M&A International Inc. Alternative Energy M&A - Western Reserve ...

10 Alternative Energy M&A
$mn
Figure 13: Asia/Pacific average deal value
and volume
125
100
75
50
25
0
12
15
27
40
30
20
10
106 27 26
0
2007 2008 2009
Average Deal Value No. of Deals
Source: Copal Analysis, Capital IQ
No. of Deals
for alternative energy in Japan has been low while
investment in the sector is limited, restricting M&A
activity. However, former Prime Minister Yukio
Hatoyama’s government has significantly enhanced
Japan’s emission reduction targets for 2020, which
we expect will stimulate sector activity. In the
meantime, significant investment interest is focused
overseas.
Figure 14: Asia/Pacific targets split by country
photovoltaic (PV) cells, with established incentive
policies to stimulate domestic demand and
deployment including feed-in tariffs. In July 2009,
China imposed a feed-in tariff for new onshore wind
power plants, providing wind energy generators with
a significant premium over the average rate paid to
coal-fired electricity generators. India recently added
a new renewable portfolio standard for utilities,
starting at 5% in 2010 and increasing by 1% each
year to 15% in 2020.
Positive regulatory changes in China and India have
resulted in a steady increase in regional M&A activity.
Deal value for most transactions in these countries
has been less than $10mn. The largest transaction
during the past three years was the 2009 acquisition
of India-based independent power producer Green
Infra Ltd. by BP Energy India Pvt. Ltd. for $95.8mn.
Population growth, urbanization (including a
concomitant wealth effect) and high GDP growth will
continue to increase energy requirements by Asian
countries and stimulate investments in alternative
energy. This region will account for an increasing
proportion of both deal flow and deal value in the
future.
15% China
11%
37%
India
Australia
17%
20%
Source: Copal Analysis, Capital IQ
Japan
Others
However, M&A activity in Australia has stalled partly
due to uncertainty concerning a carbon trading
scheme being introduced by the government led by
Prime Minister Kevin Rudd. The renewables sector
in Australia has also been affected by an artificial
increase in the supply of renewable energy
certificates which dramatically reduced their price in
2009, acting as a disincentive for utilities to conclude
longer-term power purchase agreements for
renewable generation.
Despite these headwinds, there has been abundant
M&A activity in the sector due to strong demand from
both China and India which accounted for 57% of
deals within the region between 2007 and 2009.
China and India have taken principal roles in the
development of alternative energy technologies.
Both are world leaders in the manufacture of
June 2010
M&A International Inc. – the world's leading M&A alliance