By Isabella Kaminski
The GlobalData study, Alternative Energy Quarterly Deals Analysis – M&A and Investment Trends, Q1 2011, found that the value of investments in alternative energy dropped by 28%, while the number of deals dropped by 15%. The sector recorded 180 deals worth US$42 billion in Q1 2011, compared to 211 deals worth $58b in Q4 2010.
According to the report, however, the large difference in deal value was primarily due to Ecopetrol’s $18.1b bond announcement recorded in Q4 2010. Excluding the Ecopetrol deal, investments in the alternative energy market remained almost unchanged with $40b in Q4 2010 and $42b in Q1 2011.
The majority of new investment focused on wind, hydro and solar energy with $16.6b, $16b and $14.3 b respectively in Q1 2011.
According to the report, the mixture of emerging countries and developed nations is creating a healthy environment for renewables through policy changes, tax incentives and grants.
Overall, North America and the Asia Pacific region reported a decrease in the number and value of deals in Q1 2011, while Europe reported a a significant increase in deal value with $39.3b in Q1 2011, compared to $30.1b in Q4 2010. Investments in the rest of the world, including South and Central America and the Middle East and Africa, decreased from $52.6b in Q4 2010 to $36.6b in Q1 2011.
Raghunandan Kothamasu, Analyst at GlobalData, says: “Even though there is a dip in investments in Q1 2011, this year will experience a significant growth in renewable power investments globally. Canada, China and India are some of the emerging countries globally which are expected to have high renewable energy investments this year. The US, Germany and the UK will continue to invest significantly in wind and solar technologies.”
Merger and acquisition (M&A) activity, meanwhile, saw a substantial increase in deal value from $18.4b in Q4 2010 to $50.1b in Q1 2011. According to the report, the increase could be due to the merger of Duke Energy with Progress Energy, which is valued at $25.9b. Overall, the number of deals decreased marginally from 108 deals in Q4 2010 to 102 deals in Q1 2011.
M&A activity was most prominent in the solar energy sector, which registered 30 deals in Q1 2011, with companies making huge investments into their product portfolio.
In terms of asset financing, the capital intensive solar and hydro energy sectors won the majority of technology funds in Q1 2011, although even the dominant sector, solar, registered an overall decrease from $34.4b in Q4 2010 to $22.9b in Q1 2011.
Key solar energy deals included Masen’s financing of $9b for a solar power project in Morocco, Yingli Green Energy’s $1.5b financing of the solar photovoltaic power park in China and Welspun Energy’s $1.4b investment into the Million Solar plant in India.
Kothamasu says: “Investments through asset financing will improve from Q2 2011 as the annual financial statements of companies will be declared and new budgets will be announced. With the expected increase in global renewable power capacities in the next two to three years, renewable market will show an increase in the number of asset financing investments this year.”