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Mergers brochure cleantech 2012 Mergers brochure cleantech 2012 Document Transcript

  • Global CleantechSector Report 2012 www.mergers-alliance.com
  • Sector Report 2012Contents Report 2 Introduction 3 Report Highlights 4 Deal Focus by Country Americas Brazil 8 Mexico 10 USA 12 Asia, Africa and Middle East China 14 India 16 Japan 18 South Africa 20 Turkey 22 Europe France 24 Germany 26 Italy 28 The Netherlands 30 Poland 32 Russia 34 Scandinavia 36 Spain 38 United Kingdom 40 Contacts 43 Transactions 44
  • Sector Report 2012 Sector Report 2012 Report Introduction About the report Whilst the major economies of the world continue to navigate a difficult credit environment and weaker This sector report was edited by Andre Johnston For more information on this report please growth prospects, the cleantech industry remains of the Mergers Alliance central team. To compile contact Andre Johnston, Mergers Alliance our findings we conducted interviews with our Research Manager. somewhat unique in that it continues to develop strongly sector experts from each member firm within the in almost all countries. As you will see from our sector Mergers Alliance partnership. We also surveyed Andre Johnston owners and senior executives within cleantech Mergers Alliance experts across the world whilst each country may be at sector organisations and private equity investors +44 207 881 2967 different points in their development trajectory, prospects worldwide. andrejohnston@mergers-alliance.com in almost all are compelling. Deal Focus This development is being driven by the need for governments to tackle climate change on a As the global recovery takes hold, we at Mergers Alliance are ideally placed to help you. Whether multi-lateral basis and ensure security of energy you seek growth through acquisition, wish to Within each country’s Deal Focus we review Additionally, we provide an overview of the supply for their populations and industries over restructure or realise value in your business, merger and acquisition (M&A) activity, focusing cleantech sector as a whole, highlighting the the long term. Legislation and attractive fiscal our international advisors are in a unique position on key deals and trends within the cleantech market structure as well as commenting on the incentives are key to much of the recent growth to help you. Our member firms have a prominent sector. Cleantech is a shortened form of clean key trends and the factors influencing M&A. We and in most countries these levers will drive position in boardrooms across the world and are technologies. We define cleantech as those provide our own insight on how we think the investment for decades to come. renowned for delivering award winning partner- activities relating to renewable power generation: market might play out over the coming 18 led advisory service with seamless international Wind farms, solar, hydro, waste to energy, months and attempt to identify key investment You will find in our report a great deal of cooperation. geothermal, biogas, biomass and tidal. Our opportunities. We also provide a summary of market-leading insight into the key issues report also includes transactions relating to two government policies from each country facing the sector in 2011 and beyond: how We hope you enjoy reading our report and energy efficiency and resource management: that we believe has, or will, influence M&A the industry needs to operate on a global basis, welcome any thoughts or additions you might Recycling, air & environment management, activity in cleantech. why geographical comparative strengths are like to contribute. energy infrastructure, water treatment / focusing investment in each country and how conservation. We have included tables of Key terminology: PV (Photovoltaic), GW broad state initiatives and targets are ensuring recent transactions where the target company (Gigawatt), MW (Megawatt), KW (Kilowatt), that transactions get done. Our work also is located in the country under review. Mwh (Megawatt hour), kWh (Kilowatt hour) highlights the key developments in different cleantech sectors and how this is shaping the M&A strategies of mid-cap companies, global corporates and the private equity industry alike. Andy Currie Disclaimer Chairman of Mergers Alliance This publication contains general information and is not intended reasonable effort has been made to ensure the accuracy of Managing Partner of Catalyst Corporate Finance LLP to be comprehensive nor to provide financial, investment, legal, the information contained in this publication, this cannot be tax or other professional advice or services. This publication is guaranteed and neither Mergers Alliance nor any of its member + 44 207 881 2960 not a substitute for such professional advice or services, and it firms or other related entity shall have any liability to any person andycurrie@catalystcf.co.uk should not be acted on or relied upon or used as a basis for any or entity which relies on the information contained in this investment or other decision or action that may affect you or publication, including incidental or consequential damages your business. Before taking any such decision you should arising from errors of omissions. Any such reliance is solely consult a suitably qualified professional adviser. Whilst at the user’s risk.2 3 View slide
  • Sector Report 2012 Report Highlights We at Mergers Alliance believe the main factors to shape M&A in the cleantech sector over the next three years will be: Sector focus Chinese wind turbine firms are emerging to become highly competitive across the globe thanks to improving technology and lower overheads. It is now home to four of the world’s top ten wind turbine firms. Nonetheless, The “globality” of cleantech Government targets impacting Solar’s future uncertain we expect European turbine players to continue to excel internationally especially in regions such as Latin America cleantech where they can leverage their financial resources and The deployment of technology and capital (both In Europe the solar industry is facing somewhat of a mini-crisis due to increased competition from Asia, industry experience. corporate and institutional) in cleantech has had a Renewable targets are driving cleantech sector distinctly international flavour since the industry’s development. One of the more sweeping initiatives is the overcapacity and a significant reduction in government inception. Nonetheless, there has been a slight EU’s 20-20-20 directive. It mandates a change in energy support. This is especially apparent in Italy, Spain, France reduction in cross-border activity over the past 18 consumption and efficiency habits and for renewables to and Germany. We expect heightened M&A activity as Waste management transforms months which can be largely attributed to ongoing constitute 20% of energy generation by 2020. China’s European companies look to expand their geographical global economic concerns and contracting government reach in an effort to maintain the same growth they have We expect investment flow into the waste management Renewable Energy Law aims for 15% renewable energy support. This trend should reverse as balance sheets become accustomed to domestically. industry to accelerate which should result in a rise in M&A usage by 2020. South Africa, whose domestic cleantech strengthen and as investors start looking for targets in activity. Market optimism in this sector can be attributed industry is currently almost nonexistent, is targeting an M&A in the solar sector was characterised by developing economies with strong macro fundamentals to the increasing attractiveness of vertical integration, ambitious 37% by 2030. Such initiatives will underpin three factors: and robust support mechanisms. We expect interest to legislative and fiscal incentives and the push for ever investment decisions and help ensure deals get stretch beyond the BRIC countries to include nascent rising recycling rates in developed nations. Consolidation completed, even in the face of global economic Overcapacity and market saturation has lead firms, cleantech markets with high-growth potential such as is driving M&A in the more traditional collection and uncertainty. who are looking to lock in higher margins, to focus South Africa and Poland. processing sectors which includes acquiring advanced on improving efficiency, specifically through materials material recycling facilities (MRF’s). Investment is also innovation and light management technologies. being channeled into energy from waste whether Specific policies having direct advanced thermal plants or anaerobic digestion. Countries to capitalise on their affect on M&A A decrease in state support, mostly in Europe, has diminished the business viability of many solar players. comparative advantage Reduced feed-in-tariffs in particular have caused Certain legislative and fiscal policies are directly affecting financial difficulties for smaller firms. There was a Certain cleantech sectors viable Each country will capitalise on their comparative natural the volume of M&A transactions. The National Biodiesel marked increase in major solar firms entering strengths; the UK with offshore wind, South Africa with Program in Brazil, which mandates a 5% biodiesel blend without state support non-EU markets. solar, Sweden with biomass. Equally, countries such as in diesel, has triggered a number of deals, the recently the Netherlands with its water industry and Germany and Cash heavy Asian firms acquiring foreign companies Thanks to reduced costs, innovation and logistical implemented feed-in-tariffs in the UK was the catalyst Japan with their manufacturing capabilities will be looking as they aim to achieve technological internalisation maneuvering, a number of sub-sectors in certain behind some of the most notable transactions in the to entrench and further develop their respective as well as technological parity. countries have emerged to become economically viable UK. Conversely, regressive policies have also been the competitive advantages. without the helping hand of government. These include driving force behind a string of deals; the reductions in wind power in Brazil, re-refining in the USA and the water photovoltaic subsidies in Italy being a good case in point. treatment industry across a number of regions. Wind energy: The surge continues Scope of private equity interest broad We should see a new round of incentives, particularly from countries with healthy current account surpluses, The past 18 months saw a record number of M&A Unlike in many industries, private equity investors have as they attempt to emerge from the renewables arms transactions in wind. Importantly, there was a decline been involved across the whole financing cycle from pre- race endowed with a healthy green portfolio. in the average purchase price of running wind plants. revenue venture finance, through traditional MBO’s, to This was partially due to project developers disposing of investing into large-scale generating assets. It should be their already built wind farms to secure capital to finance noted that there was a slight increase in investments into The impact of Fukushima their future/current wind developments. more mature businesses which have clearer paths to exit. The nuclear renaissance has seemingly slowed as a result Installations grew in all the major markets, albeit at a Our research shows that PE/VC investment in 2010 of the Great East Japan earthquake creating conditions more modest pace compared to 2009. China experienced increased by 19% compared to 2009 and 2011 is set to for the meltdown of nuclear reactors in Fukushima. It is the largest growth (48% of the new total wind installations achieve similar growth numbers. We expect this number clear now that Fukushima has had a substantive effect over the past year took place in China). The UK lead the to continue to increase over the coming years due to the on the policies of both governments and energy way in offshore installations thanks to multi-billion dollar emergence of a growing number of specialist PE funds conglomerates. The biggest news was arguably investments into the sector. We expect Germany and that focus exclusively on cleantech. Interestingly within Germany’s decision to shut down all of its nuclear power China to also emerge as important bastions of offshore PE circles, the definition of cleantech has been plants by 2022. Just weeks after the Japan earthquake wind over the coming years. broadened to include sectors such as water, waste nuclear energy giant EDF bought out the remaining management and industrial process efficiency. shares it does not already own of its renewable energy4 subsidiary EDF Energies Nouvelles; a possible indication 5 that the disaster is influencing corporate decision making. View slide
  • Sector Report 2012 Country Highlights Mergers Alliance partners highlight some interesting observations. Russia Netherlands Russian energy giants Inter Rao UES and UK Rushydro are expanding their geographical A strong private equity tradition The rise in landfill taxes and recycling reach to include Vietnam, Georgia and Armenia. is manifesting itself in the cleantech targets continues to stimulate M&A industry with a number of firms France activity by overseas and domestic setting aside funds aimed at the buyers in the waste sector. M&A volumes in biomass will renewable segments. China increase as both large strategic buyers and industry newcomers look to capitalise on The government’s decision to repeal the new tax on polluting rates. legislation that required that 70% of the components used to build a wind turbine are domestically produced should encourage fresh foreign investment into the wind sector. Norway USA Norway’s Statoil and France’s Technip have partnered to build large capacity Even without state support the floating wind turbines. Stronger offshore India biofuel re-refining sub-sector has winds should offset increased installation The merchant power market in seen a number of deals take place. and infrastructure costs. India should attract renewable Improving green technology will make Spain firms seeking more flexibility in this space even more attractive. After buying out its renewable arm, their energy generating operations. Iberdrola Renovables SA is expected to move towards diversifying its renewable portfolio, both domestically and abroad. Japan Japan is reassessing its energy Germany Mexico provision, which is still highly dependent International firms have been actively on foreign oil. Japanese corporations are Spanish based firm Iberdrola buying German solar firms. We expect looking to increase their exposure to Renovables SA has been actively this trend to continue as foreign Poland international markets. buying up Mexican wind, lifting its companies seek access to premium Reforms in government legislation total capacity in the country to German technology. will create better conditions in the 106 MW. Polish wind sector, which is expected to grow almost threefold by 2015. Turkey The considerable wind potential in Turkey has yet to be fully realised. The US$1.1bn purchase Brazil of a portfolio of Turkish wind farm power projects Expect to see prominent South Africa by UK based Renewable Energy Systems may Ethanol players Cosan, ETH, prove to be an indicator of things to come. Large renewable energy players Bunge and Guarani to start looking Renewable Energy Systems, Mainstream for global M&A opportunities. Renewable Power and Suntech Power Italy Holdings have entered the South African The auspicious new state market in the past three years. energy efficiency scheme should prove to be highly beneficial for domestic firms.6 7
