“How dare you?”
This September at the UN Climate Action Summit, the young, Swedish Greta Thunberg reminded1 world leaders they are not doing enough regarding climate change. M&A activity in renewable energy reflects that inactivity. 2018 was the only year with increased interest in high-volume renewable targeted M&A, with total volume soaring to a record-high of $106.0bn. Even without its biggest deal ($52.0bn): the German E.ON has acquired the local renewable energy company, Innogy SE, for $54.4bn, 2018 would still hold its highest year on record title. Interestingly, since 2013, the number of solar and wind power targeted M&A deals have been sharply increasing in comparison with hydroelectric’s. The rhapsodic interest towards renewables is caused by policy uncertainties, dependence on government tenders and tax credits.
Let’s make renewables great!
If we set aside the unprecedented E.ON mega deal, between 2013-2019YTD, China attracted the largest amount of investment, totaling $44.0bn. Chinese investments have high activity in both deal count and volume, since solar energy in the country is now cheaper than the electricity supplied by the national grid.2 Although insurers and pension funds are at the bottom of the list of acquirors spending only $3.0bn in 2018-2019YTD, this might change. The recent UN summit proposes that pension funds and insurers will make $2.0tn in investments transitioning to carbon-neutral portfolios by 2050.3 Early stage M&A deals already reflect this scenario, as the pipeline of renewable transaction reach $6.5bn in 2019YTD. So, M&A interest in the sector looks set to grow.
– Written by Cseperke Tikász & Szabina Valkai, M&A Research
Data source: Dealogic, as of October 3, 2019