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    Anne B. Butterfield of Daily Camera and Huffington Post, f is an occasional contributor to NewEnergyNews


    Some of Anne's contributions:

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT), November 26, 2013
  • SOLAR FOR ME BUT NOT FOR THEE ~ Xcel's Push to Undermine Rooftop Solar, September 20, 2013
  • NEW BILLS AND NEW BIRDS in Colorado's recent session, May 20, 2013
  • Lies, damned lies and politicians (October 8, 2012)
  • Colorado's Elegant Solution to Fracking (April 23, 2012)
  • Shale Gas: From Geologic Bubble to Economic Bubble (March 15, 2012)
  • Taken for granted no more (February 5, 2012)
  • The Republican clown car circus (January 6, 2012)
  • Twenty-Somethings of Colorado With Skin in the Game (November 22, 2011)
  • Occupy, Xcel, and the Mother of All Cliffs (October 31, 2011)
  • Boulder Can Own Its Power With Distributed Generation (June 7, 2011)
  • The Plunging Cost of Renewables and Boulder's Energy Future (April 19, 2011)
  • Paddling Down the River Denial (January 12, 2011)
  • The Fox (News) That Jumped the Shark (December 16, 2010)
  • Click here for an archive of Butterfield columns


    Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart




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  • ---------------
  • FRIDAY WORLD, October 21:

  • This Is How To Beat Climate Change. Now Get To It.
  • China To Build World’s Biggest Solar Panel Project
  • Europe’s Ocean Wind Boom
  • Australia’s Huge Ocean Energy Opportunity

    Tuesday, June 11, 2013


    Green Energy 2013; Renewable energy M&A activity in the Americas

    June 2013 (Clean Energy Pipeline via CohnReznick)

    Executive Summary

    M&A activity will keep growing

    Global renewable energy M&A activity has grown at a steady pace during the past four years. A total of 591 acquisitions valued at $37.8 billion were announced in 2012, a 58% increase by number on the 375 deals totalling $42.1 billion announced in 2009. An absence of large deals resulted in the decline in the total value of announced transactions.

    Survey respondents expect this level of activity to continue – c.90% predict the number of sub-$500 million M&A transactions to increase or at the very least remain stable during the next 18 months. Given that deals of this size accounted for 97% of all M&A deals globally in 2012, 2013 looks set to be another strong year.

    The Americas accounted for 42% of the total value of M&A deal activity last year. Some 217 renewable energy M&A deals valued at $15.9 billion were announced in 2012, representing a 9% increase in value on the 225 deals totalling $14.6 billion announced in 2011. Wind and solar were the most active sectors, accounting for a combined 78% of the total value of all transactions.

    The USA – still the undisputed leader

    The USA is by far the most attractive country for global corporates and investors. Almost 45% of survey respondents plan to invest in or acquire in the US renewable energy sector during the next 18 months, more than double the number targeting 2nd placed Germany. The USA is highly attractive due to its strong economy and attractive long term incentive frame work.

    Transaction activity underlines the growing attractiveness of the US – US M&A deals totalled $10.1 billion in 2012, more than twice the $4.8 billion announced in 2011. The surge was fuelled by a rush to acquire and finance preoperational wind farms in anticipation of the expiration of the US wind energy production tax credit in December 2012 and growing interest in pre-construction stage solar projects.

    The US is also attractive to institutional investors due to its large number of operating renewable energy assets that are being put up for sale by their original developers. Some 60GW of wind capacity was operational at the end of 2012, more than in any other country bar China.

    However, challenges are bubbling up to the surface. Another lively debate regarding the wind energy PTC renewal will almost certainly take place at the end of this year. Attacks on renewable portfolio standards are also creating uncertainty in some states. Ongoing low natural gas prices remain a thorn in the side of new renewables development.

    Canada – a new global renewables leader

    Canada shot up the Renewables Country A-list in the last 12 months – 20% of survey respondents are targeting Canada for clean energy investments during the next 18 months, significantly more than 12% last year. In fact, Canada is now the fifth most attractive country globally for renewable energy investment, behind only the USA, Germany, China and the UK.