  • Deal Focus Capital City: Brasília Area: 8,511,965 sq km Population: 198,739,269 Time zone: GMT -3 Brazil “While consolidation in the including sugarcane residues, wood and charcoal, is predicted to reach 4.3% by 2013. Biomass energy, Market forces drive wind expansion Recent transactions ethanol sector dominated represents around 30% of the country’s energy matrix. A number of the smaller firms that have developed wind Date Target Description Acquirer Deal Value (US$m) cleantech activity over the farms have lacked the balance sheet strength needed Apr 11 Jantus SL Wind farms CPFL 960 M&A activity settling after to obtain long term financing from BNDES (Brazilian past several years, and expansive growth Development Bank), forcing them to sell to larger Apr 11 ERSA Wind / small hydro / biomass CPFL n/d players. Furthermore, the emergence of medium sized with more still to come, M&A independent players has attracted attention from the Mar 11 Cavo Saneamento Waste Management Estre Ambiental 375 M&A activity in the Brazilian cleantech market boomed in transactions involving large wind 2009 and although there was a slight contraction in 2010, larger strategic companies requiring scale to enter Dec 10 ETH Bioenergia Biofuel Petroleo 1760 Brasiliero S the segment. Sep 10 Omega Energia Small Hydro Warburg Pincus 215 total volume and average deal value has remained fairly players are beginning to occur, constant over the past four years. In April 2011 local Even without any tariff subsidies, Brazil has huge Aug 10 Biooleo Industrial Plants Biodiesel and Tarpon Petrobras 10 as independent players become integrated player CPFL Energia acquired financial potential for wind energy usage as capacity factors range Feb 10 Amyris Brasil Celulosic Ethanol Biocombustiveis Stratus 54 investor-backed Jantus SL for US$960m. The deal from 36-55%. Importantly, the 2004 PROINFA subsidies large enough to attract strategic involved four wind farms with a 210 MW wind farm -see inset- are no longer necessary as construction costs Nov 09 Brenco Ethanol ETH Bioenergia n/d acquirers or in order to gain more project andforportfolio of 732 MW energy auctions. CPFL are eligible a participation in the certified projects that have come down to approximately US$2.5m per MW. The fact that the market alone can sustain the Brazilian Oct 09 Santelisa Sugar / Ethanol Louis Dreyfus 630 Bioenergia Commodities scale in the face of challenging is now in talks with ERSA, a large independent player that wind sector has alerted investors looking for viable Aug 09 Energimp Wind Farms CEMIG 115 is backed by various private equity funds and banks. business propositions. IPO prospects.” In the middle market, Brazilian private equity firm Stratus acquired a 40% stake in Amyris Brasil, a unit of Derek Gallo, Broadspan US-based Amyris Biotechnologies for US$54m. Stratus’ Biodiesel: An industry waiting for strategy is to support Amyris’ plans to transform government support Government Support Macro growth driving clean tech M&A sugarcane into renewable feedstock, at an industrial scale, for the domestic production of chemicals by 2014. Despite a spate of recent deals, the biodiesel sector will PROINFA: Brazilian GDP growth remains strong, at 7.4% in 2010 likely remain somewhat stagnant until the government The National Biodiesel Program, which mandates The Incentive Program for Alternative Energy and 4.1% expected for 2011, which has encouraged releases a new regulatory framework elevating the a 5% biodiesel blend in diesel, was the impetus behind a Sources, otherwise known as the PROINFA consolidation and also attracted international strategic minimum share of biodiesel in the diesel blend. number of M&A deals. For example, the merger of Brasil Programme, was promulgated in 2002 to stimulate investors seeking high growth markets. The need for Independent producers might be sold to players Ecodiesel and a Spanish owned agribusiness firm renewable energy generation by providing investment in energy generation to produce this growth with crushing facilities and agricultural operations demonstrated the attraction of a vertically integrated government (through Eletrobras) Power Purchase has attracted foreign operators and investors with to guarantee a steady supply of oil. production model. Petrobras also strengthened its Agreements. experience in the renewable energy sectors. position in the sector with the acquisition of a 50% stake The sector that benefited the most was the wind Relatively high interest rates leave many smaller in a greenfield biodiesel plant. By and large, however, companies vulnerable to larger players endowed with most of the recent M&A activity emanated from the Cross-border opportunities in wind energy sector, which jumped from 22 to 414 MW of installed capacity from 2002 to 2007. both lower costs of capital and the corporate guarantees ethanol sector, accounting for about half of all deals. and ethanol required during construction in project finance structures. Because the programme has been targeted at small Although there are a handful of dedicated private equity independent producers who do not have the The cleantech industry in Brazil has historically been M&A activity and venture capital funds that have invested in recycling, financial strength to secure long term financing from dominated by biofuel, specifically ethanol and more biomass generation, and water treatment, there is still a local development banks, many of the recipients recently a growing biodiesel programme, as well as distinct lack of involvement in the market. The solar have been forced to sell their projects to larger renewable generation which includes hydro and more 16 600 thermal and energy efficiency sub-sectors have still not players therefore stimulating overall M&A activity. recently biomass (e.g. sugar cane cogeneration) and 14 500 fully matured, mainly due to the high cost of capital in onshore wind farms. Hydro represents 68% of installed Average deal value $m 12 Brazil. Wind and ethanol will continue to dominate the Transaction volume capacity and 87% of the electric energy generation in National Biodiesel Program: 400 M&A landscape. the country. 10 The programme requires the mandatory use of a 8 300 biodiesel blend in diesel. It started with a 2% blend Due to their prominence in the ethanol industry look for Renewable energy generation and biofuels are expanding 6 in 2008, which increased to 4% in July 2009 and 200 Brazilian firms such as Cosan, ETH, Guarani or Bunge at a rapid pace, driven by Brazil’s economic growth and then to 5% in January 2010. There are plans to 4 to begin searching for opportunities abroad whilst we the success of government programmes that have 100 reach a 20% mandatory blend in 2020. The 2 also expect to see an inflow of M&A in the Brazilian pushed for the proliferation of biodiesel and wind. programme has been the driver behind a number 0 0 wind space. Although the ethanol sector has experienced a lot of of M&A deals. 2008 2009 2010 H1 2011 consolidation in recent times, the market is still relatively fragmented so expert further consolidation. Wind energy, Total deal volume8 which accounts for 0.5% of the electric generation, 9 Source: Capital IQ, Mergermarket Average deal value $m
  • Deal Focus Capital City: Mexico City Area: 1,972,550 sq km Population: 111,211,789 Time zone: GMT -6 Mexico “The need for alternative well as the reduced government support in the industry up until recently. The bulk of the deals completed have Large foreign involvement in Recent transactions wind power sources of energy has been in wind power. Date Target Description Acquirer Deal Value (US$m) accelerated in recent In early 2011 Spanish based firm Iberdrola Renovables’ Mexico has the potential to equal, if not surpass Brazil as Apr 11 Eolia Revovables Portfolio of two Wind Farms EDF Energy Mexico (Spain) n/d SA purchased the Mexican Bill Nee Stipa wind farm from the dominant wind player in Latin America. The logistical times due to a reduction Gamsea Corporación Tecnológica. This was Iberdrola demands of such an endeavour will mean progress will be Jan 11 Bill Nee Stipa Wind Farm Wind Energy Iberdrola Renovables n/d SA (Spain) gradual. Nonetheless, in the short term we expect in oil reserves. The government Renvables’s second operational wind farm purchase in Mexico, lifting its overall capacity to 106 MW. The deal escalating government support mechanisms to Oct 10 Repsol Bio-energy KUO (Spain) Joint Venture Jul 10 Baja Aquafarms Sustainable Lions Gate Lighting 17 has been increasingly active in was in line with Iberdrola’s strategy of extending its Latin encourage foreign players. Farming (Canada) American coverage and establishing growth in countries Feb 09 Promotora Recycling Double V Holding 11 supporting the sector through with increasingly favourable regulatory frameworks. In July 2011 Canon Power Group, a US based renewable Ambiental Services SA energy firm, announced its intention to invest US$2.5bn Dec 08 Gamesa Wind Energy Iberdrola Renovables 100 various initiatives, which has In late 2010 Spanish oil and gas giants Repsol joined into the Mexican wind market. The sizable investment will Jul 08 Earth Tech Waste Water SA (Spain) Mitsui & Co 55 comprise of three wind farms located in Zacatecas, Baja attracted foreign companies to forces with one of Mexico’s biggest conglomerates KUO to establish KUOSOL, a company dedicated to the California and Quintana Roo for a combined power Mexican Holdings Treatment (Japan) invest in Mexican cleantech, with production of bio-energy. The new company will be output of 312 MW and will bring total installed wind headquartered in Mexico and its main operations will be capacity in Mexico to over 1 GW. wind power especially favoured.” the industrial scale cultivation of the jatropha plant. It is Siemens made its first foray into the Latin American wind hoped that the biofuel crop will generate 16 MW per year Government Support market by supplying 70 wind turbines to Mexican wind Luis Garcia, Sinergia Capital for consumption. power firm Grupo Soluciones en Energias Renovables. Energy Transition Fund The turbines will be installed in the Tamaulipas region In 2009 the state enacted the Energy Transition of Mexico and will supply over 160 MW. The cost of the Diminishing oil reserves driving M&A activity order totalled US$270m and marked one the largest Fund in an effort to promote green energy start-ups and to help facilitate the flow of capital and cleantech investments by a Mexican firm into the wind energy resources into renewable projects. market to date. 3 90 Mexican GDP grew at 5.5% in 2010, its fastest rate of Over the course of three years, starting in 2009, 80 growth for ten years. A sharp rise in manufacturing was 3bn pesos (US$240m) will have been spent to help Transaction volume Average deal value $m 70 the main attributing factor. Despite fast growth, inflation 2 60 Small-scale moves into solar support the renewable sectors. Although the fund has actually dropped to 3.8%, down from 4.4% in 2010. has so far created more favourable business 50 Growth, however, is putting a strain on energy There has not been much interest in solar to date, parameters, it is questionable whether it has requirements. 40 primarily due to the prohibitively high costs of solar helped boost M&A activity. 1 30 panels relative to other technologies. No major One of the most important macroeconomic drivers of 20 large-scale projects are planned; however companies Fonaga Verde Mexican cleantech in recent years has been Mexico’s 10 such as Abengoa, a Spanish conglomerate with In 2010 in support of sustainability projects and dwindling oil reserves. Oil reserves have fallen nearly 0 0 significant operations in renewable energy, are starting renewable energy, the Mexican government opened 50% since 2000. Although the state has made attempts 2008 2009 2010 H1 2011 to make incremental encroachments into the Mexican up a guarantee fund called Fonaga Verde. to finesse its way out of its reliance on fossil fuels and photovoltaic (PV) space. This is certainly a sub-sector nuclear energy, the renewables industry has been Total deal volume The start-up and operation costs of the fund will be Source: Mergermarket, waiting to be exploited by foreign firms that possess relatively slow to get off the ground. Despite this, industry 200m pesos (US$16m). The fund will have around Capital IQ Average deal value $m lower costs of production, especially considering Mexico analysts look upon Mexico’s cleantech potential with 2.5bn pesos (US$200m) to finance sustainable has the third largest solar potential in the world. great sanguinity. In a regulatory and institutional context, projects in the agriculture, forestry and fishery Mexico is much more favourable to M&A in renewable industries. energy than it was just two years ago. The industry waits for firmer government intervention Spanish interest Although policies, initiatives and subsidies have Total volume in cleantech has been relatively low over progressed over recent years, the state still offers more the past 18 months. Underlying this has been the monetary and legislative support to the fossil fuel monopolised ownership of the electricity sector as industries. The aforementioned dwindling oils reserves should reverse this over time. We expect M&A in cleantech to increase once the synergy between what the market can offer and what the state can offer reaches a10 suitable equilibrium. 11
  • Deal Focus Capital City: Washington,D.C. Area: 9,826,630 sq km Population: 307,212,123 Time zone: GMT -5 USA “The US cleantech market US$353.5m invested globally. Improving technology for solar manufacturers is increasingly valuable as the Tax Credits (“PTCs”) -see inset- should be safeguarded because Republicans have been focused on reducing Recent transactions outlook seems to be industry struggles to rapidly decrease costs. The first government spending rather than on increasing taxes. Date Target Description Acquirer Deal Value (US$m) round of price reductions in the solar industry stemmed marching bravely ahead from outsourcing to developing countries, vertically Jul 11 Innovalight Silicon ink solar technology DuPont n/d in the face of a largely integrating, and streamlining manufacturing. With most of these achievable gains realised, the solar industry is Wind power growth slows Apr 11 Compass Wind 40 MW wind farm NorthWestern Energy 78 uncertain outlook. Industry keenly focused on improving efficiency through Wind power installations continue to grow, albeit the pace Apr 11 CH Energy Group 19 MW New York ReEnergy State biomass plant n/d technological advances. growth and valuations have been is slowing to a 40.3% growth rate. Projects that are being Apr 11 Lincoln Renewable 10 MW solar Macquarie Energy 41 Energy project in New Jersey financed all have pertinent agreements with investment One particularly interesting technology investment was Apr 11 Primestar Solar Thin film solar General Electric n/d exceptional over the past 12 DuPont’s recent purchase of Innovalight. Innovalight grade credit entities. These agreements include the power Mar 11 Heritage technology 1,950 barrel per day Bank of America 20 purchase agreement (“PPA”), engineer, procure, construct months, as investors are betting produces silicon ink for printing onto multi crystalline panels to increase panel efficiency by 1-2%. This (“EPC”) contract, and long-term O&M agreement. PPAs Feb 11 Crystal Clean waste oil re-refinery Bowersock Mills & Hydropower RGA and Waddell 24 that renewable energy incentives acquisition highlights an emerging thesis within the continue to be the most elusive. The intermittent power generation which occurs primarily during non-peak hours Feb 11 Power Company SunRay Solar power & Reed SunPower 277 industry that manufacturing efficiency gains are will not fall victim to Washington’s Renewable Energy developer Corporation reduces utility demand for the projects. approaching diminishing returns. Solar manufacturers Nov 10 Mt Poso Biomass fuel DTE Energy 40 Cogeneration Services recent enthusiasm for spending now must begin to look at materials innovation and light management technologies. In M&A markets, acquisitions are occurring at 8.5% to Sep 10 Marubeni Sustainable Biomass operator Korea East- 44 West Power (South Korea) 9% unleveraged after-tax yields. These yields are slightly discipline.” higher than solar projects because wind power debt is more expensive due to the higher variability in production. Ted Kinsman, Headwaters MB M&A activity For example, Northwestern Energy, an investor owned utility, agreed to purchase a 40 MW Compass Wind project for US$77.8m, or US$1.95m per MW. Government Support 180 Cleantech marches on 160 300 Federal Production Tax Credit (PTC) Average deal value $m 250 The PTC is a per kWh tax credit for electricity 140 Investors take note of the waste Transaction volume The US cleantech market continues to defy gravity with a 120 generated by stipulated energy sources. The rates potentially record setting year in store. Although political 100 150 oil sector are US$0.022 kWh for utility scale wind, solar, and economic storm clouds loom, most sectors within 80 geothermal, closed-loop biomass and US$0.011 cleantech have seen robust investment activity. Cleantech 100 Out of the fever for green investment opportunities comes 60 kWh for hydropower, open-loop biomass, landfill transaction volumes in the United States for H1 2011 the resurgence of the waste oil re-refining industry; a 40 50 gas and marine renewables. increased by 25.9% on a pro-rata basis. This growth, process that takes used lubricant oil and re-refines it into 20 plus the 16.9% jump in average deal values, illustrates virgin-quality base oil for reuse. Re-refining has been Originally initiated in 1992, the federal PTC has 0 0 the improving outlook in the industry. around since the mid 1900s but the processes were often been revised and expanded several times since. 2008 2009 2010 H1 2011 as dirty as the waste oil itself. Today, green technological Renewable energy is quickly becoming a factor in the Total deal volume improvements combined with increasing demand for Renewable Energy Certificates (REC’s) overall US power generation stack. For the first time, sustainable products have propelled the re-refining The REC’s mandate typically requires 20-25% renewable electricity production within the US is greater Source: Capital IQ Average deal value $m industry to new levels. of a state’s energy to be generated from than nuclear power production by 5.6%. renewable sources. The sub-sector is active with multiple deals despite the Political compromise should absence of government incentives. Heritage Crystal Clean State REC’s will drive up cleantech demand, Multiple deals in upward trending safeguard cleantech obtained a US$20m construction financing from Bank of especially as they ratchet up as the 2020 and solar sector America to start construction on its 1,950 barrel per day 2025 deadlines draw near. So far 29 states have plant. Further, the sale of the 1,000 barrel per day adopted RECs. While the cleantech industry is expanding and valuations Four of the five largest project fundings that occurred in Heartland Oil plant to Warren Distribution provides the are increasing, trouble is brewing. Budget deficits are 2010 were made in the US, including; HSBC and BNP lubricant blender a steady supply of high quality lubricant causing the public to plead for a balanced budget, and Paribas’ loan to Abengoa Solar’s CSP plant and NRG that is increasingly in demand from eco friendly cleantech earmarks may fall victim to cost cutting efforts. Solar’s investment in Sunpower’s 250 MW project. consumers. Not only is this a green industry, but it is Without government incentives, cleantech growth will Assuming government support does not follow in the also quite profitable for re-refiners without the need for slow. However, these incentives may be able to avoid the footsteps of European markets there is no reason to government subsidies. chopping block for two reasons: First, the incentives are believe that this growth will not continue in the US. indirectly funded, and second, there is substantial state level involvement. Tax code incentives such as Production The US also led the world in solar venture capital12 investment in Q2 2011, having invested 78.2% of the 13
