Renewable M&A lives on despite death of Treasury cash grants.
The U.S. Treasury cash grants for new renewable power projects expired at the end of 2011. These incentives, which were implemented under Section 1603 of the American Recovery and Reinvestment Act of 2009, helped to support continued capacity additions throughout the recession. The impending expiration of these grants caused a wave of merger and acquisition (M&A) activity during 2011 as developers and financiers rushed to get deals done and to begin construction in order to meet the Section 1603, 5-percent safe harbor threshold by the Dec. 31, 2011 deadline.
With a history of fluctuating tax policy, the renewable power sector is accustomed to moving swiftly to take advantage of incentives. But even before this recent dash to the latest finish line, M&A activity in the renewables industry had been gaining momentum. Renewable deal activity strengthened in the five-year period from 2007 through 2011, with a notable exception. Activity dipped in the second half of 2008 because of the economic slowdown; however, it rebounded about a year later due to favorable government incentives and regulations.1