nation sector purchase(US$m)

Figure 7: Top ten renewables deals 2010

1,625

900

742

729

565

500

440

414

389

383

15 Dec 10

15 Nov 10

04 Jan 10

04 Feb 10

09 Nov 10

29 Jun 10

10 Feb 10

20 Jul 10

15 Nov 10

16 Feb 10

Cosan Ltd.

John Deere Renewables LLC

Elkem Energi Lakshola AS; Elkem Energi Siso AS

Waneta Dam

Comber Wind Farm (166 MW)

Cedar Point Wind Energy Project (250 MW)

El Andevalo Wind farms (244 MW)

Africana Energía SL

HEAG Sudhessische Energie AG

Energy Developments Ltd.

Royal Dutch Shell plc

Exelon Corp.

Norsk Vannkraftproduksjon AS

British Columbia Hydro and Power Authority

Brookfield Renewable Power Fund

Enbridge Inc.

Iberdrola Renovables SA

Ortiz Construcciones y Proyectos SA, TSK Group

HEAG Holding AG –Beteiligungsmanagement derWissenschaftsstadt Darmstadt

Pacific Equity Partners

Operational

Operational

Operational

Operational

Operational

Operational

Operational

Operational

Operational

Operational

1

2

3

4

5

6

7

8

9

10

Brazil

USA

Norway

Canada

Canada

USA

Spain

Spain

Germany

Australia

Biofuels

Wind

Hydro

Hydro

Wind

Wind

Wind

Solar

Wind

Biomass

The Netherlands

USA

Norway

Canada

Canada

Canada

Spain

Spain

Germany

Australia

*Note: based on top 200 deals by value

Figure 6: Operational vs technology purchases – 2009-2010*

2009 2010Number Value (US$m) % number % value Number Value (US$m) % number % value

Operational 150 32,968 75% 78% 127 17,645 64% 75%

Technology 50 9,266 25% 22% 73 5,840 36% 25%

Total 200 42,234 100% 100% 200 23,485 100% 100%


Later in the year, Elkem announced thattalks were underway for its takeover byChina Bluestar in a US$2.1bn deal. Thedeal would give Elkem access torenewables growth in China whileenabling Bluestar to strengthen itscompetitiveness in the solar market andgain technological know-how. Elkemtechnology enables highly energy-efficientand environment-friendly production ofsolar-grade silicon. The Bluestar movereflects an intensification of efforts bychemicals companies such as Bluestar andDupont to gain solar market share and stepup technological innovation. In a smaller2010 deal, for example, US specialtychemical maker Solutia bought privatelyheld Etimex Solar for US$326m.

Infrastructure operators, such as oilpipeline companies, and infrastructureinvestors are getting increasingly involvedin the sector through the purchase ofcompleted, operational assets and, in somecases, the development of such assets. Theattraction is the steady long-term return oninvestment provided by renewableincentive mechanisms. Two of the NorthAmerican deals in the 2010 top ten listreflected this trend – BrookfieldRenewable Power Fund’s US$565macquisition of Canada’s 166 MW ComberWind project and Enbridge’s US$500mpurchase of the Cedar Point Wind EnergyProject in Colorado, US, from itsdeveloper, Renewable Energy SystemsAmericas.

Brookfield Renewable Power Fund is aleading Canadian income fund whileEnbridge is best known for its oil pipelineand gas transportation infrastructure. Boththe Comber Hill and the Cedar Pointwindfarms have secured 20 year powerpurchase agreements for the sale of theirelectricity to state power authorities,giving assurance and predictability oninvestment returns.

The other main deals of 2010 and movinginto 2011 are listed in figures 5, 7 and 8.We look at these in more detail in therelevant regional sections later in thisreport.

No. Value of Date Target name Target Acquirer name Acquirer Market sector Type of transaction announced nation nation purchase(US$m)

Figure 8: Top five renewable deals announced in 2010 and pending at 31 December 2010

2,100

1,760

933

264

175

26 Oct 10

11 Dec 10

19 Oct 10

13 Dec 10

15 Jun 10

Elkem AS

ETH Bioenergia SA

Rete Rinnovabile Srl

Swedish District Heating Business

Jan Reichert (353 MW development pipeline)

China National Bluestar (Group) Co. Ltd

Petroleo Brasiliero SA

Terra Firma Capital Partners Ltd

Macquarie Group Ltd

AES Corp.