  • Deal Focus Capital City: Beijing Area: 9,596,960 sq km Population: 1,338,612,968 Time zone: GMT +8 China “Chinese cleantech firms, GCL-Poly Energy Holdings Limited acquired China based polysilicon producer and one of the world’s leading solar Technological spillover Recent transactions as with their conventional wafer suppliers Jiangsu Zhongeng Technology Chinese firms are not shying away from using their Date Target Description Acquirer Deal Value (US$m) Development for US$3.4bn in what was one of manufacturing the largest cleantech deals of 2009. financial clout to appropriate foreign technological expertise. Elkem, a Norwegian firm heavily involved in July 11 Shunda Holdings Renewable energy developer Furbon Life Insurance (Taiwan) 12 counterparts in the past, solar technology, was acquired by China’s National Jun 11 Changzhou Yijing Light and Power Silicon crystal rod manufacture Haitong Food Group (Hong Kong) 436 Bluestar for US$2bn. This should provide National have recognised the need to Opportunities for investors in the Bluestar with the technology spillover necessary to May 11 Golden Idea Bio-Engineering Wastewater Sino Kingdom Intl Investments 12 partake in technology transfer established wind sector effectively compete in the PV market. The magnitude of Jan 11 Giga-World Industry Solar/Wind Tech Pro Technology (Hong Kong) 41 this deal was another indicator that Chinese firms are Jan 11 Wanxiang Energy efficiency Ener1, Inc. n/d through M&A if they want to 2010 saw China surpass the US to become the world’s seeking technology internalisation in the cleantech sector. Electric (USA) largest wind energy producers. Their total output now Look for outbound M&A to continue to be influenced Nov 10 Jinzhou Silicon solar cells Solargiga Energy 108 deliver the best and most cost stands at 43 GW compared to 40 GW of the United along these lines. Sep 10 Huachang GE Energy Wind energy (Hong Kong) Harbin Electric 24 effective products to their local States. It has been projected that it will rise sharply Aug 10 (Shenyang) Hanwha Solar Machinery Hanwha Chemical 370 again by the end of 2011 to 55 GW customers.” SolarOn (South Korea) Warren Buffet invests in the Chinese Feb 10 JD Holdings Inc Clean technology Northern Light 15 This rapid expansion has been largely due to generous government subsidies and China’s panoptic approach to green car market Jun 09 Wu Ling Power service provider Hydro Venture Capital (USA) China Power Intl 653 Zachary Tsai, Catalyst Corporate Finance Corporation (Hong Kong) renewable installations. Moreover, vast coastlines and an In 2008 American multibillionaire investor Warren Buffet accommodating climate, along with lower costs of capital acquired a US$232m stake in Chinese rechargeable goods, gives China a distinct comparative advantage in Macro strength protects the wind power game. It is now home to four of the top battery firm BYD Co. The Chinese firm’s main appeal to Buffet is its electric car subsidiary BYD Automobile and cleantech industry ten wind turbine firms in the world in terms of market the development of automotive battery technologies. Government Support volume: Sinovel, Goldwind, Doungfang and United Power. Buffets 10% stake illustrates the attractiveness of China managed to emerge from the global economic Interestingly for investors, state legislation that required investing into the world’s largest car market and what will Renewable Energy Law downturn almost unscathed as overall growth continued that 70% of the components used to build a wind turbine be (if predictions hold) the world’s largest manufacturers The 2005 Renewable Energy Law is an all unabated throughout the cycle. Unlike many Western are domestically produced has been repealed. This was of electric cars by 2019. encompassing legislative act designed to ensure the economies, China’s economic robustness meant the done to attract more foreign investment and technological steady development of renewable energy, to protect cleantech sector was relatively insulated from external know-how to the wind turbine industry. Accordingly, this the environment and to guarantee a certain amount pressures. With its vast foreign reserves the Chinese have the monetary capacity to truly allow the renewable should be a good opportunity for international firms to Key features to look out for of energy autonomy. begin engaging in M&A more aggressively to secure some industries to continue to drive its industrial expansion Underpinning the law is to have renewable energy of the lucrative Chinese wind market. Looking ahead, one of the major challenges facing whilst reducing its reliance on conventional forms constitute 15% of its total energy generation output. of energy. China’s cleantech industry is the shortage of capacity in Its framework includes feed-in-tariffs and a cost its grid system. Connectivity issues between renewable sharing scheme that flattens the cost of electricity Indeed, China’s investment into cleantech has come on M&A activity energy production and the end user have not been generation. leaps and bounds over the past several years, catching resolved. As mentioned, China leads the way in total many Western observers by surprise. It has now reached installed wind capacity, however, only 73% of installed The 2005 law was updated in early 2010 to include a point where it has become a global leader across 60 160 capacity is grid connected. further provisions in an effort to resolve teething certain sub-sectors of renewable energy with regards 140 problems that arose during China’s cleantech 50 to production and installations of PV and wind. This could be an opening for tech savvy foreign firms Average deal value $m Transaction volume 120 proliferation. 40 to tap into this section of the market to help alleviate the 100 disconnect. Although the state will assist in distributing The Golden Sun Initiative 30 80 new smart grid technologies, the market should look to Large and mid-market deals evident 60 lessen and indeed capitalise on the inevitable lag In 2009 Chinese policy makers rolled out a 50% 20 subsidy on solar projects above 500 MW. The 40 between need and implementation through the Mid-market deals in solar and wastewater treatment 10 Golden Sun initiative will subsidise half the building 20 deployment and use of better technology and more made up most of the M&A over the past three years. costs which includes initial grid connection and cost effective measures. Recent deals included the purchase of Jinzhou Huachang 0 0 general energy distribution infrastructure. 2008 2009 2010 H1 2011 Photovoltaic Technology, a Chinese based manufacturer China should remain a compelling target for inbound There has been an increase in Chinese solar of silicon solar cells, by Solargiga Energy Holdings, a M&A, especially in wind power. With wind making up Total deal volume investment although M&A in this sub-sector has not Hong Kong based firm engaged in the production of only 1.18% of total energy generation those looking to been particularly impacted. The initiative is expected silicon solar wafers, for US$208m. Source: Mergermarket, Corpfin Average deal value $m outpace the already speedy Chinese economy could do to end in 2012-13. worse than breaking into this bourgeoning sector.14 15
  • Deal Focus Capital City: New Delhi Area: 3,287,590 sq km Population: 1,166,079,217 Time zone: GMT +5:30 India “Most investors are aware Large private equity involvement M&A strategies Recent transactions that the value-conscious Transaction volumes in cleantech have continued along Cleantech deals usually follow two patterns; either Date Target Description Acquirer Deal Value (US$m) consumer in India is the same upward trajectory for a number of years now. Indian transaction volumes are up heavily on a pro-rata strategically acquiring to adopt new business models (renewable power plants, component construction) or May 11 Gondwana Engineers Ltd. Wastewater Doshion Veolia Water Solutions 10.5 unlikely to pay high basis for the current year. acquiring to procure new technologies. The majority of Mar 11 NSL Renewable Power Renewable energy projects International Finance Corp (USA) 20 deals fall into the former category, especially from private premiums for goods and services Private equity investments, both domestic and foreign, equity firms who have typically invested in companies Jan 11 Kiran Energy Solar Power Development of photovoltaic New Silk Route Bessemer (USA) 50 have played a large role in helping grow the Indian tagged ‘clean’ for quite some that are fundamentally sound and have positive EBITDA. Jan 11 Clearwater Ltd. Wastewater Technofab n/d cleantech industry. In January 2011 US based private Early stage pre-revenue start-ups, offering an innovative treatment Engineering Ltd. Dec 10 Titan Energy Solar PV IFCI Venture 6.8 time. There is a belief that clean equity players Argonaut Ventures, New Silk Route and Bessemer Ventures acquired a majority stake in solar concept tend to be less attractive. Oct 10 Auro Mira Renewable - Aureos South Asia 21 energy projects are not power company Kiran Energy Solar for US$50m. Kiran Aug 10 Energy Moser Baer Hydro, Biomass Solar PV Fund Blackstone 300 has several power purchase agreements (PPA) already in sustainable without government place; a 20 MW PPA with Gujarat Urja Vikas Nigam and a India’s USP Projects Group (USA) Jul 10 UEM India Wastewater India Value 19.3 support. Considerable support by 5 MW PPA under the 20 KiranSolar Mission state target. GW treatment Fund Advisors One of the most unique aspects about Indian renewable Jun 10 Nandha Energy Biomass power Clenergen 14 The investment will help achieve its goal of owning Limited plant Corporation (USA) energy is the existence of a lively merchant power market. the state and transfer of proven a portfolio totaling 200 MW capacity in three years. Unlike conventional power plants, that are built and Jan 10 DLF Wind Power Wind power GDF Suez SA (France) 203 technology from overseas will be There has been a large amount of domestic private equity operated by a regulated utility body (designed to serve directed at the water industries. India Value Fund the customer), merchant power plants are funded by needed to help boost the Indian Advisors agreed to invest US$19.3m in UEM India, a investors and any electricity generated is traded on an energy spot market. Plants are therefore not tied down cleantech industry.” company that provides water/wastewater treatment and disposal services to the New Delhi locality. Peepul Capital to long term contracts. Government Support agreed to acquire an undisclosed stake in Chennai based Karan Gupta, Singhi Advisors Tariffs are determined purely by market forces rather than Aqua Designs India. Both transactions will allow the State Electricity Regulatory Commissions through PPA’s. Total merchant capacity is expected to be companies to diversify and increase the scale of their Mandates 23 GW by 2015. Ultimately, through this process, barriers water operations. In 2003 the various State Electricity Regulatory to entering the power generation industry in India are Economy in transition Commissions (SERC’s) were mandated to promote reduced relative to other developing countries. renewable energy. The SERC’s are autonomous, Economic reforms over two decades have helped India M&A activity statutory commissions. As of 2009, all the states in become one of the world’s largest and fastest growing India except Arunachal Pradesh, Nagaland and economies. Integration into the global economy and the Opportunities in water Sikkim have a SERC. ongoing liberalisation of India’s regulatory and legislative 30 60 frameworks have enabled M&A activity to flourish over Water and wastewater recycling facilitates are The principle SERC provision to date has been the 25 50 increasingly under pressure to keep up with growing renewable purchase obligations initiative. It requires Average deal value $m the last few years and has attracted a number of foreign Transaction volume cleantech players into the market. demand. Domestically manufactured equipment tends to distribution companies to source up to 10% of their 20 40 be cheaper than imported equivalents. What local firms power from renewables. Globally, India is currently placed fifth in total renewable 15 30 lack are the design technologies and industry expertise to capacity. Excluding large hydro, India’s installed capacity Other SERC provisions include feed-in-tariffs and develop larger scale wastewater treatment plants. 10 20 fiscal incentives, such as accelerated depreciation, of renewable energy stands at 18.7 GW and accounts for 11% of total capacity. Although wind is currently far and 5 10 To bridge the gap, Indian policy makers have amended and tax breaks/holidays. away the biggest renewable contributor (11 GW), solar foreign direct investment legislation to allow 100% energy is being heavily advocated by the state and a 0 0 investment into local wastewater treatment plants. This is Solar Generation Based Incentive 2008 2009 2010 H1 2011 target of 20 GW of total installed capacity by 2022 has an opportunity for companies with the requisite technical In 2008 the Ministry of New and Renewable Energy been set to meet its growing energy demands. Ultimately, aptitude to enter the market worth an estimated US$4bn (MNRE) launched a generation based incentive. Total deal volume The subsidy scheme provides a generation based policy makers aim to have renewables constitute 30% of and growing at 15% annually. total electricity capacity in addition to large-scale hydro Source: Mergermarket, VC Circle Average deal value $m incentive of 12 rupees (US$0.28) for electricity by 2032. generated from Solar PV and 10 rupees (US$0.23) for electricity generated from solar thermal. A capacity cap of 10 MW is placed on each state and a maximum capacity of 5 MW per developer. The electricity is sold to state-owned utilities. The fiscal incentive will run until 2018.16 17
