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Green Dealing

Renewable M&A lives on despite death of Treasury cash grants.

April 2012

will favor deal activity in generation-stage projects and will negotiate PPAs for development-stage projects as a risk-mitigating strategy and to meet state RPS. They’re also likely to seek out JVs with developers on larger projects in order to take advantage of their development pipelines.

From a sub-sector perspective, wind has traditionally dominated utility deals; however, the amount of solar deals has surged since 2010, with an increase in the number of utility-scale projects due to falling panel prices and government incentives. Given current tax policies and consolidation among solar manufacturers, this trend likely will continue. Biomass has gained utility interest recently, although feedstock supply issues are still a concern. Deals are expected to increase in light of biomass’s exemption for emissions caps under the EPA Prevention of Significant Deterioration and Title V Programs for the next three years (see Figure 4). While their focus has been primarily on acquiring renewable generation assets, utilities might divest some renewable projects in the next couple of years due to lower energy prices from other sources or to shift their portfolio mix toward improved technologies. This shift can be viewed as the natural course in a rapidly maturing marketplace.

All things considered, the renewable sector is poised to continue generating clean, reliable electricity as well as acceptable returns for investors. Despite the death of the Treasury cash grants, the renewable power sector is as resilient as its name implies. M&A activity likely will continue over the next few years as new innovations spur growth and as mature portions of the industry consolidate.

Endnotes:

1. Herold Transactions Database, deals from Jan. 1, 2007 through Dec. 7, 2011, IHS Inc.

2. Annual Energy Outlook 2011 , U.S. Energy Information Administration

3. Deloitte reSources 2011 Study

4. Center for Climate and Energy Solutions .

5. “AES opens largest battery storage project of its kind high atop W.Va. mountain,” SNL News Feed , Nov. 1, 2011; “Sandia Lab: Solar PV installation no threat to Lanai microgrid,” SNL News Feed , Jan. 20, 2012; “ Duke Energy to Deploy Energy Storage Technology at Texas Wind Farm ,” April 14, 2011.

6. Generation Y and the Workplace Annual Report 2010 , Global WorkPlace Innovation, Johnson Controls, accessed via www.Oxygenz.com

7. Natural Gas Weekly Update , Energy Information Administration.

8. 2010 Wind Funding and M&A Report, Mercom Capital Group

9. “EPA Defers GHG Permitting Requirements for Biomass Industries,” Renewable Energy World, Jan. 19, 2011.

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