Technology

Operational

Technology

Operational

Operational

1

2

3

4

5

Norway

Brazil

Italy

Sweden

Poland

Solar

Biofuels

Solar

Biomass

Wind

China

Brazil

UK

Australia

USA

Deal dialogue:Japanese international renewables expansion*

The Sogo Shosha integrated trading companieshave already established a significant footprintacross the world. But utility companies, whohave long been purely domestic players, areless accustomed to the risks involved ininvestment into developing countries. Theseinclude the challenge of finding appropriatelocal partners, preparing for volatile feed intariffs in some territories, and securingequity/debt financing.

Some players have started to invest inestablished developers with a secured pipelineof projects rather than directly into assets. ThisM&A approach has many advantages (localstaff, secured contracts, capacity to graduallyinvest) but requires robust multi-disciplinarydue diligence and sensitivity analysis toproperly value the company and assess thepipeline by layers of risk and financialattractiveness.

*Commentary written prior to March 2011 Japan earthquake

Most Japanese outbound renewables investmenthas focused mainly on developed countriesincluding:

• Mitsui has agreed with Spanish construction major, FCC, to participate in a 50 MW concentrating solar power (CSP) project in Palma del Rio (Cordoba), Spain, through its subsidiary Mitsui Renewable Energy Europe.

• Mitsubishi Corporation has invested in the Changwat Lop Buri power generation project in Thailand. In terms of scale, the 73 MW solar photovoltaic (PV) project ranks among the world’s largest PV projects currently scheduled for production.

• ITOCHU Corporation and GE entered into a collaboration and cooperation agreement to identify co-investment opportunities in renewable energy worldwide.

• Sojitz Corporation has entered the US solar PV market with an investment in Solar Power Partners (SPP), the largest privately-held independent solar PV developer in the US. SPP owns, manages, and operates over 50 solar energy systemstotaling c. 23 MW.

• Eurus Energy Holdings Corporation, a joint venture between Tokyo Electric Power and Toyota Tsusho, will commence the construction of a world-class mega solar power plant with a total installed capacity of 45 MW in California. Its commissioning is scheduled for June 2011. All of the PV panels for the project will be supplied by Sharp Corporation.

• Sharp Corporation’s US$305m purchase of Recurrent Energy in the US (see ‘Deal Totals’ section).

Mitigating the risk involved in international investments, especially when entering newly developing markets, is one of the key challenges facing Japanese companies.


Deal dialogue:How EAM techniques can enhance deal value

Lifecycle costs can vary considerably, dependingon the renewable technology deployed. Forexample, solar PV panels, once installed, requirealmost no routine maintenance. The requiredattention increases as the asset becomes lesspassive, as is the case with hydro, wind,geothermal, and biomass. Geography has animpact too – fleet maintenance is moredemanding in a cold and wet location, such asthe North Sea, compared to a dry and arid area,such as western Texas.

To increase value, the asset owner needs to befully involved during development, includingthe pre-construction phase, choosing a designand selecting materials that will decreaselifecycle costs. For example, a wind turbinedesign that incorporates non-corrosivematerials, has easy machine access forpersonnel and a fleet-specific maintenanceprogramme can reduce ongoing maintenancecosts.

Modern maintenance programmes help tomitigate the consequences of failure by usingcondition-based maintenance techniques suchas online performance and vibration analysis,wall thickness monitoring and thermal imaging.These maintenance programmes must continueto be specified as third party maintenanceproviders change over the asset lifecycle.

Value is also enhanced when the asset ownerdefines not only the required machineperformance but also the expected reliability forthe project's lifespan. Low failure rates meanthat production goals can be met with lessinstalled capacity than otherwise might bedeployed. As a result, the upfront capital costcould be lower and the gain extracted from adeal may be correspondingly higher.

By emphasising EAM early during thedevelopment stage, the owner of the asset canrealise optimal performance over the expectedoperating life of the investment. This will reducethe overall cost of ownership and increasecapacity, which means a higher sale price whenexiting the investment.

Embedding effective asset management (EAM) practices across the asset lifecyclehelps in the successful completion of renewable energy M&A transactions. Itreduces the initial investment and ongoing cost of ownership. It increases assetavailability. It also supports a higher sale price in an exit transaction.Consequently, best-in-class developers are deploying EAM solutions as early asthe design phase of renewable projects.

Deal dialogue:Valuation – the green premium The term ‘green premium’ was coined to describe the price, relative to peers,investors were willing to pay for businesses with products exposed to therenewable energy sector.

The premium reflected the perceived structuralgrowth that existed in markets pursuing a lowcarbon agenda. But it has diminished asgovernment expenditure and support forrenewables has become less certain in the wakeof the financial crisis.

Nonetheless, a legacy still remains in the form ofa value gap between buyers and sellers. Sellersstill seek significant premiums while buyers,reluctant to pay for uncertain growth profiles,are no longer prepared to pay significantmultiples for these businesses.

