Trends in Renewable energy deals in 2008, by PWC

The first edition of Renewables Deals, an annual review by PricewaterhouseCoopers of deal-making in the renewable energy sector has some interesting conclusions:

– The impact of the credit crisis was felt in terms of value of deals dropping even though number of deals held up

– PWC sees a growing trend for deals for manufacturing and technology assets higher up the renewables value chain.

European deals, seven out of eight of which were for wind assets, dominated the 2008 renewables top ten deals table. Much of the renewables deal activity in Europe was for assets on the Iberian peninsula. Together, Portugal and Spain accounted for US$8.1bn of deal value, giving them a 55% share of European deal volume. In particular, just two Portuguese deals added US$4.2bn to the 2008 totals – the US$2.8bn float of a 25% stake in EDP Renováveis, the wind power arm of Portuguese power group EDP, and Babcock & Brown’s US$1.4bn disposal of wind farm assets.

Babcock & Brown sold several European wind farms as the parent investment group sought to reduce debt levels. In the first, Spanish infrastructure company FCC paid S$1.15bn for the company’s wind farms portfolio in Spain. Three months later, in November 2008, the Enersis portfolio of wind farms in Portugal was sold to a consortium of investors led by Magnum Capital for US$1.45bn. A second notable Spanish wind power deal saw RWE subsidiary, RWE Innogy Holdings acquire wind power operator Urvasco Energia in a deal worth US$394 million.

However, the bulk of deals in Spain, 10 out of a total of 12 transactions, were for solar assets, headed by a US$394 million purchase of Gamesa Solar by private equity firm First Reserve Corporation. Solar power deals accounted for 30% of all European renewables deals and 20% of total deal value in 2008. Spanish deals took the lion’s share of European solar deal value – US$2.1bn of the US$3.5bn total.

Nevertheless, it is wind power that dominates the European renewables deals tables, more so than any other major region, accounting for 60% of total European renewables deal value. Hydro accounted for the largest North American deal value in 2008, but this was almost entirely attributable to one deal.

After hydro power, wind and solar power delivered the highest value deal segments, accounting for $1.4 billion and $1.3 billion of deal value respectively, PWC says.

The biofuel sector delivered the largest number of North American renewables transactions–22 deals totaling $1.1 billion. Of these, 20 were in the US and the remaining two were in Canada.

The 20 North American wind power deals in 2008 were split evenly between the US and Canada, but the majority ($977 million) of the $1.4 billion total wind deal value was in the US, PwC adds.

Looking ahead, PWC sees a trend of emerging worldwide players that will come not just from the increasing involvement of large diversified players such as GE and Bosch. Already we are seeing companies from utility company origins, such as Iberdrola Renewables and EDP Renováveis, as well as renewable sector players, such as Suzlon Energy, building an increasingly global presence.

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