  • Deal Focus Capital City: Tokyo Area: 377,944 sq km Population: 127,420,000 Time zone: GMT +9 Japan “Japanese corporations of its solar business and recently acquired Recurrent Energy, a US based solar energy independent power Expertise across the sub-sectors Recent transactions will look to acquire producer and developer of solar farms. The Japanese electronics industry was an early entrant to Date Target Description Acquirer Deal Value (US$m) overseas companies the solar energy sector and remains a global player in the production of solar panels and equipment with Sharp, May 11 Shinsei Solar power generation panels IDEX Co n/d to accelerate the Nuclear will continue to play an Kyocera, Panasonic/Sanyo, Mitsubishi and Kaneka all Mar 11 Kokuho System Photovoltaic construction Vitec Co n/d important role being major suppliers of PV solar panels. development of new low cost Mar 11 Yamanaka EP Corp Solar, optical fiber Ceradyne (USA) n/d While Japan may not be the lowest cost manufacturer Feb 11 First Energy Energy conservation Nihon Techno Co 6 renewable energy technologies About 96% of the energy resources supplied in Japan are of solar PV panels, Japanese companies are leading the Service . services imported from abroad with oil accounting for 47% of total Dec 10 Ecosystem Solar energy Itochu n/d for Japan and its global markets.” supply, down from 77% in 1973. In order to reduce its development of new technologies and materials to boost the efficiency of solar cells. Sep 10 Japan Torishima Pump installation services Wind power Konica Minolta n/d high dependence on foreign energy sources and fossil Owen Hultman, IBS Yamaichi Securities fuels (84% of supply) the Japanese government and Chemical companies such as Kaneka, Kuraray, Mitsubishi May 10 Ishii Hyoki Co Solar battery Excel Solar 19 wafers Battery Wafer corporations have made increasing efforts to develop Chemical and Asahi Kasei are actively developing new May 10 Zephyr Corp Wind-solar and INCJ 11 renewable energy resources and energy efficient materials for solar panel films and encapsulants and as water power technologies. such we expect Japan to continue to hold a large Deal malaise May 10 Excel Inc- Solar Battery Solar battery wafers Ishii Hyoki 19 influence on new solar PV technologies. Japan is the third largest player in nuclear power behind Mar 09 Futamata Operates wind- EOS Engineer 33 Furyoku power generators Domestic deal activity and average deal value involving the US and France with 53 nuclear plants. Despite the Energy management and smart grids are segments in local targets in cleantech has seen a year on year decline disaster of the Great East Japan earthquake creating which Japanese corporations are becoming stronger since 2009 as both mid-size and large Japanese conditions for the meltdown of nuclear reactors in through M&A (Toshiba/Landis Gyr AG). Indeed, one area companies shift their strategic focus to overseas markets, Fukushima, nuclear power will continue to be an the Fukushima shutdown did highlight was the pressing especially Asia and the BRICS but also the traditional important source of energy for Japan, generating need to invest in efficient energy management. markets of Europe and North America. A number of about 26% of the supply of electricity. Government Support factors are driving this trend including the attraction In transportation, Toyota and Nissan have made major developments in the commercialisation of hybrid gas Solar Feed-in-Tariff of high growth markets in the developing world and shrinking domestic demand due to a declining and electric auto engines using nickel-metal hydride In 2010 Tokyo Electric Power Company was M&A activity and lithium-ion battery technology from Panasonic mandated to purchase electricity generated by and ageing population in Japan. and GS Yuasa. household solar power systems. The vast majority of the deals have been domestic 35 12 The 2011 rate is JPY 42 kWh (US$0.51 kWh) such as IDEX Co’s acquisition of Shinsei, a solar power generation services company, and the sale of 30 10 Average deal value $m down from JPY 48 kWh (US$0.58 kWh) in 2010. Changing shape of the Japanese Transaction volume clean energy distributor Windtech Tahara to Electric 25 Decreasing costs of solar panels was the underlying Power Dvlp. 20 8 cleantech industry reason behind the tariff price drop. 6 15 The Japanese government is developing new regulations Home Solar Energy Systems 4 Seeking international exposure 10 and policies as they attempt to successfully navigate this Japanese policy makers are encouraging the public 5 2 precarious post earthquake period. We expect the more to use solar energy and have offered subsidies for Japanese trading companies are actively seeking favourable government policies to stimulate cleantech households and businesses that purchase solar 0 0 renewable energy-independent power production M&A over the medium term especially in solar. electric power systems. 2008 2009 2010 H1 2011 opportunities abroad. Itochu, Marubeni, Sojitz, Mitsubishi, The prime minister recently said he would like to In the private sector, Japanese corporations are, with the and Sumitomo are all investing in solar and wind farms in Total deal volume see 10 million Japanese households have solar assistance of government, taking action to accelerate the Europe and the Americas as well as the developers and Average deal value $m power systems installed in their homes over the Source: Mergermarket, Corpfin development of renewable energy sources and energy systems integrators of these renewable energy projects. coming years. efficient technologies by investing in cleantech energy Recently, Mitsubishi acquired an equity stake in the related businesses both domestically and abroad. The subsidy will be up to JPY 480,000 (US$5.800) Spanish solar thermal energy company Acciona The rationale for deals by Japanese acquirers is for the purchase of solar power systems. Thermosolar SL. Sharp, a major developer and technology transfer, lower cost overseas production manufacturer of solar panels, is also interested in and global distribution. Japanese companies will be acquiring solar farms in order to expand the scope targeting a broad range of investments from new breakthrough technologies in equipment and materials to the steady long-term income from investments in independent power producers.18 19
  • Deal Focus Capital City: Pretoria (exec.) Area: 1,219,912 sq km Population: 49,052,489 Time zone: GMT +2 South Africa “With a superb solar In January 2010 Renewable Energy Systems (RES) made its first investment into the South African renewable Photovoltaic vs concentrated Recent transactions solar power resource and a vibrant market. The UK based energy project developer acquired Date Target Description Acquirer Deal Value (US$m) a portfolio of wind power projects with an estimated and innovative industrial installed capacity totaling 300 MW. RES has identified South Africa has among the best solar resource in the Mar 11 Lyanda Power Technologies Business and renewable services Norconsult (Scandinavia) n/d world and is in the process of trying to establish a very sector, M&A opportunities South Africa as a high growth renewable market and an area where solar and wind resources are abundant. large solar park with the support of the Clinton Climate Jan 10 Portfolio of wind farm projects Wind power Renewable Energy Systems (UK) n/d Initiative. PV -ground and roof mounted- offers, in our in South African cleantech will According to industry sources RES is likely to step up view, the largest sector opportunity in the medium to long Apr 09 Genesis Eco-Energy Wind power Mainstream n/d Renewable Power (Ire) its presence in South Africa in the coming years. Nov 08 Bio Therm Renewable enrgy Denham Capital 150 be through the merging of term, with wind filling the gap in the interim. It is likely that Energy . developer Management (USA) Ireland based Mainstream Renewable Power (MRP) the utility scale PV generation sector will come to be Aug 08 EnviroServ Waste Waste treatment Black Economic 238 independent power producers entered into a joint venture agreement with Genesis Eco- dominated by five to six players, with projects being Management and recycling Empowerment clustered into eight to ten large-scale independent power in the renewable energy sector.” Energy, a South African wind project operator, to develop an initial 500 MW of wind energy by 2014. It is projected producers each with between 2-5 GW of power capacity. that the capital expenditure will total US$1.2bn over five Dudley Baylis, Bridge Capital Advisors With the forecast rate of increase in local energy prices years. From MRP’s perspective the significant investment was made on the back of the untapped upside potential and declines in the cost of PV installations, it is likely that Government Support PV will dominate the solar sector. Although concentrated in wind in the region and the expectation of a coherent solar power (CSP) has promise because of its ability to REFIT Government to support job growth and persistent government support programme. store energy through high temperature storage, we REFIT, the feed-in-tariff programme, was and alleviate power requirements believe that energy storage systems appropriate for PV promulgated in March 2009, initiating a rush of will become ubiquitous in the next decade rapidly eroding offshore project developers to SA in the hope of There are certainly reasons to be optimistic about the Large international presence this advantage. We do not foresee CSP achieving the participating in the approximately 1,025 MW of general state of the South African economy after it in renewables cost reduction rates experienced in PV, and combined capacity tariffs to be awarded in the first round. experienced a positive response to the global economic with the ease of installation of PV, we think that this will crisis and has seen inflation decline to a much more Virtually every major international renewable energy give PV an extended competitive advantage over CSP. Unfortunately, the generous tariffs elicited an palatable level. It does however need to stimulate the systems vendor and project developer has a presence of There will be opportunities for CSP, however we think overwhelming 22 GW of aspirant REFIT projects, creation of five million jobs as high unemployment some form in South Africa with some small manufacturing this is likely to be limited to a maximum of 1-2 GW. which was far more than anticipated. However, this remains a problem. It is hoped that the renewable energy capacity established, particularly in solar water heating, is expected to be addressed prior to the United sectors will go someway in supplying some of these jobs. heat pumps and similar sectors. The industry is very Nations Framework Convention on Climate Change which will take place in South Africa Furthermore, 20 GW of renewable power capacity fragmented with over 1,000 companies providing a variety Factors to shape the industry in December 2011. of clean energy related services to a population of 55 needs to be built if South Africa is to meet its power million. Around 50 technology vending companies are The energy generation sector, currently monopolised requirements and its global renewable commitments. IRP2010 vying for inclusion in the REFIT programme, each with by state utility giant Eskom, is in the process of being Manufacturing competitiveness alone is unlikely to create IRP2010 indicates the most significant shift in supply agreements of between three and ten project deregulated. Eskom will most likely fill the role of owner significant incentives for large international investment in energy policy thinking. Renewable energy (excluding developers. and manager of the national grid -which requires national the renewable component manufacturing space. It will be nuclear) is now projected to make up 37% of new the government incentives and local content programmes competence in order to accommodate the large-scale generation capacity by 2030, approximately 8 GW that will encourage investment and open up opportunities adoption of solar energy, particularly if it is widely in each of wind and solar. in manufacturing. Electrical Energy Capacity Forecast, distributed. The massive power capacity building programme will South Africa Looking ahead the keys factors driving the development M&A opportunities will likely be enhanced as there will be a significant amount of offshore capital require huge foreign investment, and much of this may of the cleantech sector will be the added forms of energy requirements. come in the form of the acquisitions of local generating generation needed to accommodate South Africa’s power 100 100 assets or developers with sector specific knowledge as 90 90 requirements, jobs creation and the provision of modern well as political sway. 80 80 affordable energy to the 15 million people who are 70 70 without it. These factors along South Africa’s almost GigaWatts 60 60 50 50 unlimited solar resource will shape the industry for the foreseeable future. Big players entering the market 40 30 40 30 20 20 There have been relatively few M&A transactions in South 10 10 African cleantech to date. This is expected to change in 0 0 10 15 20 2 5 30 the coming years as programmes like the REFIT, and the 20 20 20 20 20 implications of the IRP2010 for independent power Renewables generation begin to take hold. Total system capacity excluding nuclear20 21
  • Deal Focus Capital City: Ankara Area: 783, 562 sq km Population: 78,785,548 Time zone: GMT +3 Turkey “The Turkish cleantech maintenance of hydropower plants, by Energo PRO of the Czech Republic. Turnkon-MNG was previously owned by Geothermal sectors emergence Recent transactions sector, supported by holding firm Turkon Holding AS and conglomerate MNG Starting from a low position, the geothermal sector Date Target Description Acquirer Deal Value (US$m) Holding AS. The Turkish hydro market also saw strong fundamentals, Norwegian renewable energy giants Statkraft AS acquire is starting to live up to its potential. Several domestic strategic investors, such as BM Muhendislik, have begun Feb 11 Anel Energy Hydroelectric power Kioto Photovoltaics (Austria) n/d government support a 95% stake in Yesil Enrji, a Turkish hydropower operator, for US$126m. These deals highlight the attractiveness locating suitable well locations and some have already Oct 10 Cooper Island Steel dust recycling plant Befesa Medio Ambiente, SA (Spain) 10 completed their drilling activities. The state mining and a resilient banking industry, of participating in an established yet growing Turkish authority (MTA) owns a number of fields that have Sep 10 Dogal Elektrik Uretim A.S. Hydroelectric power plants Hamza Dogan 12 hydro industry. continues to build on its been confirmed as suitable for the construction of power plants. Apr 10 Turkon-MNG Hydropower plants Energo PRO A.S. (Czech Republic) 380 A notable deal outside of the hydro space was the Apr 10 ABK Elektrik Wind farm Undisclosed bidder n/d momentum. Strategic investors purchase of a large portfolio of Turkish wind power Transfer of Operating Rights (TORs) are underway for Uretim management Oct 09 Turkish Wind Wind farms Renewable Energy 1100 are targeting Turkey to capitalise projects for US$1.1bn by Renewable Energy Systems (RES), a subsidiary of UK based construction firm Sir these plants with construction and energy firm Celikler Jun 09 Power Projects Yesil Enerji AS Hydropower Systems (UK) Statkraft AS 126 Holding being one of the biggest acquirer’s of TORs, on the market dynamics and to Robert McAlpine. The wind power projects will amount buying enough for a potential 45 MW field. Only a small Dec 08 Polat Energy Developer of (Norway) EDF Energies n/d to 500 MW and will expand RES’ exposure to emerging, establish long term partnerships fast growing renewable markets. portion of these have been offered to the market thus far, however, it is expected that a new round of privatisations Jul 08 Industry & Trade Inc wind energy Bares Elektrik Wind energy Nouvelles SA (France) Italgen SpA 51 Uretim AS company (Italy) with domestic strongholds.” will take place in the near future. Mar 08 Demrad Dokum Photovoltaic EDF Energies n/d installation Nouvelles (France) Can Atacik, Daruma Corporate Finance Rapid growth in wind Consolidation and IPOs According to a study by the European Commission, Turkey has the second highest potential for wind energy to drive M&A market Healthy economy despite generation in Europe after the UK. The state owned Government Support The consolidation trend in the renewable energy sector, high inflation national grid company TEIAS has already begun particularly in hydro and wind, will continue over the near upgrading its distribution infrastructure in an effort to Amendment to Law on Renewable Resource term. A number of funds, actively involved in cleantech, Although inflation has surged in recent times Turkey has connect 15 GW of wind farms. Indeed, analysis suggests Utilization are accumulating assets or helping strategic investors realised solid and steady growth over the past eight years that Turkey’s wind power capacity looks set to grow at The amendment to the 2008 law changed the set accumulate assets with the intention of an exit in the next thanks to the strong macroeconomic policies that were around 30% annually until 2014, easily outpacing overall ten year guaranteed feed-in-tariff price of US$0.07- few years, most likely to either larger strategic investors put in place following Turkey’s own financial crisis in renewable energy capacity growth. 0.08 for energy supplied from renewable sources to or through IPOs. With the introduction of the new solar 2001. This has been complemented by a single party provide differing rates for different sources. The new feed-in-tariffs and a lack of affordable technology from government that has actively tried to promote private rates are US$0.133 kWh for solar, plant-burning Europe and the US, we believe there will be an increase sector growth. A relative decline in investment M&A activity in inbound interest in local technology companies and biomass and gas produced by organic waste, opportunities and macroeconomic fundamentals in other US$0.105 kWh for geothermal and US$0.073 kWh domestic production facilities by Western firms. emerging markets has further accelerated equity and debt for hydro and wind. flow into Turkey energising the M&A market. It is 5 450 expected that these main drivers will continue to The amendment also added incentives for plants 400 sourcing equipment or components from domestic Average deal value $m fuel Turkish cleantech M&A. 4 Transaction volume 350 300 suppliers. The dynamic pricing system should help 3 maintain steady investment flows into the Turkish 250 cleantech industry. Active hydro market 2 200 150 100 Changes in the energy market operational structure Turkish M&A volume in cleantech has been relatively low 1 50 Based on the governments recent strategy paper, in recent years. Baring a few large deals, average deal 0 0 policy makers have made changes to the renewable value has hovered around the mid-market range. 2008 2009 2010 H1 2011 market operating system. The majority of transactions have been cross-border with some of the most noteworthy transactions being The most significant changes are the creation of an Total deal volume in hydropower. energy spot market and a more transparent pricing Source: Mergermarket, Corpfin Average deal value $m structure in the energy trading market. Deals included the US$380m acquisition of Turknon-MNG, a Turkey based electricity generation company firm with operations in the construction and22 23