The recent listing of Enel’s renewables-focusedbusiness Enel Green Power (EGP) is a case inpoint. Originally marketed at a 10.4 EV/Ebitdamultiple, EGP made it to market at 8.4EV/Ebitda, a significant fall from the loftyheights of its direct play wind flotationpredecessors. Iberdrola, EDP and EDF all listedtheir renewables arms between 16.9 and 40.4EV/Ebitda*. Although unique businesses, withtheir own risk idiosyncrasies, the difference ininvestor perceptions is noteworthy.

As the value gap begins to narrow, thanks togreater stability in the macro-economy and alowering of price expectations on the part ofsellers, we are likely to see an increase in biddercompetition for targets. As deal sizes increaseand the availability of finance improves,financial investors will re-emerge, increasingprices and valuations, and pricing will swingback in favour of sellers, at least for a period oftime.

The indecisive policy approach by governmentsto the sector creates uncertainty, and, in theminds of many investors, risk. This uncertaintytranslates directly into downward pressure onvaluation metrics and, ultimately, to lessappetite by investors to deploy capital intorenewables. Within the wind and solar sectors,there are specific and dynamic trends alsoinfluencing value, in particular:

• Wind assets are seeing a resurgence of interest from investors as they seek a haven from the turmoil surrounding uncertainty in some governments’ policies in solar. This should translate into support for the pricing of generating assets and development pipelines.

• The global wind supply chain, still recovering from recession-driven sluggish demand, is showing signs of a recovery with a number of transactions trading for higher than usual multiples. Acquisition of technology and integration-plays, resulting in synergies, will drive competition for good businesses and improve valuation metrics.

• Overcapacity in the solar supply chain is driving M&A activity in an attempt to consolidate and drive down costs. Premiums are being paid for companies that provide a distribution platform for current product ranges or exposure to cutting-edge technology.

The recent return to US$100+ priced oil, andthe reaction to the nuclear emergency in Japan,should provide some further support tovaluations.

*Source: Company accounts; Capital IQ


Deal numbers in all the major regions rose year-on-year (figure9). There were increases in both target and bidder numbers inNorth America, Europe and Asia Pacific. These included rises of71% for targets in North America and 50% in Europe. Biddersfrom both these regions were out in force, particularly in NorthAmerica where bidder numbers more than doubled, from 103 in2009 to 209 in 2010. The number of bids from European buyersrose 41%, from 171 to 241.

Deal places: a focus on markets worldwide

Europe continued to deliver the largestnumber of targets, accounting for nearlyhalf (48%) of all targets worldwide (figure9). But target deal value was evenly splitbetween Europe and North America. Bothdelivered US$13bn worth of deals (a 39%share each). While North American targetvalue increased US$3.9bn (43%) year-on-year, European deal value went in theopposite direction with a US$18bn (58%)fall.

The number of Asia Pacific targets nearlydoubled, from 33 in 2009 to 64 in 2010.The region accounted for 12% of all dealsin 2010. But total deal value in the regionfell from US$7.3bn to US$3.6bn. However,these totals do not include the substantialflow of Chinese renewables IPOs that tookplace in 2010 (see figure 5).

Elsewhere, South America’s share ofworldwide deal value rose to 10% in 2010.The US$1.6bn Shell/Cosan deal accountedfor nearly all of the region’s year-on-yearincrease, although it is notable that SouthAmerican buyer activity also rose, albeitfrom a small base, with 13 dealscontributing US$1.4bn of total value.

North America 2009 2010 % change

Value of deals (US$m) 9,082 12,951 43%

Number of deals 106 181 71%

Average deal value (US$m ) 86 72

Europe 2009 2010 % change

Value of deals (US$m) 30,964 13,045 (58%)


Average deal value (US$m) 181 51

Figure 9: Deals by target continent

Figure 10: 2010 deal percentages by continent by value of transactions (2010 total: US$33,416m)(2009 percentages shown in parenthesis – 2009 total: US$48,799m)

By target

Europe 39% (63%)

North America 39% (19%)

Asia Pacific 11% (15%)

South America 10% (3%)

Middle East & Africa 1% (0%)

By bidder

Europe 41% (62%)





By target

Europe 48% (54%)





By bidder

Europe 45% (54%)




Middle East & Africa < 1% (< 1%)

Figure 11: 2010 deal percentages by continent by number of transactions (2010 total: 530)(2009 percentages shown in parenthesis – 2009 total: 319)


South America 2009 2010 % change

Value of deals (US$m) 1,423 3,390 138%



Asia Pacific (incl. Australasia) 2009 2010 % change

Value of deals (US$m) 7,329 3,563 (51%)




The changes made by Spanish regulatorsin December 2010 in relation to the overallremuneration of certain completedprojects sent shock-waves through theinvestor community and claims are likelyto be heard in European courts in relationto PV installations. Although thegovernment has underlined its continuingsupport for reasonable returns to investors,a lack of attention to the impact of changesof control since initial licensing and thefunctioning of project financing packageshas caused concern to secondary investors.

