Business Irish

Tuesday 12 December 2017

Renewable energy M&A hit a record €51bn in 2015

Gaelectric owns 13 windfarms in Northern Ireland and nine in the Republic. Photo: Keith Arkins
Gaelectric owns 13 windfarms in Northern Ireland and nine in the Republic. Photo: Keith Arkins
John Mulligan

John Mulligan

A RECORD $55.3bn (€51bn) worth of mergers and acquisitions in the renewable energy sector took place last year around the world, according to a new report from PwC.

The figure was almost double the $28.3bn in deals that were sealed in 2014.

And despite global economic headwinds, PwC expects power and renewables deal momentum to remain strong in 2016.

In Ireland, power assets including Energia owner Viridian are currently up for sale.

Viridian is owned by Bahrain private equity firm Arcapita. It has been whittling down the list of potential buyers, with Bord Gáis Energy owner Centrica already out of the running.

While it had been expected that Viridian could fetch as much as €1bn, it's more likely now that it could sell for around €850m.

Irish renewables firm Gaelectric is also considering a sale of some or all of its wind energy assets. It has hired Rothschild to handle the potential sale.

The windfarm assets could have an enterprise value of about €750m, with an equity value of between €250m and €350m.

The PwC report noted that year-on-year deal value nearly doubled in 2015 in Europe, and more than doubled in Asia Pacific. It was up between 25pc and 33pc in North America.

PwC said that while the number of deals in renewables during 2015 wasn't notably higher than in previous years, the size of the deals "markedly increased".

"The record highs for Asia Pacific and the strength of renewables activity across other territories from Europe to Central and South America clearly demonstrate the global and technological shifts taking place across the sector," according to Ronan MacNioclais, partner, power and renewables at PwC's Ireland office.

He added that there is a strong flow of power and renewable deals in countries such as India, continuing "major outbound moves" by Chinese companies.

He said that there's also a good flow of attractive grid assets coming to the deal table.

"If anything, wider economic uncertainty will heighten the attractiveness of such assets," he said.

Mr MacNioclais said that another "bumper year" for M&A in the power and renewables sector is expected in Europe in 2016, and that deal dynamics in the United States are also strong.

The UK's National Grid is looking at a possible disposal of a majority stake in its UK gas distribution business, while a planned sale of German gas grid Thyssengas by Macquarie is also under way.

Mid-cap consolidation is becoming an important deal theme in the US power and utility sector as buyers' size up opportunities, according to Mr MacNioclais.

"There is the opportunity on the natural gas side to deploy long-term capital into these platforms, with premiums being justified not just by synergies but by rate base growth opportunities," he said.

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