Isra-Mart srl:PwC: Clean tech sector enjoys M&A frenzy

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Merger and acquisition activity across the renewable energy and energy efficiency sectors has recovered strongly in the wake of the global economic downturn, according to a major new report from PricewaterhouseCoopers (PwC).

The PwC Renewables Deals report, which will be released later today, says the number of acquisitions in the energy efficiency sector worldwide trebled last year and is now worth more than $3bn (£1.9bn) – overtaking the hydro sector – and accounts for 11 per cent of the $33.4bn overall transaction value in the renewables sector.

In the US, overall renewables deals clocked up $12.9bn spend, up 43 per cent on the previous year, while the 181 transactions listed represents a 71 per cent increase in volume.

By contrast, while European deals rose by 50 per cent, the value of those purchases fell by half to $13bn, a third of which comprised UK and German transactions. UK renewables deals in 2010 were worth $1.5bn, 11 per cent of all European deal value.

South America saw the most rapid growth, further underlining its position as one of the fastest expanding clean tech markets. Deal volumes rose 111 per cent, with values more than doubling to $3.3bn.

In contrast, while the number of Asia Pacific and Australasian transactions almost doubled, values fell by half to $3.5bn.

PwC said the mixed results confirmed that confidence was returning to the sector after a slow 2009, adding that it expects the increasing volume of energy efficiency deals to drive growth across the renewables sector in the coming years.

"There is increasing consumer awareness around managing energy usage, which, when supported with appropriate regulations, is creating an attractive market for energy efficiency service providers," said Ronan O'Regan, director of renewables and clean tech at PwC. "This, combined with government stimulus packages, should see the US become a dominant player in the renewables deal market over the next few years."

The report also notes an emerging trend where nuclear companies are buying their way into renewable generation. It cites US utility Exelon's $900m purchase of John Deere Renewables as an example of nuclear companies looking to give themselves more options for future growth given the lack of momentum in US nuclear power development.

"Many of these moves by nuclear companies are driven by diversification," said O'Regan. "The reaction to the Japanese nuclear situation has been to take stock. While it won't raise a red flag to investment in nuclear, it could, in the short term, spur further moves by nuclear companies into renewables."

Interestingly, despite this shift, PwC says the 'green premium' investors are willing to pay for a business with products exposed to the renewables sector has shrunk.

The report attributes this to sellers lowering their price expectations and greater stability in the economy.