Germany and the UK took over from theIberian Peninsula as the focus forrenewables deal-making in 2010. Together,deals for UK or German assets accountedfor well over a third (38%) of Europeanrenewables deal value. The focus on theUK and Germany reflects the majorexpansion of offshore wind power in theNorth Sea as well as deals in non-offshoreassets. Most of this activity, however, wasconcentrated on smaller deals.

Nowhere is the trend toward more deals but lower values moreevident than in Europe. Deals for renewables targets in Europerose 50% year-on-year but total value fell by US$18bn, down58% on the previous year’s total. Average deal value droppedfrom US$181m to US$51m.

EuropeDeal places: a focus on markets worldwide

Figure 12: Europe renewables deals by sector – 2010

By value % share of total Number of deals % share of total(US$m) Europe deal value Europe deal number

Solar 5,387 41% 89 35%

Wind 4,418 34% 97 38%

Hydro 1,150 9% 8 3%

Energy Efficiency 1,134 9% 34 13%

Biomass 501 4% 18 7%

Biofuels 300 2% 7 3%

Geothermal 155 1% 3 1%

Total 13,045 100% 256 100%

Subsidy uncertainty has been in thebackground of the renewables dealenvironment in some parts of Europe.Governments find themselves having tobalance constrained public finances withgreen energy and energy securitypriorities. Add to this the falling costsassociated with solar installations and theyfind good reason to introduce reviews oftheir tariff structures. Germany Spain andItaly have announced plans to cut solarsubsidies. In the UK, the government hasannounced an early review of a feed-intariff regime that was only introduced inApril 2010, which coincides with a reviewof the support levels for large scalerenewable projects.


Alongside Spain, Italy was a deal hotspotin 2010. Italian deal value was boosted bythe Enel Green Energy flotation (see ‘DealMakers’) but, also, by a significant level ofsolar deal activity, spurred by governmentsubsidies for the sector (see commentaryin ‘deal totals’). Together, Spain and Italyaccounted for a fifth of Europeanrenewables deal value. The third largestcompleted European deal came in Spainwith the US$414m purchase of AfricanaEnergia, a 49.9 MW solar power plantproject, by construction and engineeringgroup Ortiz.

Renewables deals in Germany and the UKwere smaller. One exception, and theremaining European deal in our top tentable (figure 7), was the US$389m sale byEON of its remaining share of HEAGSüdhessische Energie to HEAG Holding.HEAG has significant activities in therenewable energy sector primarily due toits activities as a generator of wind power.

In a deal that remained pending at theclose of the year, US independent powerproducer AES announced a majorexpansion of its renewables footprint inEurope with an intended US$175m 51% stake in the 353 MW development pipelineof Polish wind developer Jan Reichert. Itfollows AES’ earlier majority stake inanother Polish developer 3E’s 422 MWproject portfolio and adds to AES Wind’sexisting European footprint in the UK. Thecompany also has minority stakes in winddevelopers in France and Bulgaria.

Elsewhere, deals for more establishedhydro assets continued to contribute todeal flow and, indeed, the largestEuropean deal completed in 2010 was aUS$742m hydropower sale by metalscompany Elkem in Norway (see ‘DealMakers’). The second biggest Europeandeal saw Iberdrola Renovables acquire theEl Andévalo (Huelva) wind farm fromGamesa for US$440m. The deal falls underthe scope of an agreement for the sale ofwind farms in Andalusia agreed betweenIberdrola Renovables and Gamesa Energíain 2005.

The El Andévalo purchase in early 2010has since been followed by Iberdrola’sfurther expansion of the installed capacityof the wind complex with the purchase ofthe 48 MW Los Lirios wind farm fromGamesa. The Los Lirios acquisition takesthe overall capacity of the complex to 292MW, making it the second largest wind sitein Europe behind the 322 MW Whiteleefarm in Scotland, also owned by IberdrolaRenovables.

