EY Report: Green energy dominates the energy and utilities transactions

EY Report: Green energy dominates the energy and utilities transactions

56% of the transactions covered the renewable energy segment, with a total value of $ 12.7 billion

Mergers and acquisitions (M&A) in the renewable energy segment dominated the global energy and utilities market in the first quarter of 2019, registering 61% of total transaction value and a $ 3.7 billion increase over Q4 of 2018, according to the report EY Power Transactions and Trends: Q1 2019 (PTT).  At the entire sector, the total value fell 33 percent from the last quarter of 2018 to 20.6 billion dollars in the first quarter of 2019.

While the outlook for renewable energy is optimistic, governments continue to put pressure on traditional investments in fossil fuels. In Europe, Greece and France have announced new plans to promote the development of the renewable energy sector, Germany plans to close all 84 coal-fired power plants by 2038 and the Norwegian government has proposed phasing out oil exploration and exploitation and gas from its sovereign fund, worth 1 trillion dollars.

In the US, local governments continue to support the evolution of the renewable energy segment after New Mexico joined state governments in California, Hawaii, Washington DC and Puerto Rico in adopting targets that require 100% carbon-free energy sources.

And corporations set their own renewable energy targets, with over 150 companies committed to using 100% of these sources by 2050 through the RE100 Global Initiative. Thus, corporations are now starting to conclude contracts for the purchase of direct electricity with renewable energy developers and not with local utility providers. In March, over 200 companies launched the Renewable Energy Buyers Alliance, with the goal of operating 65 gigawatts of renewable energy sources by 2025.

Mega-transactions in the renewable energy segment dominate the European market

In Europe, the value of transactions in the energy and utilities sector declined by 27% compared to the fourth quarter of 2018 to $ 6.8 billion in the first quarter of 2019, of which $ 5.4 billion was generated by two mega- transactions on the renewable energy market.

Against the background of corporate sustainability, the German asset management company Commerz Real has joined the consortium members to acquire an 80% share ($ 2.6 billion) from the offshore wind farm Veja Mate, with a capacity of 402 MW. Total Eren also bought NovEnergia II, a renewable energy company in Luxembourg, with a 675 MW portfolio for $ 1.1 billion.

"While financial investors have pushed the accelerator pedal by purchasing renewable energy assets ($ 3.9 billion), there is an increase in greenfield investment commitments by utility companies as well as convergence strategies in this section. Large European utility companies have made public investment plans of over 17 billion dollars in renewable energy by 2022. Also, some major oil companies have announced plans to transform their core business by channeling energy and utilities investments, " stated Miles Huq, EY Global Power & Utilities Transactions Advisory.

Renewable energy and emerging technologies support the value of transactions on the American continent

The value of transactions in this sector in the US declined by 35% compared to the fourth quarter of 2018, to 9.1 billion dollars in the first quarter of 2019. These included investment of renewable investments in financial investors, cross-border investment in the US and Latin America, and portfolio restructuring as a result of activist shareholders' pressures or financial problems in the field of development of nuclear or coal-fired power plants. Renewable energy contributed $ 3.7 billion to transaction value, especially as a result of seven transactions worth several million dollars each.

China, the main player in the Asia Pacific region

The total value of transactions in the region fell to 4.1 billion dollars, a decrease of 45% compared to the fourth quarter of 2018. The Renewable Energy Segment was the only one to increase the value of transactions, which doubled to $ 3.6 billion, accounting for 88% of the total value of transactions. The report shows that much of this increase was due to the privatization of CP Clean Energy with China's Power New Energy's (80% of the total value of the renewable energy business).

China remains the major growth actor in the Asia Pacific region, registering both domestic and foreign transactions, and growing interest in greenfield investments.