  • Deal Focus Capital City: Paris Area: 643, 427 sq km Population: 64, 057, 792 Time zone: GMT +2 France “Market leaders are New business models to drive growth New feed-in-tariffs for biomass Recent transactions and biogas looking to capture the 2010 deal volume was up from the year before and this Date Target Description Acquirer Deal Value (US$m) growth of sustainable auspicious trend looks set to continue as deal volume for H1 2011 has already almost equaled the 2010 figure. In February 2011 French policy makers introduced new Jul 11 Power ENR Wind and solar farms Axa PE and Neoen n/d generous feed-in-tariff rates to support the sustainable technologies and The French M&A market is strongly fuelled by blue chip development of its biomass and biogas sectors. The rates Jun 11 Televent IT for sustainable activity Schneider Electric 1,400 companies acquiring technologies to transform their were raised by approximately 50% in an effort to make infrastructure, which should lead business models and generate additional growth. biomass/biogas energy generation more cost-effective Jun 11 Leader Harvest Power Medium voltage drives Schneidder Electric 450 to a boost in M&A activity and This was illustrated by General Electric’s acquisition Apr 11 EDF Energies Renewable EDF 6,650 and competitive compared to fossil fuels. The lucrative Nouvelles energy of Converteam, a multi-faceted electrical engineering tariff increases will entice long-term investors and should Apr 11 SunPower Photovoltaic Total 1,050 increase strategic premiums.” cleantech firm, for US$3.2bn. stimulate M&A in the sector as firms vie for market share Mar 11 Converteam panels Power conversion General Electric 3,200 in what will be an increasingly profitable segment of This common theme was also evident in EDF’s acquisition Michel Degryck, Capital Partner renewables. Mar 11 Ecoslops Residues recycling BNP Paribas n/d of the remaining 50% shares of its renewable energy subsidiary EDF Energies Nouvelles. Alongside nuclear Mar 11 Biogazyl Biomass Saria 12 production (EDF is the world’s leading producer of EU and domestic directives nuclear energy) renewable energy enables the group Energy conglomerates increasingly Feb 11 ASCAL Testing Eurofins n/d driving the sector to further diversify its forms of decarbonised energy drawn to emerging countries Dec 10 Carso Testing FSI (French state n/d production, which currently accounts for 74% of its funds) Although there is a strong disposition towards cleantech installed capacity. By launching an offering for its French energy conglomerates (e.g. EDF, Areva, Total, solutions by both the public and domestic policy makers, renewable energy arm a few weeks after the Fukushima Suez), environment service providers (e.g. Suez the French cleantech market is primarily driven by the disaster EDF sent a strong signal of intent that it is Environnement, Veolia) and traditional industrials (e.g. EUs ambitious 20-20-20 target, the objective of having serious about seeking a greener portfolio. Schneider Electric, Alstom, Saint-Gobain) are actively 20% of total energy consumption to be generated seeking entry into emerging markets as they look to Government Support through renewable means by 2020. capture their strong GDP growth, their ever expanding Amendment to the state photovoltaic policy M&A activity energy needs and their low cost resources. They are also As 2020 objectives are set to be achieved by 2013- Through sustainable actions and commitments, many of looking to acquire energy efficiency technologies (mostly the EU directives are laid out in France’s “Grenelle de in Europe and the US) to broaden their services and 14, the French government placed a three month l’Environnement” laws of 2007 and 2010: 20 2500 products portfolio of value-added solutions. This strong moratorium on PV projects to determine the future 18 market movement is being followed by mid-sized of the sub-sector. In March 2011 policy makers I. New standards and rules are defined for building 16 2500 companies, generating an increase in domestic and agreed to reduce PV subsidies by up to 40% in Average deal value $m and housing energy Transaction volume 14 cross-border M&A. an attempt to prevent market speculation and to 2000 II. New tax system favouring green automotives and 12 reduce costs. waste-to-product & waste-to-energy solutions 10 1500 This new policy has strongly reduced PV activity This framework, combined with favourable feed-in-tariffs 8 6 1000 Sector forecast in France, causing financial difficulties for market and easier permitting procedures, will provide a boost to players. This new initiative will also likely have a 4 500 offshore wind, biogas and biomass, hydrogen-related After two years of a buoyant fund raising market (more very negative impact on PV M&A in France. 2 solutions, sustainable waste management (waste to than 120 cleantech fund raisings in France), successful 0 0 energy and waste to products), smart grid and the energy 2008 2009 2010 H1 2011 emerging cleantech firms will start becoming targets to New TGAP rates storage sectors. After some initial problems that came strategic buyers offering multiples exceeding 10x EBITDA, In December 2010 France introduced new TGAP about due to reduced feed-in-tariffs and a distinct lack of Total deal volume providing high returns to their financial investors. rates (tax on polluting activities and waste). The tax visibility, the geothermal market is now recovering thanks applies to every producer of waste and polluter of Source: Mergermarket Average deal value $m In the short to medium term the French cleantech sector to new building energy standards, and the solar market emissions. should begin recovering over the next 18 to 24 months. will likely experience piecemeal movements rather than Expect these sectors to become more stable and less wholesale changes. Nevertheless, the sector should enjoy The TGAP provisions are to increase progressively speculative. double digit growth in the coming years, supported by the over the coming years but are subject to strong and Grenelle objectives and tax on polluting initiatives. increasing deductions if pollution is tackled through appropriate green means such as through waste to energy, biogas and recycling. TGAP should be a clear booster to waste to product and waste to energy solutions.24 25
  • Deal Focus Capital City: Berlin Area: 357,021 sq km Population: 82,329,758 Time zone: GMT +1 Germany “With feed-in-tariffs for Inc. With a purchase price of US$340m this was one of the bigger renewable German targeted energy The existing grid is unable to provide sufficient capacity to transport the electricity from the north to the south. Recent transactions new projects decreasing transactions of 2010. The acquisition is a significant step Experts have estimated a need for approximately Date Target Description Acquirer Deal Value (US$m) in Solutias plans to strategically grow its specialty 3,600 km of further high voltage long distance grid. on a yearly basis the chemicals and performance materials portfolio by Jun 11 Projet Green Wind farms EOS Holding SA (Switzerland) 286 Such an endeavour will not be straightforward to attractiveness of foreign enhancing its current businesses. implement due to local opposition. Equally, any onshore Apr 11 Solarkraftwerk Ahorn Operates a solar park Investor Group n/d markets will increase further. wind projects targeted at the densely populated southern Feb 11 Solarparc AG Alternative energy services SolarWorld AG 73 regions will also likely be opposed. Nonetheless, with the Thus, German companies are M&A activity intended exit from nuclear power, policy makers will look Feb 11 Calyxo Gmbh Solar power cells Solar Fields (USA) n/d looking for investments in fast to wind power to bridge the energy gap. We expect the Feb 11 REETEC Machinery to the EDF Nouvelles n/d Regenerative wind industry (France) 60 larger energy players to become increasingly active in Feb 11 HKW GmbH Biomass, Kosinus Holding BV n/d 900 growing markets such as India or 800 targeting both wind turbine manufacturers and wind Jan 11 photovoltaic SOLAR23 GmbH PV-grid (Netherlands) Ubbink BV n/d 50 farm projects. China, often with a local partner.” Average deal value $m 700 (Netherlands) Transaction volume 40 600 Dec 10 Epuron GmbH- Wind development Impax New Energy n/d Wind Assets Investors II (UK) 500 Felix Hoch, CH Reynolds Corporate Finance 30 400 Germany seeks to retain automotive Nov 10 SUNSELEX GMBH Solar panels JPK Beteiligungs GmbH 19 20 300 excellence Nov 10 SLS Solar Line Solar cell production Roth & Rau AG 49 200 General optimism ahead 10 100 The automotive industry, one of the most important 0 0 German industry sectors, is now strongly pushing the The M&A environment in 2011 is much improved 2008 2009 2010 H1 2011 development of electric vehicles with the target of having compared to two years ago. Germany’s relatively one million electric vehicles on Germans roads by 2020. disciplined approach to the global economic downturn Total deal volume This major thrust, facilitated by government initiatives, Government Support ultimately brought about real growth and a rebalanced Source: Mergermarket, Corpfin Average deal value $m will have a profound effect on the general shape of the economy. The financial results of companies in 2010 have Renewable Energy Sources Act (EEG) industry as the key success factors associated with been positive and the order book and intake in 2011 The EEG provides subsidies for energy produced electric cars such as batteries, electric motors and light- continues to strengthen. from renewable sources. The act’s most significant weight chassis differ significantly to the automotive norm. Primary influencing factors fiscal incentive has been the feed-in-tariffs (FITs) The average number of deals in the German cleantech initiative. sector has remained fairly constant with none of the The industry is driven by three major factors: The EEG dramatic peaks and troughs that were present in some legislation with feed-in-tariffs. The 20-20-20 target by The precarious state of the German The FITs would normally remain unchanged of the other major Western economies. There was a the EU 27 (20% of final energy consumption must be photovoltaic sector throughout the 20 year period after connection to conspicuous collapse in the total deal value in 2010 generated by renewable energy in 2020, in 2010 the the grid. There is now however potential for year however, dropping from a high of US$15.7bn in 2009 figure stood at 11% in Germany). The shut down of There has been substantial investment in the German on year reductions to the FITs for new projects to just US$1.8bn in 2010. seven to eight nuclear plants in 2011 in Germany after PV sector, more than all the other renewable sectors which has resulted in uncertainty in the market and the Fukushima disaster and the total exit of nuclear combined: US$19.5bn compared to US$2.5bn in wind a rush to get renewable projects completed before However deep the contraction was, aggressive energy around 2022. the end of this year. This has been especially and US$1.55bn in biomass. This is despite the fact that government initiatives and an ongoing balanced apparent in solar. significantly more energy was produced by wind and economic recovery should help ensure a flourishing biomass compared to PV. cleantech industry for years to come. Environment and Energy Efficiency Programme Stumbling blocks to wind energy 20 800 The German PV sector is currently at a cross roads; Under this loan subsidy initiative, state owned expansion Average DealDeal Value ($m) 18 20 16 700 800 although it receives the highest subsidies it is not banks provide artificially low interest loans to small- Average Value ($m) 18 600 700 Notable deals in solar 14 producing sufficient amounts of energy. International medium sized enterprises operating in cleantech. DealDeal Volume 16 12 500 600 14 Volume 10 400 Although new installed capacity was down in 2010 12 8 10 500 300 400 competition has increased dramatically, especially from 6 48 200 Asian companies where not only are prices more The loans are available to both domestic and foreign In February 2011 Germany’s Calyxo, Europe’s second compared to the year before there is no doubt that wind 26 300 100 04 200 competitive but the quality of their products is on course companies operating in the German “green” largest producer of solar modules, was acquired by US energy will play a considerable role2008 helping Germany 2005 2006 2007 in 2 0 100 0 0 to meet near parity over the next decade. What is more, industries. based Solar Fields for an undisclosed sum. The purchase achieve its EU 27 targets; wind is expected to provide 2005 2006 2007 2008 will allow Calyxo to develop its business model in 25% of electricity generation by 2020. reductions in subsidies will reduce the attractiveness of non-European markets such as Asia and the US. PV electricity, at least in the short run. German firms Numerous wind parks have already been planned for participating in the sector may therefore look for In June 2010 the German based supplier of EVA films construction in the North Sea. The current problem facing opportunities abroad. for the encapsulation of solar cells in PV solar modules Germany’s energy infrastructure is that most of the Etimex Solar GmbH was acquired by US based Solutia electricity is needed in the southern states of Germany.26 27