Figure 13: Europe renewables deals by country - 2010

By value % share of total (US$m) Europe deal value

Germany 3,582 27%

UK 1,469 11%

Spain 1,410 11%

Italy 1,230 9%

Norway 1,139 9%

France 989 8%

Denmark 472 4%

Switzerland 335 3%

Sweden 328 2%

Malta 305 2%

Other 1,787 14%

Total 13,045 100%2010 review…...Regulatory reviews have clouded the deal environmentin some countries with a particular impasse in Spainbetween investors and the government…

2011 view……But, the Spanish changes were not as radical as initiallyfeared and were essentially limited to solar PV installations.Alterations to the regime for concentrating solar power (CSP)and wind were reached by agreement with industry bodies inan overall environment that reflects Spain’s continuingsupport of the renewable industry. In consequence, asignificant volume of operational assets were brought tomarket following the December 2010 announcement.


In the United States, the environment forrenewable deal activity has become morefavourable. Alongside a recovery infinancial markets, a key factor has been the‘stimulus bill’, The American Recovery andReinvestment Act of 2009. An element ofmulti-year certainty was brought into tax-based incentives, which previously hadbeen subject to doubt due to their yearlyexpirations. The act also includes aUS$6bn loan guarantee programme forrenewable energy and electrictransmission technologies, US$4.5bn forgrid modernisation and smart gridimplementation, and a number ofmeasures to tighten energy efficiencyrequirements.

North America provided the main focus for renewables deal-making in 2010, with a year-on-year US$3.9bn rise in targetvalue (up 43%) and an even bigger US$5.2bn increase in biddervalue (up 57%). It now rivals Europe in terms of the total valueof deals.

North America

Companies have also been able to take agrant in lieu of investment tax creditswhich has simplified things for developersby diminishing the need to attract taxequity into projects. However, to earn agrant, the facility had to be placed inservice, or construction begun, by the endof 2010 and must be completed within aspecified period. In December 2010, theseincentives were extended for another year.This spurred a rush of projects which willhave had an impact on deal activity asdevelopers seek to sell projects at certainmilestones, such as at financial close or thein-service date.


Figure 14: North America renewables deals by sector – 2010

By value % share of total Number of deals % share of total(US$m) North America deal value North America deal number

Wind 3,984 31% 35 19%

Energy Efficiency 2,482 19% 52 29%

Solar 2,401 18% 35 19%

Hydro 1,803 14% 10 6%

Biomass 1,172 9% 24 13%

Biofuels 861 7% 18 10%


Total 12,951 100% 181 100%


The largest Canadian deal completed in2010 was metals company Teck Resource’sUS$729m sale of a one third interest in theWaneta Dam hydro facility to BC Hydro.The deal had been announced the previousyear as the miner sought to strengthen itsbalance sheet following mining purchasesmade at the height of the commoditiesboom. In the US, another large deal notdiscussed elsewhere in this report waspower generation company NRG Energy’sUS$350m acquisition of Green MountainEnergy, a retail provider of clean energyproducts and services. Like the Exelondeal, it highlights moves by generators toexpand their renewable energy portfolios.

The low price of gas in the US has cast ashadow on the renewables sector, keepingvalues down and hindering development.One impact has been as a drag anchor ondeal-making in some larger-scalegeneration assets. For example, Australianwind power producer, and former Babcock& Brown-owned, Infigen Energy has beenseeking to sell some of its US assets inorder to reallocate capital to its homemarket. But agreement could not bereached on valuation and the sale waswithdrawn.

Figure 15: North America renewables deals by country – 2010

By value % share of total (US$m) North America deal value

United States 10,360 80%

Canada 2,591 20%

Total 12,951 100%

Another effect of low gas prices has beenadded pressure for consolidation in theturbine manufacturing sector. In a key dealclose to the year end, United TechnologiesCorporation completed the purchase ofCalifornia-based Clipper Windpower, inwhich it already had a 49.9% stake. Theturbine market is increasingly dominatedby multinational diversified companiessuch as GE, Siemens and UTC, posingtough competition for independents likeClipper. In contrast, UTC not only hasgreater market reach and balance sheetstrength but is able to leverage expertise inblade technology, turbines and gearboxdesign gained from activities such as itsinvolvement in Pratt & Whitney aircraftengines and Sikorsky helicopters.

2010 review…...The gas glut that has arisen from shale gas extractionin the US has dampened the renewables sector in theUS…

2011 view……But even against a background of low gas prices, deal activityhas been lively and the outlook looks set for continued dealgrowth. There is particularly strong growth in the energyefficiency sector which will continue to be spurred by newenergy savings targets and codes. North America already hasthe largest share of energy efficiency M&A, accounting forUS$2.5bn or 65% of the US$3.8bn worldwide total.Additionally, continued investment in renewable generationprojects is necessary to meet level renewable portfoliostandards now present in more than 30 states.

