Renewable energy investment accounts for 50% of all global power transactions19. February 2016 | Markets & Trends, Global PV markets, Industry & Suppliers | By: Edgar Meza
Global investors are focused on adding wind and solar assets to their portfolios to comply with regulations and reduce exposure to increasingly volatile commodities, according to a new report by auditing group EY.
Investment in renewable energy by accounted for 50% of global power and utilities transaction activity last year, according to EY's Power Transactions and Trends: 2015 Review and 2016 Outlook report.
Total transactions in the power and utilities sector maintained momentum in the fourth quarter with deal value ending 2015 up 13% from 2014 at $200 billion — a six-year high, EY reported.
With 245 deals generating $68 billion, investment in renewables made up half of all transactions. EY said the figure demonstrates “that investors around the world remain focused on adding wind and solar assets to their portfolios to comply with regulations and reduce exposure to increasingly volatile commodities.”
Looking at the U.S. market, Matt Rennie, EY's Global Power & Utilities Transactions leader, said recent regulatory developments and five-year extensions to wind and solar tax credits would continue to bolster renewables investment in the country.
In Africa and the Middle East, investor interest focused on new generation capacity, particularly around renewables, according to the report. EY said 2015 was “a transformational year for Africa and the Middle East's power and utilities sector as governments advanced reforms aimed at attracting private capital.”
Asia-Pacific led transaction activity with domestic and outbound deals in China and energy reforms resulting in a 100% increase in regional deal value over 2014.
"The need for new generation capacity across the region alongside energy reforms in China, India, Japan and Vietnam points to another strong year of transaction activity in the sector,” Rennie said, adding that recent clarifications and certainty around the Renewable Energy Target would also spur renewables activity in Australia.
EY expects deal activity in China to remain strong despite the economic slowdown. The country accounted for $51.7 billion and 69% of total regional deal value in 2015.
In Europe, the transforming power and utilities market prompted many to pursue deal-making to transition to new business models and explore new opportunities, such as energy services and customer solutions, through restructuring and expanding downstream operations, the report found. Transaction deal value totaled $39 billion in 2015 — a 20% decline over 2014 despite a fourth quarter increase.
Alongside renewables, cross-sector convergence and midstream/upstream investment were primary deal drivers for utilities seeking new avenues for growth. Transactions involving convergence totaled $33 billion in 2015.
"Utilities are increasingly joining forces with firms outside the sector to capitalize on synergies and shared experience,” Rennie said. “Electricity and gas megamergers in the U.S., telecommunications deals in Japan and tech-driven partnerships in Europe highlight the pursuit of innovative growth across the sector throughout 2015."
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