    The opportunity for renewables investment in Canada is compelling but it varies significantly by province. Most opportunities lie in Ontario, where there exists a large number of projects with locked in feed-in tariffs that are ready to be built. Illustrating this point, only c.2,000MW of wind and c.500MW of solar capacity was operational at the beginning of 2013. However, the province expects to install 10.7GW of non-hydro renewable energy capacity by the end of 2015.

    Other provinces offer longer term growth potential. Quebec awarded 800MW of wind capacity in May 2013 to help meet its 2015 target of 4,000MW installed capacity. Similarly, British Columbia is considering procuring a sizeable volume of wind energy in the next decade to meet the growing power demands of its burgeoning population and industrial base, in addition to a series of large-scale liquefied natural gas terminals.

    Renewables offer real alternative to fossil fuels in Latin America

    Renewable energy projects are now cost competitive with newly built fossil fuel power plants in many Latin American countries including Mexico, Brazil, Chile, Ecuador and the Caribbean. In Brazil, wind has been so successful competing against combined cycle gas turbine (CCGT) plants on price that the government has implemented measures to ensure wind does not win all new auctioned capacity.

    Renewables hitting grid parity is only one reason why many Latin American countries have become more attractive from an investment standpoint. Some 70% of survey respondents believe renewable energy assets in emerging markets represent attractive investment propositions even without subsidies, given prevailing high energy prices.

    Survey respondents are particularly enamoured with Mexico. Some 12% plan to acquire and or invest in Mexico in the next 18 months, significantly more than the 3% in last year’s survey. Mexico is also attractive following implementation of national climate change legislation in October 2012, which legally binds the country to reduce its carbon emissions by 30% by 2020 and 50% by 2050.

    Solar - the hottest ticket

    Solar is the most attractive sector for North American survey respondents. Some 63% of survey respondents are targeting investments or acquisitions in solar PV, more than the number targeting biomass (45%), onshore wind (41%) or biofuels (39%). Solar’s attraction lies in the plethora of subsidy mechanisms available throughout the Americas including the solar US investment tax credit (ITC) and Ontario’s feed-in tariff. System costs also continued to decrease rapidly in 2012, increasing prospective returns for investors in new build assets.

    In the longer term, Latin America will undoubtedly become even more attractive for solar investment. Many countries across Latin America are blessed with fantastic solar resources and a growing number, including Brazil, Mexico, Chile and Uruguay, have now established solar subsidy mechanisms or development frameworks.

    The rush to acquire solar PV assets across the Americas has already begun. Some 68 solar M&A deals were announced in the Americas totalling $5.0 billion in 2012, representing a 61% increase by value on the $3.1 billion worth of solar acquisitions announced in 2011.

    Global installation hits new high but M&A volumes decline

    Installed new renewable energy capacity continued to grow rapidly in 2012. A record 44.8GW of wind capacity was installed globally in 2012, representing a 10% increase on the 40.6GW brought online in 2011. Not quite as impressive but following a similar trend, new solar PV capacity reached 30GW in 2012 matching the record-breaking volumes achieved in 2011.

    From an M&A perspective, the sector was less active. After a 42% increase in the value of M&A activity in 2011, the value of announced deals fell 14% to $37.8 billion in 2012. This was caused by a 4% decline in the number of announced deals and an absence of $1 billion+ deals. Only five $1 billion+ deals with a total combined value of $8.6 billion were announced in 2012, compared with seven similar sized transactions (total value: $14.3 billion) in 2011. However, looking over a longer timeframe, last year’s M&A activity looks healthy based on historic trends – 591 acquisitions were announced in 2012, a 58% increase on the 375 deals announced in 2009.

    Global Clean Energy M&A will keep growing

    Looking at 2013 and beyond, survey respondents are almost unanimous in predicting that M&A activity will remain buoyant – nine out of ten survey respondents believe that the number of sub-$500 million M&A transactions will increase or at the very least remain stable during the next 18 months. Given that deals of this size accounted for 97% of all transactions globally in 2012, 2013 looks set to be another bumper year.

    However, when it comes to larger $1 billion+ deals there is no consensus – 37% of survey respondents predict that the number of mega deals will decrease in the next 18 months, slightly more expect the number to be maintained (43%) and the remainder (20%) forecast an increase.