Energy efficiency deals are a major growthspot in North America deal-making. Theyaccounted for the largest share of deals inour 2010 analysis – 52 out of 181 deals –and their US$2.5bn total value accountsfor nearly a fifth (19%) of total deal value.Their value just outstrips solar and issecond only to the US$4bn wind sectortotal. North America has by far the biggestshare of worldwide energy efficiency deals– accounting for two thirds of worldwidevalue (see earlier ‘Energy Efficiency’section for more commentary).

The largest North American deal, Exelon’sUS$900m purchase of John DeereRenewables (see ‘Deal Makers’) wassymbolic of the extent to which therenewables sector has come of age and isnow an essential part of mainstream powerportfolios. Other key North American dealsincluded large windfarm purchases by‘infrastructure-type’ investors, includingBrookfield Renewable Power Fund inCanada and pipeline operator Enbridge inthe US (see ‘Deal Makers’). There werealso significant inbound purchases of USsolar technology companies by Sharp andAreva (see ‘Deal Totals’).


Asia Pacific was again a relatively small contributor toworldwide renewables deal value in 2010, accounting for 12% ofall deals in 2010. Like Europe, the strong theme in the region wasa bigger volume of deals but for smaller values. Deal numbersnearly doubled but deal value halved (figure 9). However, thesetotals related to mainstream M&A activity and do not includethe substantial flow of IPO activity involving Chinese renewablescompanies.

Asia Pacific

The Huaneng Renewables flotation wasnot helped by its timing so close on theheels of China Datang’s US$643m flotationof its renewable power unit. However, likeEnel Green Power in Europe, the Datangoffer was priced at the lower end of itstarget range. Earlier in the year, theinvestment arm of the Hebei provincialgovernment divested natural gasdistributor and windfarm operator ChinaSuntien Green Energy in a US$426m IPO.On the solar front, Trony Solar Holdingsheld a US$257m IPO in September 2010.

Chinese wind turbine manufacturers werealso active in the IPO market. In October2010, the largest Chinese renewables IPOsaw the US$1.1bn flotation of China'ssecond-largest wind turbine maker,Xinjiang Goldwind Science & Technology.This was priced at the top of expectationsbut only after earlier plans had to beshelved in the light of market conditions.Then, early in 2011, its larger rival,Sinovel, came to the China stock marketwith a US$1.4bn IPO. Chinese windturbine companies Sinovel and XinjiangGoldwind provide formidable competitionfor western manufacturers such as Vestas,GE and Siemens. The IPO proceeds willenable them to expand their pipelines aswell as strengthen R&D as they compete inglobal markets for the next generation oflarge 6 MW turbines.

China plans to source 15% of its energyrequirements from renewable sources by2020 and the country’s Alternative EnergyPlan is encouraging investment in wind,solar and nuclear power. China is theworld’s biggest exporter of solar cells andwestern companies have been busyforming manufacturing alliances and, insome cases, conducting M&A. In 2010, thisincluded the purchase of China NationalSolar by US company National Clean Fuels.


Figure 16: Asia Pacific renewables deals by sector – 2010

By value % share of total Number of deals % share of total(US$m) Asia Pacific deal value Asia Pacific deal number

Solar 1,302 36% 20 31%

Wind 1,061 30% 21 33%

Biomass 514 14% 3 5%

Hydro 361 10% 12 18%

Energy Efficiency 136 4% 3 5%


Biofuels 61 2% 2 3%

Total 3,563 100% 64 100%

There were a number of Chinese IPOs onthe Hong Kong stock exchange in 2010 andthe trend is set to continue into 2011. Twoof the major Chinese ‘gencos’ - HuanengGroup and China Datang – planned IPOs oftheir renewable arms during the year.However, while investor interest has beensubstantial, the flow has been dogged bymarket volatility. Huaneng Group decidedto cancel its flotation of HuanengRenewables at the last minute in December2010. It intends to revive it in 2011.


Investec’s stake in the 206 MW CollgarWind Farm, which is under constructionand will be Western Australia’s biggestwindfarm, was acquired by UBSInternational Infrastructure Fund (60%)and Retail Employees SuperannuationTrust (40%). The project also was thesubject of a A$750m debt-equity projectfinancing transaction with a consortium offive commercial banks (ANZ, NationalAustralia Bank, Westpac, WestLB and theCommonwealth Bank of Australia) andDenmark’s export credit agency, EksportKredit Fonden.

There is keen interest in investing in theAustralian renewables sector, not onlyfrom Japanese companies (mainly tradinghouses and utilities), but now also theKorean and Chinese wind turbinemanufacturers. For example, Goldwind ofChina has entered the Australian marketby setting up an Australian office in 2010and, in a deal which is also believed toinvolve an equity investment, entered intoan agreement with Epuron in February2011 to supply the 73-turbine GullenRange Wind Farm in New South Wales.