  • Deal Focus Capital City: Rome Area: 301,230 sq km Population: 58,126,212 Time zone: GMT +1 Italy “The recent changes Firma. The deal value amounted to US$899m (US$6.2m per MW). All of Rete Ronnovabiles 145 MW power counterparts. In the meantime, we expect to see more foreign firms entering the market to capitalise on the Recent transactions in legislation will slow generation will benefit from the Conto Energia feed-in- poor energy efficiency of Italy’s private and public Date Target Description Acquirer Deal Value (US$m) tarrifs – See inset. sector buildings. investments into new May 11 Sorgenia Solar S.r.l. Solar power plants RTR Capital 140 Deals in the solar segment continue to dominate the large-scale photovoltaic cleantech market, however, there has been a marked Apr 11 Hydro Co- Ver S.r.l Production of turbines Palladio Finanziaria n/d Solar M&A opportunities in the wake plants but will accelerate M&A increase in the number of deals in the other renewable sub-sectors. These market trends can be partly attributed of reduced support mechanisms Mar 11 Ansaldo Trasmissione Renewable energy services Toshiba Corporation 37 on already existing plants.” Dec 10 Fortore Energia Renewable energy BKW FMB Energie n/d to the kneejerk reductions in PV subsidies which resulted generation AG (Switzerland) in supply suddenly exceeding demand. Deals outside the Previously, the state had maintained high solar feed-in- Dec 10 Italgest Solar energy GSF Capital n/d Photovoltaic production (Luxembourg) solar space included the sale of turbine manufacturers tariffs despite declining technology prices. As a Stefano Indigenti, Ethica Corporate Finance Nov 10 Energia Tre Solar power Mistral International 40 Hydro Co-Ver to Italian private equity firm Finanziaria and consequence, cumulative installed capacity more than generation (Luxembourg) ERG Renew’s acquisition of wind farm operator IVPC doubled every year and now stands at 2.9 GW. The Oct 10 Rete Rinnovabile Solar Energy Terra Firma Capital 887 (UK) Power 5. revision of the state support scheme has left the Italian Cleantech flourishing despite PV sector in a precarious state. Despite this uncertainty, Jun 10 IVPC Power 5 S.r.l. Wind farms operator ERG Renew S.p.A 320 macro concerns we expect the recent slowdown in solar M&A activity to Feb 10 Italgest Wind Wind farm Enel Green Power 29 S.r.l. engineering reverse: Contagion from Greece and Portugal along with M&A activity Jan 10 Italian Wind Wind farm operator EDP Renovaveis 17 Energy (Spain) dangerously high levels of government debt (120% The most recent feed-in-tariff scheme (the 4th Conto of GDP) has been a cause for alarm for investors Energia) will limit the construction of large-scale PV 25 200 throughout 2011. plants, therefore investors that entered the industry 180 to diversify their investments over the past two or Average deal value $m 20 160 Transaction volume Despite Italy’s economic concerns, the cleantech industry three years will start seeking opportunities to divest has not suffered as a result. It experienced an 8.6% year 140 and take advantage of the increasing prices of already Government Support 15 120 on year increase in 2010. Wind production was up 29.1% 100 built PV plants. Renewables Framework Bill whilst PV production exploded, rising 136.5%. 10 80 60 We are already seeing acquisitions of these assets gain The Legislative Decree No. 387 of 2003 enacting Italian energy giant ENEL currently leads the pack in both 5 40 momentum and are starting to see some upward the European directive 2001/77/EC effectively hydroelectric and geothermal production by market share 20 pressure on their valuations. marked the beginning of the renewable energy (56% and 100% respectively) whilst multinational British 0 0 market in Italy. 2008 2009 2010 H1 2011 based electricity operator International Power has The decree lays out various policy initiatives such positioned itself at the forefront of wind power in Italy Total deal volume Futures buyers of foreign cleantech as simplifying the approval process for renewable (17%). Meanwhile, Italian utility company A2A dominates Source: Mergermarket Average deal value $m energy plant construction, fixed incentive tariffs, the biogas, biomass solid waste energy production Outbound investment from local acquirer’s has historically grid improvements and fines. segments. In terms of installed capacity the PV segment come from large independent power producers or utility is still negligible compared to overall energy generation. firms. Enel Green Power, the listed green energy company The Fourth Conto Energia PV players tend to be smaller and more dispersed and Energy services dominated by of Enel, is active in acquiring global cleantech assets An offshoot of Decree 387, the Conto Energia feed- are, for the most part, newcomers to the energy market. French players particularly in North and South America. Other active in-tariffs have made Italy the world’s most profitable cross-border buyers include Ambienta SGR, Solar PV market. The most recent feed-in-tariff framework The Italian energy efficiency and services sectors are Ventures, Atmos Group, ERG Renew and TerniEnergia. however establishes a sharp reduction in incentives Recovery in cleantech M&A dominated by a crop of large French firms; Dalkia, GDF and subsidies and sets limits to the number of Despite turbulent economic conditions, Italy remains a Suez, Veolia and Cofatech. The current support scheme large-scale PV projects built. Italian cleantech M&A is currently experiencing one its strong cleantech market. We do however expect for the energy efficiency sector - the so called White most buoyant periods. Deal volume over the past 18 investors, both domestic and foreign, to be a lot more The overall effect on M&A could turn out to be net Certificates - has proven to be wildly convoluted and months has been high whilst average deal value rose mindful about the fundamental business viability of neutral as regulatory uncertainty and reduced tariff ineffective. A new incentive system is expected to be steeply from years previously. Bucking the overall global potential targets due to the overhaul in state subsidies. guarantees will put off certain sector players while passed coupled with a more pronounced power purchase trend, cross-border activity also experienced an increase agreements arrangement. This should support domestic existing PV plants, newly available on the secondary in activity. firms allowing them to grow and develop to a point where market, should prove attractive to investors. they can successfully compete with their French Of these cross-border deals one of the largest was the 20 800 Average DealDeal Value ($m) sale of Rete Rinnovabile, a PV company with a production 18 20 16 700 800 Average Value ($m) 18 600 14 700 capacity equating to approximately 10% of Italys total DealDeal Volume 16 12 500 600 14 Volume 10 400 solar capacity, to UK based private equity firm Terra 12 8 10 500 300 400 6 200 4828 29 300 26 100 200 04 0 2 100 2005 2006 2007 2008 0 0 2005 2006 2007 2008
  • Deal Focus Capital City: Amsterdam Area: 41,526 sq km Population: 16,715,999 Time zone: GMT +1 The Netherlands “For decades the AG become a major turnkey player in solar technology. Key sub-sectors Recent transactions The acquired technology will also enable the company Netherlands has been at to expand its crystalline silicon solar cell offerings. The most important sub-sectors in the Netherlands are Date Target Description Acquirer Deal Value (US$m) wind, water and waste management. the forefront of the global There have been some notable cross-border movements Jul 11 Enfinity Green electricity distributor Waterland PE (UK) 19 including South Korea based firm STX Heavy Industries’ Wind in particular remains an interesting proposition for water technology and acquisition of Harakosan Europe BV, a Dutch producer investors. Although capacity is already high (it has the Jun 11 Van Gansewinkel Solid waste Groep management Veolia Environmental n/d Services (France) water management industries. of multi megawatt gearless wind turbines. Through this May 11 Norther NV Solar products Electrawinds NV n/d largest off shore wind capacity next to the UK and acquisition, STX has secured key technologies for the Denmark) there is still plenty of room for expansion in Apr 11 Horizon Solar energy HVC NV n/d The government’s recent decision installation and maintenance of wind power plants. the technology enhancement and efficiency side of this Energy BV developer Elsewhere, MCP Group SA, a Belgium based firm with sub-sector. Apr 11 Verhuur EN Energy efficiency Feenstra n/d to offer additional support to substantial operations in scrap recycling, was acquired Apr 11 Energie Ducatt NV Solar energy Verwarming Capricorn n/d The Netherlands has a highly developed water these sub-sectors in their ‘Top by Canadian metal and chemicals firm 5N Plus for US$301m. management industry and current government policy to Apr 11 MCP Group developer Recycling and Venture 5N Plus 301 Technology Sectors’ should help SA reprocessing (Canada) make it one of the key technology sectors is expected Mar 11 Ikaros Solar manufacturer Credit Agricole n/d to boost activity and investments even further. Solar NV Private Equity (France) entice investors looking to invest M&A activity Feb 11 Novopolymers Polymer based Capricorn 4.2 The Netherlands is also one of Europe’s leaders in waste NV encapsulates Venture in firms with a clear competitive management and recycling. Large players include Van Dec 10 Mastervolt International Solar products Actuant Corporation (USA) 115 Gansewinkel Group and Shanks, both of which have advantage.” 35 12 made several recent key acquisitions. 30 10 Average deal value $m Transaction volume Ronald Bobbe, Bluemind Corporate Finance 25 8 20 Expansive growth predicted Government Support 6 Macro indicators remain strong 15 4 The Dutch cleantech market has the potential to grow The Environmental Act 2011 10 from US$2.6bn today to US$12.3bn in 2015 partly fueled The Environmental Act 2011 draws from the EU The Dutch economy remains one of the most robust in 5 2 by EU regulations and its energy targets for 2020 and Directive of 2008/9 which requires that EU members the EU. Its strong trade links with Germany, which itself is partly fueled by the Netherlands technical ingenuity and 0 0 revise their environmental legislation before 2013. experiencing its own sturdy, albeit moderating, recovery, competitive advantage across certain sub-sectors. 2008 2009 2010 H1 2011 The EU Directive introduces new regulations and has facilitated the Netherlands steady growth rates. Dutch sets new waste management and recycling targets. companies have traditionally been highly active in global We expect M&A growth to be greatest in wind where Total deal volume M&A relative to its GDP; the Netherlands being the third Source: Reach, Amadeus, there have been several noteworthy acquisitions in both Since the Netherlands is already close to meeting Zephyr BvD Average deal value $m technology and wind park operators in recent years. largest investor in the US being a good case in point. its recycling targets the new law will help Dutch We also expect further consolidation in waste companies gain more momentum. M&A activity may A good deal of cleantech activity over the past few years management in the coming years, mainly due to the increase as firms look to capitalise on this clear involved the consolidation of the waste management Growing interest from private equity capital intensity of the sector and a need for up-scaling. competitive advantage. sector, although transactions in wind energy (equipment and generation) and solar cells were also evident. Private equity’s intent on the Benelux cleantech market Top Technology Sectors has become increasingly pronounced. French private Policy makers have pinpointed nine economic equity firm Crédit Agricole PE acquired a stake in Ikaros sectors to which they will offer financial and Lively M&A market Solar, one of Belgium’s more prominent PV solar energy regulatory support. One of those sectors is water plant manufacturers. Crédit Agricole has already made 18 management/conservation. In recent years there has been substantial M&A activity investments in the wind, solar, hydroelectric and biomass in cleantech in the Netherlands. Transaction volumes segments. Because of the high-cost, low yielding nature peaked in 2009, while transaction values were also high of the water management/conservation industry, during that year with the total deal value exceeding There has been a growing tendency by private equity we expect foreign firms, through M&A, to penetrate US$1bn. firms to set up funds which focus exclusively on the Dutch market to take advantage of these cleantech. Waterland Private Equity, Capricorn Venture support schemes. There have been no big ticket deals over the past 18 Partners and NIBC, are expected to become major 20 800 months, however, there were some notable mid-market cleantech investors over the coming years. Average DealDeal Value ($m) 18 700 20 16 800 Average Value ($m) 18 600 transactions including the acquisition of Dutch solar cell 14 700 DealDeal Volume 16 12 500 600 14 Volume producer OTB Solar by German solar energy firm Roth & 10 12 8 400 500 300 10 6 400 Rau AG for US$51m. The acquisition will help Roth & Rau 48 200 300 26 100 20030 04 2 2005 2006 2007 2008 0 100 31 0 0 2005 2006 2007 2008
  • Deal Focus Capital City: Warsaw Area: 312,679 sq km Population: 38,482,919 Time zone: GMT +1 Poland “The Polish cleantech (Poland’s North-West coastal area is adjacent to some of Germany’s largest wind farms in Mecklenburg and Promise in wind, biomass Recent transactions and biogas sector is set to grow Brandenburg) and local Polish power generators, looking Date Target Description Acquirer Deal Value (US$m) to acquire production capacity to make up for their exponentially from a limited investment to date. While Poland’s theoretical wind capacity is similar to May 11 Dexia FondElec Energy saving technology E-Star Alternative (Hungary) 19 Germany’s, its current installed wind power capacity nominal base. While Several of the larger wind farm sales have been carried is less than 3% of that of its neighbour. Key constraints May 11 Portfolio of Wind Farms, Poland Wind farms ELKOP Energy n/d include bureaucratic hurdles in licensing and network production and generation will out by Warsaw Stock Exchange listed energy generation firm Polish Energy Partners SA, which sold a series of connections and structural problems with the grid Jan 11 Piecki Wind Farm 16 wind turbines RWE Innogy GmbH, (Germany) n/d Jun 10 Centrozlom Metal recycling KGHM Ecoren SA n/d increasingly be the purvey of the wind farms to RWE and Electrabel. They also sold 43 MW network, which is poorly developed in the areas with Wroclaw SA services Pagowo and 30 MW Wartkowo projects to GDF Suez the highest wind potential. However, thanks to a recent Apr 10 Portfolio of Wind Wind farms AES Wind Generation n/d market giants, there will be a (for around US$21m), broadening its relationship with streamlining of legislation and mounting pressure on Feb 10 Farms, Poland Iberdrola Wind farms (USA) The EBRD 169 power generators and distributors, installed wind capacity range of opportunities for those the French power company which also includes joint involvement in biomass power development. is expected to grow exponentially from 1.58 GW (with just Jul 09 Renewables Gamar SL, Develops wind Renewable Energy 2 servicing and adding value to this over fifty largely small-scale wind farms) in 2010, to just Jul 09 Poland Ecofys Poland Sp farm projects Energy saving Holdings (UK) Aveco de Bondt n/d under three times that level (5.19 GW) by 2015. Zoo services (Netherlands) emerging industry.” M&A activity May 09 Eco-Wind Wind plant Trakcja-Tiltra SA 7 Poland’s large arable farming and forest industries also Construction manufacturer offer considerable scope for industrial and farm enterprise Michael Harvey, IPOPEMA Securities scale biogas and biomass facilities. These projects are 9 70 still in their infancy, with only 16 biomass plants with an 8 60 overall capacity of 254 MW and 136 small-scale biogas Average deal value $m Transaction volume Several factors to spur on 7 50 plants generating just 79 MW in place to date. Poland’s Government Support 6 cleantech growth 5 40 potential in this area is largely unexploited but these segments are expected to play a significant role in Certificates of Origin 4 30 Poland has performed well over the crisis, being the the future. The government encourages renewable energy 3 only EU country not to move into recession, and growth 20 investment through its Certificates of Origin 2 forecasts for the coming years remain healthy at 4.2% 1 10 initiative, otherwise known as Green Certificates. and 3.9% for 2011 and 2012 respectively. Ageing power 0 0 Looking ahead The initiative requires electricity distributors to buy stations, limited installation of new generating capacity 2008 2009 2010 H1 2011 renewable energy, and at premium prices. The along with the strong economic growth of the past There will be an increasing number of transactions as current renewable quota is 10.4% rising to 11.9% decade is putting huge pressure on capacity in the Total deal volume in 2014 and 12.9% in 2017. These rights are the project approval process initiated by a wide range medium term. This combined with Poland’s commitment Source: Mergermarket, Corpfin Average deal value $m of smaller companies reach fruition, and are bought negotiable and can be traded on the Polish to produce 15% of its energy from renewable sources by out by a widening range of big-league buyers. Power Exchange. 2015 means that focus will continue to be on new and The wind power sector will, in its turn, require project Renewable investments will likely hasten as power alternative forms of energy and other green initiatives. World’s largest biomass plant development, construction and maintenance services companies strive to comply with the rising quota. whilst biogas and biomass sectors demand large-scale In the biomass space, Canadian based Carbon Friendly infrastructure, logistics, financing and long-term Ministry of Economy energy targets A developing industry Solutions acquired a 51% stake in biomass pellet Cleantech investment in Poland is being cooperation between a disparate group of collaborators producer Carbiopel in May 2011. The latter is to produce to succeed. underpinned by EU legislation such as the Overall volumes in cleantech M&A have been relatively requirement under EU law that 15% of Poland’s 20,000 tonnes of pellets in 2011, rising to 80,000 tonnes low compared to Poland’s more westerly neighbours electricity output be produced from renewable in 2016. The pellets will be feed stock for the world’s and reflects the relatively underdeveloped nature of its means by 2015. Poland’s Ministry of Economy largest biomass plant; the 190 MW unit currently under cleantech industry. Focus to date has been on the large expects 8.9% renewable electricity output by Q4 construction at the Polaniec power plant owned by power production and distribution companies buying out 2011, rising to 13% by 2015 and 19% by 2030. French energy giant GDF Suez. It is expected to consume project stage or just completed wind generation projects around 1 mn tonnes of biomass annually. The deal from smaller entrepreneurial businesses. highlights the interest foreign buyers have in locking Acquirers of wind power projects have fallen into three in long-term relationships in early stage markets with broad categories: Multinational power groups with global leaders.20 800 Average DealDeal Value ($m) 18 700 20 16 800 expertise in renewables like Iberdrola and Acciona, who Average Value ($m) 18 600 14 700 DealDeal Volume 16 12 500 600 are keen to stake a claim in what is an adolescent, yet 14 Volume 10 400 500 12 8 300 highly promising and large-scale market. German based 10 6 48 400 200 300 26 power generators (like RWE) expanding across the border 04 100 0 20032 33 2 100 2005 2006 2007 2008 0 0 2005 2006 2007 2008
