ANALYSIS: US drives Americas M&A in 2012, but emerging markets are strong future bet

13 June 2013


Clean energy mergers and acquisitions (M&A) increased in the Americas region in 2012 due to increased activity in the US, but future growth may be more likely to come from emerging markets where wind and solar are reaching grid parity, according to the CohnReznick Green Energy 2013: Renewable energy M&A Activity report, produced by Clean Energy Pipeline.

M&A activity in the Americas increased 9% year-on-year to $15.9 billion in 2012, despite the overall number of deals decreasing from 225 to 217. Overall growth was driven by the US, which saw the value of its clean energy M&A transactions more than double from $4.8 billion in 2011 to $10.1 billion in 2012.

A substantial part of that US growth can be attributed to increasing interest in pre-construction solar projects, due to the continuing decline in component costs and, to a lesser extent, uncertainty over the future of the solar photovoltaic (PV) investment tax credit. The biggest transaction in the country was the $2.5 billion acquisition of the 579 MW Antelope Valley Solar Project by MidAmerican Renewables in December.

Regulatory uncertainty was already the biggest driver of M&A activity during 2012 as the production tax credit (PTC) for wind energy neared expiration at the end of the year, causing a rush to acquire or finance wind projects before the deadline was reached.

In the event, the US government extended the PTC for a year, an act that 63% of survey respondents for the report who were not targeting US-based wind investments agreed or strongly agreed would renew their interest in the US market, with only 5% strongly disagreeing.

Long term US growth could be limited due to a scale-back of subsidy schemes. In addition to the PTC for wind, which is due to expire again at the end of 2013, the 1705 loan guarantee and 1603 grant programmes have already ceased.

State-level Renewable Portfolio Standards requiring utilities to source set proportions of their energy from renewables have also recently come under attack in several states, though no decisive blow has yet been struck and states such as Colorado have in fact increased the size of the RPS this year.

In total, the US was responsible for almost two-thirds of Americas M&A activity in 2012, ahead of Canada ($2.9 billion), Brazil ($2.1 billion) and Chile ($450 million).

Brazil and Chile are at the head of several emerging markets in the Americas that look set to be far more attractive for M&A in the future. This is because the decline in equipment and construction costs, has brought renewable energy to grid parity in several emerging nations in the region, meaning it can compete without subsidies.

Wind energy is already sufficiently competitive in Brazil that it is beginning to surpass combined cycle gas turbine (CCGT) and even hydro power in popularity, while Chilean wind power is now cheap enough that projects, such as Mainstream Renewable Power's 33 MW Negrete Cuel wind farm, can be built without a power purchase agreement in place, as the electricity can be sold directly on the spot market. In addition, Chile's mining industry is increasingly turning to renewable energy projects for its own power needs.

"In Brazil, they are separating out wind into its own auction distinct from CCGT and hydro," Scott Mackin, Managing Partner of Denham Capital, told Clean Energy Pipeline. "In the past people would have said this is being done as wind needs higher prices to sustain itself but, actually, in this case wind has been winning more MWs in these auctions so consistently that the market regulators have to protect CCGT and hydro from wind to ensure diversity of supply."

"Wind power is already operating at grid parity in Chile," added Fintan Whelan, Corporate Finance Director for Mainstream Renewable Power. "Diesel generation is very fuel-expensive and there are the transport logistics of taking it from the coast to where new mines may be located. Wind and solar farms located right next to a mine can displace a lot of uncertainty around logistics and fuel price."

Chile was responsible for more renewable energy M&A activity in 2012 than the next seven countries in the Americas combined, but grid parity is also being reached in other emerging markets such as Mexico, Ecuador and several Caribbean nations. In total, 70% of the Report's survey respondents agreed or strongly agreed that renewable energy projects in emerging markets now represent attractive investment opportunities even without subsidies.

Despite that, some emerging markets are introducing subsidy schemes, including Mexico, which launched a legislative system in 2012 to help cut carbon emissions 50% by 2050. Several investors, developers and suppliers are already investing more heavily in the region, and subsidy systems, combined with lower costs, look likely to enhance deployment and M&A activity in the Americas.

Contact the reporter about this article: Rob Lavine at

- Photo courtesy of US Department of Energy

Download 'Green Energy 2013: Renewable energy M&A activity in the Americas' HERE 

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