In the Australian solar sector, the sale ofconcentrating PV specialist Solar Systemsto Silex Systems closed in early 2010. Silexhas since announced its intention to raiseA$89m in an institutional placing so that itcan expand in the utility scale solar marketwith pilot plants in Australia and,potentially, the US.

In addition, a key Australian developmenthas been the first significant private equitydeal in the country’s renewables sector.Greenspark Power Holdings, the biddingvehicle of the Australian private equityfirm, Pacific Equity Partners (PEP),acquired a controlling 80% interest in ASX-listed renewable and remote-area energysupplier Energy Developments (EDL).

2010 review…...The Hong Kong stock market hosted a flow of Chineserenewable IPOs and this is continuing into 2011…

2011 view…...Beijing Jingneng Clean Energy and the solar-glass unit of Xinyi GlassHolding plan to raise a total of roughly US$1.1bn from Hong Kong IPOsthis year, highlighting the rapid growth of demand for renewable energyin China. 2011 is also likely to see the rescheduling of the HuanengRenewables IPO.

In the Chinese wind turbine sector, GEestablished a minority stake joint venturewith Chinese company Harbin PowerEquipment to sell wind turbines in Chinaas it seeks to penetrate more deeply intothe fast-growing Chinese market. In turn,Harbin is taking a 49% stake in GE’sexisting Shenyang wind factory, whichmakes land-based wind turbines.

Japanese companies continue to step uptheir outbound global presence in thesector. 2010 was notable for being the firstyear that solar energy-related dealsexperienced significant growth. The SogoShosha, or integrated trading companies,are still leading the trend, but utilitycompanies, such as Eurus Energy andKyushu Electric Power, and manufacturers,including Sharp and Mitsubishi HeavyIndustries, have strengthened theirpresence in the area (see ‘Deal Dialogue’panel).

Australian renewables deal activity wasinhibited by a difficult regulatory andmarket environment, with electricity pricesand renewable energy certificate (REC)prices both trading at around A$35 perMWh. Price expectation gaps have provedto be an obstacle to closing deals for someoperational windfarm assets in the case,for example, of Pacific Hydro and the EmuDowns windfarm. In contrast, though, theA$191m sale of the 70 MW Mt Millar WindFarm in South Australia by TransfieldServices Infrastructure Fund to MeridianEnergy was widely seen as achieving a ‘fullvalue’.

Figure 17: Asia Pacific renewables deals by country – 2010

By value % share of total (US$m) Asia Pacific deal value

China 2,126 60%

Australia 684 19%

India 388 11%

Indonesia 73 2%

Japan 67 2%

Philippines 66 2%

Singapore 55 2%

South Korea 55 2%

Taiwan 26 < 1%

Vietnam 22 < 1%

Total 3,563 100%


The year ahead looks set to be a busy one with a number ofvery different deal dynamics arising from the very differentstages of maturity of the various technologies within therenewable sector. It is likely that values will continue to besubdued in many territories with, for example, less activitythan in earlier years by those utilities companies who arefocusing on capital project development. Apart from hydrowhich has long been cost-competitive in the marketplace, thepattern of investment and deal-making in renewables willcontinue to be strongly influenced by regulatory incentives.

Looking ahead

The debate on the balance betweenrenewable energy and nuclear routes toclean energy reopened dramatically inMarch 2011 in reaction to the nuclearemergency in Japan. As we finalised thisreport, events were still unfolding at thestricken Fukushima Daiichi power plant. InGermany, Chancellor Angela Merkel wasquick to announce a moratorium on anearlier law to extend the life of Germany’snuclear plants. Instead, Germany will re-assess its nuclear policy and has temporarilyclosed seven reactors. China has suspendedapproval for new nuclear plants. USSecretary of State Hillary Clinton has saidthe US has to answer questions about "thecosts and the risks" of nuclear power.Whatever their exact outcome, theFukushima events are likely to shift theenergy policy balance towards renewables.

In the US, even before the Japaneseearthquake, the deal environment is set forcontinued renewables deal momentum. Anincreasing number of states have adoptedrenewable energy portfolio standards andPresident Obama’s 2011 State of the Unionaddress declared an ambition for 80% of USelectricity to come from clean sources by2035. Momentum for renewable energy willalso gain further gradual support as the gassupply overhang begins to abate andnatural gas markets begin to tighten,narrowing the cost differential betweenrenewable and traditional sources of power.