  • Deal Focus Capital City: Moscow Area: 17,075,200 sq km Population: 140,041,247 Time zone: GMT +3 Russia “For Russia to remain an Joint ventures key to Russia’s Largest wood pellet plant in Recent transactions cleantech push the world energy superpower it Date Target Description Acquirer Deal Value (US$m) needs to supplement In June 2011 French energy conglomerate Alstom entered Finnish softwood sulfite pulp firm Vyborgskaya Cellulose May 09 Rusnano Solar modules technology Renova Group n/d the Russian renewable market through an agreement with and Finnish forestry services firm Ekman & Co pooled its wealth of natural Russia’s hydropower generation giant Rushydro. The resources to develop a wood pellet plant in Sovietsky, Apr 09 RusHydro Energy Distribution OAO Hydro Rushydro OAO 43 agreement between the two stipulates the creation of a a region in Russia close to the Finnish border. On its resources with investment in hydropower manufacturing facility in the Russian federal completion in December 2010 the plant became the Aug 08 Jugenergopromtrans Hydroelectric power plants Alter Energy Group AG (Switzerland) n/d advanced technology. Therefore, Jun 08 OGK-5 JSC Hydro interests Enel Investment 1225 state of Bashkortostan. The plant will manufacture largest wood pellet plant in the world and twice as large Holding Bv (NL) equipment across the hydropower production chain as any other plant currently in existence. Overall not only are foreign companies as well as auxiliary equipment. This agreement will production of wood pellets will be in the region of 1 mn strengthen Alstom’s growing presence in Russia’s tonnes per year. The target market for the pellets will be still acquiring Russian resources, energy market whilst technology spillover should help Scandinavia and parts of central Europe. there is a new trend of rich ensure improvements in the efficiency of Russian Government Support hydropower plants. Russian companies acquiring Energy powers looking east The Energy Strategy Document In 2010 Siemens retained a majority stake in a joint foreign technology through venture with Rushydro and state owned technology body Major Russian energy players Rushydro and Inter Rao The Energy Strategy document released in 2003 sets out the Russian energy policy for the period Rostechnologii to develop wind component production M&A and joint ventures.” facilities. The turbines and components built will serve UES are ostensibly keeping to their geographical and up to 2020. geopolitical comfort zone with regards to their cross- the Russian market as well as the peripheral markets The document outlines Russia’s energy priorities David Wolfe, Northstar Corporate Finance border movements. They are mostly, but not exclusively, surrounding Russia. The JV establishes a major which includes increasing energy efficiency, targeting companies and assets in the former Soviet bloc renewable player in the region and broadens the reducing pollutions impact on the environment, or in former Soviet allied countries such as Venezuela capabilities of Russia’s energy production output. In a promoting sustainable, energy and technological and Vietnam. Russia yet to capitalise on its statement made following the agreement, the CEO of development. It also promotes more openness and Siemens confirmed the company’s intention to install potential renewable capacity Examples include Inter RAO UES’ US$104m purchase of competitiveness in the energy market framework. up to 500 MW annually for the next five years. Georgian hydroelectric power stations AO Khrami GES-1 In 2009 policy makers set a target of increasing its With Russia home to a tenth of the world’s oil reserves, a and AO Khrami GES-2. The two plants will provide 110 share of renewable electricity generation to 4.5% third of the world’s natural gas reserves and a fifth of the MW combined, which works out to roughly US$1m per from less than 1% today. Direct investments and world’s coal reserves it should come as no surprise that Russian electricity production MW. Elsewhere, Rushydro acquired a 51% stake in minimal support structures have been promised to Dakdrinh Hydropower from Vietnamese state energy firm the country is not at the forefront of the global renewable by source facilitate achieving this target. push. There have been no sweeping state initiatives nor PetroVietnam. Upon completion of the deal, Dakdrinh has there been an immediate or practical need to pursue were in the process of constructing a US$125m-150m The Federal Law FZ 250 green policies as conventional energy remains (artificially) 125 MW hydropower plant in Vietnam. Rushydro also 15.5% The Federal Law FZ 250 enacted in 2007 focuses cheap. There have been some small moves of late by acquired 100% of the 560 MW Sevano-Razdan on the reorganisation of the equity positions of state sponsored and private companies to engage in 16% 0.5% hydropower cascade in Armenia. companies in the Unified Energy System of Russia renewable energy projects with joint ventures (JVs) and of other federally owned joint-stock companies facilitating proceedings. in the Russian electricity industry. The result of Short term goal to be on grid which appears to be more competitive and efficient Large-scale hydropower is by far and away the most developed renewable source of energy in Russia. modernisation electricity companies that are more prone to invest Approximately 16% of electricity is produced by in the future development of Russian electricity. hydropower (45 GW capacity). Geothermal is the next Russia’s ageing grid infrastructure is in desperate need of modernisation. It has been estimated that the distribution Implicit in this law is a policy for promoting the biggest source, contributing just 307 MW. Russia also infrastructure loses up to 12% of energy transmission at a use of renewable sources for electricity power produces 186 bn tonnes of peat, second only to Canada, cost of US$10bn annually. Russia is just beginning to generation. However, there are no specific however only 1,5 mn tonnes per annum is invest in smart grid projects which, in the long term, incentives such as feed-in-tariffs or subsidies. used for fuel production. should smooth the deployment of renewable energy technologies. 68% Nuclear Hydro Other Renewables Thermal34 35 Source: eia.gov
  • Deal Focus Countries: Norway, Sweden, Denmark Area: 12,166,85 sq km Population: 24,784,800 Time zones: GMT +1 to +2 Scandinavia “From the Swedish Greentech Energy Systems via a capital increase, on top of the 10% it already holds on a pro-forma basis. The Home to the longest coastline in Europe and considerably larger than the traditional wind farm states of Denmark or Recent transactions automobile industry to 60% share capital ownership means GWM will have to northern Germany, Norway has vast untapped offshore Date Target Description Acquirer Deal Value (US$m) make a mandatory offer for the remaining shares. The wind power potential. According to the Energy Council, Danish wind energy purchase will afford Greentech with the added capital as offshore wind power will make up 40 tWh of Norway’s May 11 Triventus AB Wind power generation Industrifonden; Sustainable Tech 16 to Norwegian energy well as access to a prominent industrial shareholder to help push forward its wind power strategy whilst renewable energy by 2025. In 2009 Norway’s Statoil and France’s Technip partnered to build the first large capacity May 11 Greentech Energy Systems Wind energy projects GWM Renewable Energy SpA (Italy) 461 initiatives, the Scandinavian expanding into other areas of renewable power floating wind turbine. The floating turbine sub-sector Jun 11 Sarepta Energi AS Wind power plant TrønderEnergi Invest AS n/d including solar and biomass. remains an interesting prospect as it is already region has reached a point Apr 11 Domsjo Biorefinery and The Aditya Birla 340 competitively priced and can be installed far from Fabriker AB specialty cellulose Group (India) In one of largest deals in the renewable sector over the Mar 11 Veidekke Waste recycling Altor Fund III 58 now where the goods it past couple of years Norway based Elkem AS, one of the the coast where wind flow is unhindered by terra firma and is therefore more constant. Jan 11 Gjenvinning AS Amminex A/S company Alternative energy GP Limited Faurecia SA 26 produces are in high demand world’s pre-eminent solar grade silicon developers, was acquired by China based chemical firm China Bluestar Although onshore wind in Sweden is expanding at a rapid Jan 11 Elkem systems Solar (France) China National 2,000 across the world.” Group. The landmark deal will give Elkem access to the pace its offshore variant is almost nonexistent with only Sep 10 Eneas Energy Energy efficiency Bluestar (China) Palamon European 64 vast and bourgeoning Chinese renewable market. 165 MW total installed capacity to date. In late 2010 the AS (Majority Stake) services Equity (UK) Bengt Ellow, Experia Corporate Finance Swedish authorities approved planning permission for an Sep 10 Ekesjo Windpower Arise Windpower n/d Windpower AB, AB unnamed German wind power firm to build a 265 MW Jun 10 Kommunekemi a/s Wastewater EQT Infrastructure 52 M&A activity offshore wind farm 11 miles off the coast of Söderhamn. Fund (UK) Construction is planned to commence within 18 months A recipe for success and should signify a new trend in large-scale offshore 60 300 developments in Sweden. For years the Scandinavian countries have made extensive efforts championing cleantech and have been 50 250 Government Support Average deal value $m Transaction volume considerably successful in this field: Denmark is a world forerunner in wind energy technology, Norway is one of 40 200 Mid-market private equity taps into Electricity Certificate System (Sweden) the world’s leading innovators of solar technology and 30 150 energy efficiency market Initially introduced in 2003, the Electricity Certificate home to Europe’s biggest renewable energy operator; System was revised in 2007 with the objective of Statkraft, whilst Sweden is leading the way in biomass 20 100 In September 2010 one of Europe’s leading mid-market increasing renewable production to 17 tWh by 2016. technology. private equity firms Palamon Capital Partners acquired a 10 50 1 MWh equals one certificate which can be traded majority stake in Eneas Energy AS for a sum of US$64m. The most prevalent renewable sources in Scandinavia are on the Nordic Power Exchange. Has promoted 0 0 Eneas provide a variety of services in the energy hydro, wind, solar and bio-energy. Sweden has the 2008 2009 2010 H1 2011 green investments into Sweden. efficiency spheres and is one of the market leaders highest share of renewable in the energy mix (excluding in their field in the Nordic region. Green car tax exemption (Denmark) large-scale hydro) among the EU27 and is well positioned Total deal volume Denmark exempts vehicle purchase tax for electric to meet its EU energy and climate commitments by 2020. The deal is representative of a growing number of Source: Capital IQ Average deal value $m vehicles (equivalent to an exemption of 105% of the mid-market private equity firms branching out of their car value below DKK 76.500 (US$14.400), and conventional investment models into sectors associated 180% of the car value above this. Electric cars also with industrial cleantech as well as cleantech consulting, Healthy industry Offshore wind in Scandinavia have an exemption from the annual registration fee logistics and financing services. of between US$95 to US$1900. The tax breaks M&A volume in cleantech was unimpeded by the Denmark were pioneers in offshore wind having have attracted a number of auto manufacturers to economic slowdown and even rose at the height of the developed its first offshore wind farm in 1991. The the country’s market. downturn. The latest notable deals include the purchase industry currently generates US$6.5bn and serves 40% Cleantech backbone of economic of Swedish biorefinery firm Domsio Fariker by the Aditya of the world market. There are a number of large-scale growth Feed-in-tariff (Norway) Birla Group, an Indian conglomerate with a substantial domestic projects in the pipeline; the most significant In 2008 the state introduced feed-in-tariffs for renewable interest, from a consortium of Sweden-based being the joint project between Denmark’s largest A comprehensive policy mix along with a propensity renewables. Producers of electricity using regionally private investors for a consideration of US$340m. Domsio energy firm Dong Energy along with pension fund towards innovation should ensure that cleantech will undeveloped technologies such as biomass receive Fabriker’s state-of-the-art biorefinery will give Aditya Birla PensionDanmark. The two entities are to build a 400 MW continue to play a major role in driving the Nordic US$00.2 kWh, whilst wind power producers receive access to a variety of different renewable sources they offshore wind farm between the island of Anholt and economies. One should look no further than Denmark, US$00.1.5 per KWh and hydropower producers currently lack exposure to. Djursland. The project will provide 4% of Denmark’s where cleantech has been its fastest export growth sector receive US$00.07 kWh. renewable consumption. for the past two years and the pace of this export growth In June 2011 GWM Renewable Energy, the subsidiary is expected to more than quadruple over the next five of Italian wealth management group GWM, agreed to 20 800 Average DealDeal Value ($m) 18 20 16 700 800 to six years. Owing largely to the above factors, we see acquire a 50% stake in Danish wind energy specialists Average Value ($m) 18 600 700 14 no reason why the recent upsurge in cleantech M&A DealDeal Volume 16 12 500 60036 14 37 Volume 10 400 12 8 10 500 300 400 should stop. 6 200 48 300 26 100 200 04 0 2 100 2005 2006 2007 2008 0 0