    The Americas in focus

    In 2012 217 renewable energy M&A deals valued at $15.9 billion were announced in the Americas, representing a 9% increase in value on the 225 deals totalling $14.6 billion announced in 2011. Growth was underpinned by US deals, which accounted for $10.1 billion of total activity last year, more than twice the $4.8 billion announced in 2011. The surge in US activity was fuelled by two factors; a rush to acquire and finance preoperational wind farms in anticipation of the expiration of the US wind energy production tax credit in December 2012; and growing interest in acquiring pre-construction stage solar projects due to a combination of falling equipment costs and regulatory uncertainty surrounding the solar PV investment tax credit. A table of some of the most notable M&A transactions announced in the Americas in 2012 and early 2013 is outlined below.

    Who’s buying and selling?

    Financial investors are the likeliest buyers

    Financial investors are the most active acquirers of renewable energy assets. In 2012 financial investors, including private equity funds, infrastructure funds, pension funds and life insurance companies announced 124 acquisitions valued at $9.7 billion, less than the 111 acquisitions totalling $12.6 billion announced in 2011, but significantly ahead of the $6.1 billion and $5.0 billion announced in 2010 and 2009, respectively.

    Survey respondents are confident that financial investors will remain active – over 50% anticipate that infrastructure funds will be very active in acquiring and investing in renewable energy assets in the next 18 months, making them the top ranked potential investor. Last year they were ranked second behind independent power producers.

    As the sector’s technology has matured and the volume of operating assets has increased, infrastructure funds have become more active. Longer term investors including pension funds and life insurance companies are also getting involved. They are being lured by the stable, often inflation-linked returns offered by operational renewable assets given the current low bond yield environment.

    “Ultimately the best long term holders of solar and wind assets will be institutional investors and large strategics looking for inflation protected stable cash flows,” explained Scott Mackin, Managing Partner and Co-President of Denham Capital.“ In Europe, over 50% of installed wind turbines are owned by institutional investors. We are seeing the same trend globally whether it is the US or an emerging market such as South Africa.”

    Among the investment community only private equity funds are reducing their exposure in the sector. “There have never been a whole lot of private equity firms that are willing to take development risk on renewable energy projects,” explained Scott Mackin, Managing Partner and Co-President of Denham Capital. “However, the number has probably gone down in the past two years because there is really no juice left in developing renewable energy projects in the US and Western Europe, which is where most private equity firms are focused.”

    The rise of the pension fund

    Pension funds are poised to increase their investment activity – 27% of surveyed participants expect pension funds to be very active acquirers of renewable energy assets in the next 18 months, almost double the percentage recorded in last year’s survey. A table of ten of the most notable investments by pension funds and life insurance companies in 2012 and early 2013 is shown below:

    When it comes to pension funds, the most significant recent development in the past year is that they are starting to assume construction-stage risk. By way of example, two Danish pension funds Industriens Pension and PKA A/S participated in the equity financing of the 288MW Butendiek offshore wind farm situated in German waters in February 2013. Construction of the project commences in the spring of 2014 and the project is not scheduled to be operational before the summer of 2015.

    As expected, long term financial investors are most interested in the mature renewable sectors - onshore wind, hydro and solar PV. However, offshore wind is becoming much more appealing – 76% of survey respondents believe that operating offshore wind assets will be attractive to long term investors in the next 18 months, a 41% increase on the proportion recorded in last year’s survey.

    To date, pension funds have invested equity in renewable energy assets either through investing in infrastructure funds or through direct investments in large-scale projects. Marc Schmitz, Senior Vice President at Rabobank, believes that pension funds are ready to go one step further and start investing in renewable energy debt. “Pension funds will become more active lenders in the next three years,” he said. “Their attitude has changed since 2009. Pension funds need to be compensated for inflation and renewable energy assets with inflation-linked tariffs can do this. They want an annual 5% return and this is not available through many traditional investments. Sustainability is also becoming a higher priority for pension funds.”