On the biofuels front, companies such as BP,Shell, Cosan and Petrobras have beenmaking much of the deal running, centredon Brazil. We expect a similar trend to beplayed out in Asia, where we anticipate thatoil companies and financial investors willonce again look at biofuel opportunities.The continued flow of Chinese renewablesIPOs on the stock exchange will further addto deal activity in Asia.

Of particular interest will be the extent towhich the flow of funds from theseflotations will be used as a platform forinternational expansion by Chineserenewables companies and the extent towhich they seek to become regionalrenewables champions or compete furtherafield. In Australia, the renewables climatehas been clouded by political uncertaintyand continued low renewable energycertificate prices. This is placing someconstraints on some renewables companiesand could result in deal flow as companiesseek to divest assets or themselves becometargets.

On the solar front, we are beginning to seesigns of a take-off in deal-making for largerscale solar power plants as more come on-stream and the market for theirconstruction grows. This is likely toaccelerate as the technology matures,scales-up and becomes more cost-effective.US, Japanese and Chinese companies aretaking a particular lead in seeking toestablish international leadership in thisfield. On the wider technology front we arealso likely to see a further sporadic but, inthe long-term, potentially significant drip-feed of deals in emerging renewablestechnologies such as wave and tidal power.

Energy efficiency has been one of thesignificant deal stories in 2010 and weexpect that deal activity in this sector willcontinue to expand in 2011, particularly inthe US but also in the Middle East and Asia.The sector is at the stage where a wave ofcompanies has come through the angel andventure investment stages to a point wheretheir market and their technology is provenand established. They provide a noteworthypool of targets for larger companies topurchase and pull that technology into theirservice offer.

A number of governments are weighing upthe best way to balance the triple objectivesof affordability, security of supply andcleaner energy in a context of tighter publicfinances. With continuing reviews incountries such as the UK and Germany,there is likely to be a further pause forbreath among investors as they wait forclarity on the exact subsidy environment.Part of the challenge for governments is todevise an optimal framework to secure amatch between the risk-averse requirementsof pension funds and other largeinstitutional investors, that have access tothe large pools of capital required to fundcapital expenditure on renewable projects,and the risk profile at the developmentstage of projects.

Governments will be keen to avoid aninvestment hiatus as they review subsidyframeworks but, nonetheless, this may beinevitable. At the same time, it may prove aspur for deals if some investors judge thatthe time is right to crystallise existing gainsor to recycle capital from lower risk tohigher risk assets. Nonetheless, thedirection of travel in all the main markets ofNorth America, Europe and Asia Pacifictowards cleaner energy and energyefficiency remains clear. For example, theEuropean Union’s low carbon roadmap to2050, launched in March 2011, reaffirmedits target of a 20% cut in carbon emissionsby 2010 but also pointed out that a highertarget of 25% could be a more cost-effectivepathway.

Manfred WiegandGlobal Utilities LeaderTelephone: +49 201 438 1517Email: [email protected]

Mark HughesEuropean Energy & Utilities LeaderTelephone: +44 20 7804 5767Email: [email protected]

Paul NillesenEuropean Renewable Energy LeaderTelephone:+31 20 568 6993Email: [email protected]

Rob McCeneyPartner, Energy and Utilities Telephone: +1 917 968 6227Email: [email protected]

Michael ShewanPartner, Energy and UtilitiesTelephone: +61 3 8603 6446Email: [email protected]

Stefan GebskiEnergy and UtilitiesTelephone: +44 20 78048061Email: [email protected]

Olesya HatopGlobal Energy, Utilities & Mining MarketingTelephone: +49 201 438 1431Email: [email protected]

UK Contacts

Ross HunterPartner, AssuranceTelephone: +44 20 7804 4326Email: [email protected]

Jason BurkittPartner, AssuranceTelephone: +44 20 721 32515Email: [email protected]

Chris GreenPartner, TaxTelephone: +44 161 245 2339Email: [email protected]

Steve JenningsPartner, ConsultingTelephone: +44 20 721 21449Email: [email protected]

Ronan O’ReganStrategy ConsultingTelephone: +44 20 780 44259Email: [email protected]

Daniel GuttmannStrategy ConsultingTelephone: +44 20 780 49714Email: [email protected]

Jason MorrisPartner, Transaction Services Telephone: +44 131 524 2265Email: [email protected]

Colin SmithTransaction Services Telephone: +44 20 780 49991Email: [email protected]

John GibbsPartner, Corporate FinanceTelephone: +44 20 721 23800Email: [email protected]

Vimal VallabhCorporate FinanceTelephone: +44 20 721 23006Email: [email protected]

Global Renewables Deals Team


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