  • Deal Focus Capital City: Madrid Area: 504,782 sq km Population: 46,745,807 Time zone: GMT +1 Spain “Due to the introduction of One of the most high-profile transactions was Spanish electricity giant Iberdrola SA’s acquisition of the remaining Looking overseas to invest Recent transactions more restrictive renewable shares it does not already own (20% approximately) of Big Spanish construction groups like FCC, Ferrovial and Date Target Description Acquirer Deal Value (US$m) Iberdrola Renovables SA, its listed renewable energy arm energy legislation recently, for US$5.3bn. The deal, announced on March 2011, ACS have been diversifying away from the construction sector and entering into new business areas with Apr 11 Jantus SL Wind power plants CPFL Comercializacao 973 (Brazil) both big and medium demonstrates Iberdrola’s strong focus on renewable assets and highlights the role the company is taking as a environmental services being top of their agenda. Mar 11 Grupo Guascor SL Renewable energy Dresser-Rand Group Inc (USA) 494 They are also increasingly interested in diversifying sized Spanish players will almost leading consolidator within the renewable energy market. geographically with the belief that a growing proportion Feb 11 Grupo Agbar Water and sewage services GDF Suez SA (France) 97 Iberdrola has also been directing its attention offshore: In certainly have to look abroad if late 2010 it announced its intention to invest US$6.9bn of their growth will occur outside of Spain. Dec 10 PET Compania Reciclado SA Recycling of plastics Dentis S.R.L. (Italy) n/d they want to maintain the growth A fiscally weak state equates to an undermined public Sep 10 Orisol Corporación Renewable Repsol YPF SA 8 into UK cleantech over the next two years. Its primary Energética SA energy projects focus will be on smart grids, carbon capture and wind sector. This is of particular importance because for firms Jun 10 Biomasa Fuente Biomass electricity Neoelectra SA 30 they achieved in a buoyant farms such as the 7.2 GW offshore farm off the coast of in certain cleantech sub-sectors, public agencies are Jun 10 de Piedra SAU Parque Eólico La (France) Wind power plants Elektrizitaets 12 East Anglia. their principle client; waste management serving local domestic market over the last municipalities being a good case in point. As a result, Jun 10 Peñuca SL Isofoton SA Solar panels Gesellschaft (CH) Toptec Company 45 decade.” we expect to see an increasing amount of cross-border deals involving Spanish buyers in the waste management Feb 10 Hersen manufacturer Recycling (South Korea + Spain) Mauser AG n/d Regressive government policies may Cinco SL company (Germany) sector, similar to the last one performed by Ferrovial when Mario Senra, Norgestion facilitate sub-sector growth it acquired Donarbon Limited, a UK based waste Jan 10 Aldesa Solar PV Construcciones SA power plants NIBC; Ampere (Netherlands) 27 management company in September 2010. Conducive market conditions along with favourable government policies have seen the number of renewable Cleantech to drive the economy energy facilities grow from 1,778 in 2000 to 57,504 in Consolidation and outbound deals Spain has been particularly damaged by the global 2010. A number of initiatives like the aggressive feed-in- Government Support tariffs have helped position Spain as one of the world’s will characterise future M&A economic downturn. A period of continued growth biggest producers of renewable energy. Recently, policy Real Decreto-ley pushed along by a credit fueled housing and construction Although there are major players in cleantech like the makers put through various changes in legislation clearly In an attempt to reduce the “tariff deficit” (the bubble ended abruptly once the financial crisis hit. Spain listed Gamesa or Abengoa or the environmental services aimed at slowing down investments in certain renewable difference between the government fixed price for has in effect had to find a new “business model” to offset divisions of some of the main construction holdings, the sectors such as solar PV due to its high costs. As a electrical power and the cost of generating it), the dramatic reduction in activity in the affected markets general market is highly fragmented with hundreds of result, other cleantech sub-sectors like waste Spanish policy makers introduced a cap on the and to allow for real growth to take place on the back of small players with revenues below US$20m. Continued management, recycling and energy efficiency are previously established solar PV feed-in-tariffs. manufacturing and exports rather than the expansion of consolidation in the domestic market is therefore emerging at the forefront of Spain’s green industries. the property market. The government has pinned its highly probable. The effect on M&A should be mixed. Positive as hopes on cleantech to kick start its struggling economy. investors, seeing how their internal rate of return Despite the recent restrictive policies adopted, mainly due Inbound M&A may increase over the coming few to budget constraints, the Spanish are still preeminent M&A activity years as foreign companies, after a period focused on is decreasing, might start to look for an exit, and negative because it introduces uncertainty and a across certain sub-sectors. restructuring and cost cutting and allowing for excess distinct lack of confidence in the Spanish renewable cash to build up on their balance sheets, start to assess energy market. 40 1800 how macroeconomic indicators develop. Spain could be 35 1600 2011: A turning point perceived to be a country with reasonable valuations as Average deal value $m 1400 PNIR Transaction volume 30 well as being a strategic launch pad into Latin-America. 1200 PNIR, otherwise known as the National Integrated Excluding the mega deals involving Endesa, Acciona, 25 1000 Wind power giant Gamesa has been shifting its attention Plan for Waste Materials, started in 2008 and is set and Enel during 2009-2010, both the volume and value 20 to run until 2015. 800 to new markets of late. In April 2011 it signed an of cleantech transactions involving Spanish targets has 15 600 agreement with Chinese wind player Longyuan to jointly Its purpose is to reduce the amount of waste been declining since 2008. This can be attributed to the 10 400 develop a new 200 MW wind farm in China. Its project generated and to increase reutilisation and recycling deteriorating macroeconomic environment and the 5 200 portfolio now totals 2.9 GW in China and 22.6 GW rates. The implementation of the plan should increasingly budget conscious attitude towards green 0 0 worldwide. Indeed, the more restrictive government gradually drive growth in areas such as recycling initiatives by the government. The volume and value of 2008 2009 2010 H1 2011 policies towards renewable energy and the sustained and waste to energy which should subsequently cross-border cleantech transactions involving targets in troubles facing domestic financial institutions should have a positive effect on M&A. Spain has also been decreasing for the same reasons. Total deal volume make outbound M&A activity predominate in the near There is an indication that deal volume will start to Source: Mergermarket Average deal value $m future with Brazil, China, the UK and the US being the recover to pre 2010 levels judging by the H1 2011 most attractive propositions. numbers. Moreover, 2011 has seen average deal value shoot up thanks to a string of large deals.38 39
  • Deal Focus Capital City: London Area: 244,820 sq km Population: 61,113,205 Time zone: GMT United Kingdom “Given that 40% of renewable industry consolidator, acquiring onshore wind farms from both Scottish & Southern and E.ON Greenstar UK for US$218m to grow its recycling footprint. Also, Viridor acquired private equity backed Reconomy Recent transactions Europe’s wind energy during 2011. Recycling Solutions (RSS) for US$39m, a business which Date Target Description Acquirer Deal Value (US$m) processes 250,000 tonnes of material a year through blows across the UK, the Whilst the North Sea oil & gas industry is primary to the three materials recycling facilities (MRFs). Jun 11 ACAL Energy Fuel Cell systems Carbon Trust, Solvay, Sumitomo 6 UK energy sector, we have seen a range of traditional oil wind industry is likely to and gas service businesses acquire renewable The industry is also experiencing increased vertical May 11 Enecsys Invertors for solar Climate Change Capital 26 dominate cleantech investment capabilities in anticipation of the growth in non carbon derived energy. At the end of 2010, Aberdeen-based integration as manufacturers secure recycled ‘raw materials’ at source. Spanish paper manufacturer SAICA, Apr 11 3 wind farms Wind farms Scottish &Southern (96MW) Infinis Plc 173 flows here for the next 20 years. Feb 11 Eaga plc Renewable and Carillion Plc 306 John Wood Group acquired a stake in SgurrEnergy, who are building a US$480m paper mill in Manchester, energy efficiency the specialist renewable energy consultant combining secured over 450,000 tonnes of paper annually for the Dec 10 Clipper Manufacturer of United Technologies 69.9 Other industries, such as waste offshore experience with wind, wave and tidal expertise. mill through the acquisitions of Futur Recycling, Nov 10 Windpower plc Aquamarine wind turbines Provider of wave Corp (USA) ABB (Switzerland), 11 recycling and energy recovery, In 2009, the more established Bristol-based Garrad Hassan Group, and recognised authority on wind Cutts Recycling and Stirling Fibre Nov 10 Power Beco and tidal energy Installation Scottish & Southern Kier Group Plc 3 are also hugely important.” especially with the funding community, was acquired Oct 10 Futur Recycling photovoltaic (PV) Recycling of SAICA (Spain) n/d by Germanischer Lloyd AG, the German maritime and Funders selective about clean waste paper oil & gas consultant. Sep 10 SgurrEnergy Renewable energy John Wood n/d Mark Wilson, Catalyst Corporate Finance technology investments services Group Plc Jul 10 TEG Perth Anaerobic digestion Albion Ventures LLP 3 Despite the growth expected across the wind supply (AD) plant chain, there are very few British manufacturing There is no shortage of clever ideas in the UK for cutting Legislation driving deals businesses of any scale remaining, most having been carbon emissions, saving energy and commercialising low acquired by overseas buyers. Blades, turbines and carbon technologies. There is however limited capital to Rising inflation and lower than expected growth has lead transmission systems are almost entirely supplied by fund these (often pre-revenue) businesses or renewables European manufacturers. We are however beginning to projects and attracting either equity investment or debt to a crisis in confidence in the UK recovery. Interestingly, financing remains difficult. Uncertainty around long term Government Support the UK economy has been greatly influenced by (EU and see the emergence of British wind service companies. UK) cleantech legislation over the last five years, ensuring fiscal incentives have also complicated investment Renewable Obligation Certificates (ROC) that even in a slow growth environment, deals are still decisions, as evident this March when the Government The certificate scheme was enacted to dramatically scaled back some of the FIT subsidies to avoid ‘solar being completed. For example, the introduction of the M&A activity farms’ emerging. incentivise renewable generation. UK’s feed-in-tariff (FIT) programme in April 2010 was a catalyst for Carillion’s acquisition of Eaga, the largest An energy supplier receives one ROC for every A number of venture and cleantech funds as well as deal of 2011 so far, at US$493m and roughly 6.8x this 120 40 1 MWh generated from a renewable source. If it corporate venturers have however been supportive of the year’s EBIT. 35 generates more than it is obliged to, the supplier is 100 Average deal value $m industry. In June, the Carbon Trust, a Government backed able to sell its excess ROCs to energy companies Transaction volume 30 fund, invested in ACAL Energy, a developer of unique fuel Eaga is poised to deliver a mass roll out of solar PV to the 80 who have failed to meet their renewable obligation. social housing community, approximately 320,000 homes 25 cell technology along with Sumitomo Corporation and The current pricing system is 1 MWh = US$59. this year. In late January they announced that they had 60 20 Solvay. This round is expected to allow the business to secured US$97m of SPV equity funding through the 15 demonstrate the technology at a prototype level and Has arguably been the principle mechanism for 40 HSBC Environmental and Barclays European 10 precedes full scale commercialisation. stimulating UK renewable energy investments. Infrastructure Funds to facilitate this. As a proven 20 ROC will run until 2037 5 deliverer of complex national installation programmes, 0 0 Eaga was an attractive target for Carillion, a leading 2008 2009 2010 H1 2011 Factors stimulating future FIT (Feed-in-tariffs) support services business, which has the balance sheet cleantech M&A Mandated under the powers of the Energy Act 2008, strength to help Eaga fully capitalise on the FIT Total deal volume the feed-in-tariffs scheme was launched in 2010. programme. Similar businesses such as Keir have Source: Corpfin Average deal value $m As landfill taxes further escalate the UK waste industry also been acquisitive in the PV roll out space. It requires the UK’s largest energy suppliers to make will continue to invest in recycling and treatment regular payments to communities, businesses and operations, often through M&A. households who generate their own electricity from Waste industry slowly reconfiguring renewable or low carbon sources such as solar Wind industry evolving A strengthening banking system will mean that funding electricity panels or wind turbines. for cleantech businesses will become easier, especially As economic activity has strengthened, many waste once the FIT and various other state programmes The wind industry is the most developed and mature of businesses have seen their volumes and resulting trading The premium, which is for power generators of up the renewable energy sectors in the UK and is poised for become more established and the industry matures. to <5 MW, will run until 2023. The initiative has so figures improve, helped by increasing global recyclate Moreover, a combination of better underlying trading and over US$160bn of investment in the off shore sector as prices (especially paper and plastics). Investment in far had a discernable impact on cleantech M&A. well as continued investment onshore. During the past more sustainable profit forecasts and RHI buys having recycling and treatment operations continues to stimulate more free cash and banking headroom is likely to further 12 months a number of assets have changed hands, M&A activity. Last July, Biffa acquired the recycling-led40 with Infinis plc, the Terra Firma Capital Partners backed stimulate M&A in 2012. 41
  • Sector Report 2012 Contacts Americas Brazil Mexico USA Derek Gallo Luis Garcia Ted Kinsman International BroadSpan Capital Sinergia Capital Headwaters MB +55 21 3873 8000 +52 552 167 1810 +1 303 572 6013 dgallo@brocap.com lgarcia@sinergiacapital.com.mx tkinsman@headwatersmb.com corporate finance Asia, Africa and Middle East Australia Finland Poland China Japan Turkey Austria France Russia Zachary Tsa Catalyst Corporate Finance Owen Hultman IBS Yamaichi Securities Can Atacik Daruma Corporate Finance Belgium Germany Singapore +44 (0) 207 881 2966 +81 3 6895 5521 +90 212 370 60 60 zacharytsai@catalystcf.co.uk owen.hultman@ibs-sec.com can.atacik@daruma.com.tr Brazil India South Africa India Karan Gupta South Africa Dudley Baylis Singhi Advisors Bridge Capital Advisors Bulgaria Italy Spain +91 22 6634 6666 +27 11 268-6231 karan@singhi.com dudley.baylis@bcrefco.co.za Canada Japan Sweden China Luxembourg Switzerland Colombia Mexico Turkey Europe Czech Republic Netherlands UK France Michel Degryck The Netherlands Ronald Bobbe Russia David Wolfe Spain Mario Senra Capital Partner BlueMind Corporate Finance Northstar Corporate Finance Norgestion Denmark Norway USA +33 148 246 299 +31 73 623 8774 +7 495 937 5855 +34 91 590 16 60 m.degryck@capital-partner.com ronald.bobbe@bluemind.nl david.wolfe@northstar-cf.ru jbarrena@Norgestion.com Germany Poland Scandinavia United Kingdom Mergers Alliance is a group of award winning Stas Michael Felix Hoch Michael Harvey Bengt Ellow Mark Wilson Mergers Alliance CH Reynolds Corporate Finance IPOPEMA Securities Experia Corporate Finance Catalyst Corporate Finance corporate finance specialists who provide high +49 699740 3020 +48 22 236 9200 +46 8 510 663 53 +44 121 654 5020 quality advice to organisations who require +44 207 881 2990 f.hoch@chrcf.com michael.harvey@ipopema.pl bength.ellow@experia.se markwilson@catalystcf.co.uk stasmichael@mergers-alliance.com international reach for their M&A strategies. Italy Over the past 12 months our partner firms Andre Johnston Stefano Indigenti have collectively completed over 100 deals, Ethica Corporate Finance Mergers Alliance +39 02 92 88 04 00 in 30 countries worldwide with an aggregate +44 207 881 2967 stefano.indigenti@ethicaen.com value of over US$3 billion. andrejohnston@mergers-alliance.com42 43
  • Sector Report 2012 Transactions Mergers Alliance cleantech transactions Advisor on Advisor on the Debt Advisor on Development Capital of Restructure of Development Capital of Bowersock Mills & Mt Poso Atlantic Energias Power Company, Cogeneration Renováveis S.A LLC to CIMC Company Group Brazil USA USA Sale of Sale of Gaia Gestao Marubeni Acquisition by Ambiental to Sustainable Energy SAICA of Haztec Tecnologia e to Korea East-West Futur Recycling Planejamento Power Company Ambiental S.A USA / South Korea Spain / UK Brazil Sale of Acquisition by Tritronics (India) Advisor on Project Areva of Private Limited Finance of PN Rotor GmbH to Luminous Power Nisan Enerji Technologies France / Germany India Turkey Sale of Acquisition by Advisor on White Rose SAICA of Development Capital Environmental to Cutts Recycling of Inovasol Stericycle Inc UK / USA Spain / UK France46
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