PwC upbeat on global M&A action in renewables

North America's switch to energy efficiency has driven its position in the global renewable mergers and acquisitions (M&A) market in 2010, and could act as a driver for the region to become the dominant renewables market within three years, according to new analysis by PricewaterhouseCoopers (PwC).

PwC Renewables Deals, the annual sector analysis of M&A transactions globally, reports that globally volumes of transactions in the sector were up, but overall values were down to USD33.4 billion (2009: USD48.8 billion). Across the world, market interest returned, with North America bouncing back to almost match deal values in Europe in 2010, with close to USD13 billion spent on 181 deals.

Ronan O'Regan, director, renewables and cleantech, PwC 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.

"We expect confidence levels to remain relatively strong throughout 2011, despite regulatory uncertainty in some markets."

Overall, wind and solar power continue to dominate global transactions in the sector but there was strong growth in energy efficiency with deals trebling in volume to represent over USD3 billion, or 11 percent of all renewable transaction value, overtaking last year's dominant market segment, Hydro power.

The US market dominated growth in the energy efficiency market in 2010 reflecting both the potential for energy savings per capita, and renewed regulatory interest, such as new US building codes aimed at delivering a 30 percent energy saving in new builds.

The largest deals were dominated by the flow of renewables flotations, including the USD3.4bn spin-off of Enel's green energy arm, and Chinese transactions, raising valuable capital for reinvestment in product and market development.

South America saw the most rapid growth, further underlining its position as one of the fastest expanding clean tech markets. Deal volumes rose 111 per cent, with values more than doubling to USD3.3 billion.

In contrast, while the number of Asia Pacific and Australasian transactions almost doubled, values fell by half to USD3.5 billion.

PwC said the mixed results confirmed that confidence was returning to the sector after a slow 2009, adding that it expects the increasing volume of energy efficiency deals to drive growth across the renewables sector in the coming years.

In other significant moves, market activity by US and French nuclear power generators and engineering firms into wind and solar sectors, are part of a wider move for the nuclear sector to extend its reach in renewables, further developing their low carbon offering.

"Many of these moves by nuclear companies are driven by diversification. The reaction to the Japanese nuclear situation has been to take stock. While it won't raise a red flag to investment in nuclear, it could in the short term spur further moves by nuclear companies into renewable," said O'Regan.

Despite increased transaction volumes, the 'green premium' on renewables deals - the price investors were willing to pay for a business with products exposed to the renewables sector has narrowed, partially due to sellers' lowering their price expectations, and partially due to greater stability in the economy.