The pace of clean energy industry mergers may accelerate this year as smaller operators seek buyers that can fund work in developing markets such as Brazil, said Banco Santander SA, last year’s top takeover adviser.
“This is a sector that is heading for consolidation,” Javier Sobrini, global head of energy takeovers at Santander in Madrid, said in an interview. “The market is growing at a brutal pace. New markets are opening up in countries where there wasn’t any investment before.”
Santander led an annual Bloomberg New Energy Finance survey of advisers to acquirers in 2010. About $55 billion in transactions were arranged, matching the performance in 2009.
The bank’s Madrid-based rival, Banco Bilbao Vizcaya Argentaria SA, was the leading adviser to takeover targets. Both worked on Enel Green Power SpA’s $1.1 billion takeover of generation plants owned by Endesa SA.
Spanish banks are leveraging their relationships with the biggest clean power producers such as Madrid-based Iberdrola SA and Acciona SA to secure advisory and financing mandates as power companies push into eastern Europe and Latin America.
Brazil saw last year’s biggest takeover with Mumbai-based Shree Renuka Sugars Ltd.’s $1.2 billion purchase of bioethanol-maker Equipav SA.
Demand for Capital
The demand for capital may also spur initial public offerings. Public share sales rose 18 percent to $17.4 billion last year with $10.5 billion of IPOs almost tripling 2009’s business, said New Energy Finance, a London-based industry researcher. Total investment in clean energy and carbon markets jumped 30 percent to $243 billion.
“Companies are looking for investors, and if they don’t find them they may look to an IPO,” Sobrini said.
Goldman Sachs Group Inc. topped the list for public share sales with $1.5 billion raised from 11 deals. It advised Enel Green Power on its $3.5 billion IPO and Xinjiang Goldwind Science & Technology Co. on its $1.1 billion offering. Credit Suisse Group AG was ranked second with $1.4 billion raised from 13 deals including China Datang Corp Renewable Power Co.’s IPO.
Spanish banks have an advantage because three of the world’s five largest clean energy producers are based in Spain. Iberdrola SA, the largest, operates wind farms in the U.S., Brazil and the U.K. and plans to increase its renewable generating capacity 18 percent to 14.7 gigawatts by 2012.
Spanish solar plants owned by individual investors and closely-held power developers may attract buyers after the government set new prices for clean power, according to Mario Pardo, head of corporate finance for Europe, the Middle East and Africa at BBVA.
About 40,000 solar parks were installed in Spain in 2007 and 2008 after the government offered subsidized prices at 10 times the market rate. Many of the smaller investors are under pressure because of the recession.
“You clearly see owners that are not long-term holders, and some of them are facing difficulties funding the projects in a challenging market environment,” said Pardo, who joined BBVA from Goldman Sachs in 2008 to develop the advisory business as a complement to the bank’s project finance operations. “There are a lot of assets that will be sold over time to global energy companies as well as energy financial investors.”
The government’s December decision to cut subsidies for photovoltaic, solar thermal and wind plants allows investors to put a price on those assets. That may also trigger takeovers of privately-held plant developers which need new investment to finance their expansion, Pardo said.
“They will have to take a view as to whether they can go public this year or whether they need to look for a buyer,” Pardo said. “The pressure in some of those companies will be mounting.”
T-Solar Global SA and Renovalia Energy SA pulled IPOs last year when the regulations were in flux.