Sun shines on renewable energy M&A as bidders pay for pipelines

Topping the charts for the past five years in Asia Pacific renewable deals is GIP’s $5 billion purchase of Equis Energy in 2017. Equis was founded by former Macquarie bankers and had 11.1 gigawatts of operating and development assets in six countries, including Australia.

Other multi-billion dollar deals include Tilt Renewables (2021), Macarthur Wind Farm (2019), Infigen Energy (2020) and Nexif, signed last week.

The pace is picking up and the big business in the pipeline is Partners Group’s CWP Renewables, which has 1.5 gigawatts in operation or under construction, but significantly more with around 11.5 gigawatts in the pipeline. Partners Group is calling for indicative offers on September 12.

If Partners Group lands the desired $4 billion, it would secure the mantle of the second largest renewables deal in history in the region.

What is driving the boom?

Zdun said that since 2015, governments have set clearer targets for the share of renewables in the overall energy mix, while companies and energy transition funds have also increased their investment.

There is much more to come with Bloomberg New Energy Finance (BNEF) tipping $5.7 trillion to flow into the Asia Pacific energy sector by 2050. Around 70 percent is expected to be in wind and solar power.

In this context, investors look beyond operating assets and to the future.

Andrew Sutherland.

“Buyers will bid quite aggressively because of the cash flow and track record of the assets that are in operation. They may make some changes to their cash flow model, but they are willing to pay 100% of the value and sometimes they see tradeoffs,” says Zdun, who sees lines of development now driving strength. of the result of the sale.

As such, bidders increasingly want to invest in “platforms” (renewable businesses with generators, equipment and systems) rather than stand-alone assets.

“For recent wind and solar deals, it has been evident that buyers have increased appetite for management platforms and teams with proven project development capabilities such as site permitting, engineering and design, plant procurement, marketing and others,” Andrew Sutherland, director of energy at JPMorgan, renewable energy and infrastructure investment banking for Australia and New Zealand, said.

New era of bidders

Both Zdun and Sutherland believe renewable energy auctions are attracting bidders they never expected to see: oil and gas giants, telecommunications companies, oil distributors and trading houses.

“For example, upstream oil and gas multinationals are entering the sector with somewhat different approaches than traditional investors, seeking to leverage their own particular competencies in areas such as trading, branding and partnering, and are often willing to take a little more. uncontracted exposure,” Sutherland said.

The new bidding style extends to consortiums, with tag teams presenting investors with the two return profiles: those willing to take some market risk and those willing to stick to traditional infrastructure roles.

This scenario played out in Infrastructure Capital Group and Shell’s acquisition of Meridian Energy’s Australian assets for $729 million, where the two played very different roles. ICG took ownership of Meridian Energy Australia’s wind, hydro and development assets, while Shell took ownership of the retail energy business PowerShop.

Zdun and Sutherland expect the renewable energy rush to continue, within Australia and in cross-border deals.

“I don’t think we’re going to see a drop in renewables M&Any time soon… in select markets we are also seeing consolidation as scale becomes important, including operators driving energy storage, trading and future green hydrogen development,” Zdun said.

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