    Utilities: divestment for re-investment continues… International markets continue to benefit from Asia-Pacific interest… USA looks inward while Canada sets sights overseas…

    Focusing in on deal terms

    Banks are becoming more aggressive

    The cost of project finance debt varies significantly by region and technology. In Europe, solar PV farms, onshore wind farms and biomass plants are currently financed at an average of 320 bps above Libor. In North America similar projects expect to secure better terms by on average 40 bps.

    Rates are low in North America because Life Insurance Companies are now allocating significant capital to renewables and the banking sector has rebounded more quickly than in Europe. The decline in the number of projects seeking financing has also forced banks to offer more competitive rates. “Historically, a lot of the debt financing capacity in this market has come from European banks,” explained Lance Markowitz, Senior Vice President and Manager of the Leasing and Asset Finance Division of Union Bank.

    “Eighteen months ago their pricing was inhibited by what was going on in Greece and other countries. While pricing had momentarily tightened it once again increased reflecting funding difficulties of various market participants. Banks are now being much more aggressive on pricing and terms. The banks that are still in the market seem to be on a more solid footing. More importantly, there are not really a lot of projects in the US seeking debt financing right now. There is a dearth of quality deals and banks are eager to get their share. We were in the 275-325bps above Libor range 12-18 months ago with lots of mini-perm structures. Today the market is plus or minus 50 basis points below with much longer tenors being offered.”

    The expiration of the 1603 cash grant program is also inhibiting developers from raising project debt financing, since the equity requirement now needs to be financed through tax equity. There is limited scope for debt to be brought into tax equity-financed projects since the cash flows are swallowed up by tax equity investors and are therefore unavailable to be used to repay debt. This is forcing banks to compete more aggressively to participate in transactions. “A lot of wind projects were financed utilising the cash grant, which has now expired. Now we are largely focused on projects that include PTCs as part of their economics,” continued Lance Markowitz, Senior Vice President and Manager of the Leasing and Asset Finance Division of Union Bank. “As a result, most wind projects are now being financed utilizing unlevered partnership flip structures, where the debt opportunity is more limited. In this structure debt is really limited to construction financing and possibly a back leverage of the sponsor’s investment. That is one reason why the banks are so aggressive when they do have an opportunity.”

    Anecdotal evidence suggests tax equity margins are also decreasing due to a reduction in PPA prices. “The margins that tax equity players were working with are not sustainable now as energy prices in PPAs have dropped significantly,” confirmed Alejandro Burgaleta, CFO of Gestamp Wind. “There is just less of the pie to share. Tax equity providers have adjusted their expectations as otherwise projects just would not have got built. With projects being so tight the returns that were available last year are not anymore.”

    US pre-construction stage solar PV assets command a premium

    There is limited disparity in valuations between Europe and America except when it comes to pre-construction stage solar PV assets. According to survey respondents, in North America these assets are currently being acquired for $1.2 million per MW, 3x the $0.4 million per MW average valuation in Europe.

    This is essentially because the US solar investment tax credit, which provides investors with a 30% tax credit on residential and commercial projects, and is not due to expire until 2016. This has triggered a series of acquisitions of pre-construction stage assets. Most notably, MidAmerican Renewables acquired the planned 579MW Antelope Valley Solar Projects (AVSP) from SunPower Corp in December 2012 for an undisclosed sum. The co-located projects, which are located in Kern and Los Angeles Counties, are the largest permitted projects in the world.

    Appetite for pre-construction stage solar PV is much more muted in Europe because subsidies are under threat. In March 2012, Germany enacted feed-in tariff cuts of 20% - 30% for sub-5MW solar PV projects and removed subsidies entirely for new projects larger than 10MW. In August, Italy cut subsidies for solar PV projects by an average of 35% as its new Conto Energia V subsidy programme came into effect. This prompted a marked decrease in the valuation of planned projects - according to surveyed respondents, valuations of pre-construction stage solar PV projects in Europe fell by an average of 8% in the last 18 months.

    It is a similar story in the supply chain. According to survey respondents, EBITDA-positive European renewable energy companies are currently being acquired for a multiple of 4.7x revenues, which is at a discount to exit multiples achieved by North American (5.1x) and Asian (5.2x) companies.


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