The current renewable energy M&A environment
By: Tim Donnelly
Tags: Solar, Renewable Energy, Solar Energy, Mergers And Acquisitions, Solar Power

Renewable Energy Mergers and Acquisitions in 2020, Q3

The current renewable energy M&A environment

M&A Environment The renewable energy industry has grown significantly on the back of government incentives and escalating environmental issues.

Many established companies from several verticals (e.g., technology, industrial, oil & gas, and utilities) have focused on reducing carbon emissions from their operations.

They are now looking toward mergers and acquisitions (M&A) for further investments in renewables.

Solar Players to Consolidate

We see many causes of increased concentration as the solar sector starts to grow. Main drivers For business consolidation comprise greater balance sheet flexibility, cost advantage via economies of scale, and brand consciousness. Industry leaders also took classes from the collapse of others (e.g., Suntech and Yingli) and are adopting a much more asset-light approach to enhance liquidity and to avoid excessive spending in areas such as mobile and polysilicon manufacturing, which are much more capital intensive. One example comprises U.S. solar panel maker SunPower, which spun off its manufacturing operations in August 2020 to concentrate on commercial and residential storage and solar installations in the U.S.

While most top solar producers are in a net debt position, there is still no cause for concern because of the time being, in our opinion. The leading manufacturers have all generated at significant scale, which has enabled them to get a price advantage relative to peers. Growing demand in China has supported higher manufacturing from the manufacturers, as we notice non-China-based companies have had an extremely challenging time profiting from a more significant quantity in this geographic region. We predict the scale from these businesses is currently too perfect for new entrants to overcome.

The industry leaders have also developed significant partnerships with critical solar programmers and providers, as their brand position will encourage additional share gain.

Tech and Utility Businesses in the Green

In the U.S., large tech companies are getting to be a significant consumer for the renewables space. In March 2019, Microsoft, along with top U.S.-based renewable energy solutions developer, Invenergy, consented to construct a 74 MW solar project in North Carolina that’s anticipated to bring Microsoft’s renewable energy portfolio over 1.3 GW. Amazon has also committed significant investments toward clean energy using its announcement of three new renewable jobs at 229 MW in Ireland, Sweden, and the U.S. in April 2019. Apple, at this point, basically meets all of its energy demands using renewables.

Additionally, the technology investor SoftBank Group aims to build up to 220 GW of solar power In Saudi Arabia and India from 2030, equal to approximately half of today’s worldwide solar capacity. But we see this is an ambitious goal given the group has only been able to ensure the contracts for around 3 GW in India and 700 MW in Japan. With tech companies helping lead the change towards renewables, major utility companies worldwide will also be actively leaping on the alternative energy bandwagon.

Traditional Energy Companies Testing Unconventional Waters

The traditional oil & gas companies are also included. For example, in the last decade, ExxonMobil, and Chevron’s alternative energy portfolio includes investments in solar, wind, geothermal, biofuels, and renewable diesel. Wind power. Fuel manufacturers on the planet) are recognizing renewables’ rising significance. What was primarily a PR practice to pretty up the yearly report is now — in some instances — a real tactical interest.

Renewable energy may come in many forms, and the VC-like approach taken by some of the supermajors is intelligent, in our opinion. Instead of investing only in one area, supermajor oil organizations diversify their renewable vulnerability, which we believe has two advantages.

First, because Various kinds of renewable energy are relatively new, there are question marks about which ones are the Most commercially scalable, which ones have the most opportunity for cost reductions, and which ones will see the fastest adoption by clients.

Second, since regulatory coverage matters a fantastic deal for Renewables, a diversified strategy should make it easier for these companies to expand quickly in regions that receive favorable regulatory treatment. Since the renewables industry begins to grow, the risk-return profile of alternative energy investments has improved. Government incentives are anticipated to continue (albeit Decreasing) in the near term, further encouraging more investments in this space.