2. Sector Report 2012
Contents
Report 2
Introduction 3
Report Highlights 4
Deal Focus by Country
Americas
Brazil 8
Mexico 10
USA 12
Asia, Africa and Middle East
China 14
India 16
Japan 18
South Africa 20
Turkey 22
Europe
France 24
Germany 26
Italy 28
The Netherlands 30
Poland 32
Russia 34
Scandinavia 36
Spain 38
United Kingdom 40
Contacts 43
Transactions 44
3. Sector Report 2012 Sector Report 2012
Report Introduction
About the report Whilst the major economies of the world continue
to navigate a difficult credit environment and weaker
This sector report was edited by Andre Johnston For more information on this report please growth prospects, the cleantech industry remains
of the Mergers Alliance central team. To compile contact Andre Johnston, Mergers Alliance
our findings we conducted interviews with our Research Manager. somewhat unique in that it continues to develop strongly
sector experts from each member firm within the in almost all countries. As you will see from our sector
Mergers Alliance partnership. We also surveyed Andre Johnston
owners and senior executives within cleantech Mergers Alliance experts across the world whilst each country may be at
sector organisations and private equity investors +44 207 881 2967 different points in their development trajectory, prospects
worldwide. andrejohnston@mergers-alliance.com
in almost all are compelling.
Deal Focus This development is being driven by the need
for governments to tackle climate change on a
As the global recovery takes hold, we at Mergers
Alliance are ideally placed to help you. Whether
multi-lateral basis and ensure security of energy you seek growth through acquisition, wish to
Within each country’s Deal Focus we review Additionally, we provide an overview of the supply for their populations and industries over restructure or realise value in your business,
merger and acquisition (M&A) activity, focusing cleantech sector as a whole, highlighting the the long term. Legislation and attractive fiscal our international advisors are in a unique position
on key deals and trends within the cleantech market structure as well as commenting on the incentives are key to much of the recent growth to help you. Our member firms have a prominent
sector. Cleantech is a shortened form of clean key trends and the factors influencing M&A. We and in most countries these levers will drive position in boardrooms across the world and are
technologies. We define cleantech as those provide our own insight on how we think the investment for decades to come. renowned for delivering award winning partner-
activities relating to renewable power generation: market might play out over the coming 18 led advisory service with seamless international
Wind farms, solar, hydro, waste to energy, months and attempt to identify key investment You will find in our report a great deal of cooperation.
geothermal, biogas, biomass and tidal. Our opportunities. We also provide a summary of market-leading insight into the key issues
report also includes transactions relating to two government policies from each country facing the sector in 2011 and beyond: how We hope you enjoy reading our report and
energy efficiency and resource management: that we believe has, or will, influence M&A the industry needs to operate on a global basis, welcome any thoughts or additions you might
Recycling, air & environment management, activity in cleantech. why geographical comparative strengths are like to contribute.
energy infrastructure, water treatment / focusing investment in each country and how
conservation. We have included tables of Key terminology: PV (Photovoltaic), GW broad state initiatives and targets are ensuring
recent transactions where the target company (Gigawatt), MW (Megawatt), KW (Kilowatt), that transactions get done. Our work also
is located in the country under review. Mwh (Megawatt hour), kWh (Kilowatt hour) highlights the key developments in different
cleantech sectors and how this is shaping the
M&A strategies of mid-cap companies,
global corporates and the private equity
industry alike.
Andy Currie
Disclaimer
Chairman of Mergers Alliance
This publication contains general information and is not intended reasonable effort has been made to ensure the accuracy of Managing Partner of Catalyst Corporate Finance LLP
to be comprehensive nor to provide financial, investment, legal, the information contained in this publication, this cannot be
tax or other professional advice or services. This publication is guaranteed and neither Mergers Alliance nor any of its member + 44 207 881 2960
not a substitute for such professional advice or services, and it firms or other related entity shall have any liability to any person andycurrie@catalystcf.co.uk
should not be acted on or relied upon or used as a basis for any or entity which relies on the information contained in this
investment or other decision or action that may affect you or publication, including incidental or consequential damages
your business. Before taking any such decision you should arising from errors of omissions. Any such reliance is solely
consult a suitably qualified professional adviser. Whilst at the user’s risk.
2 3
4. Sector Report 2012
Report Highlights
We at Mergers Alliance believe the main factors to shape M&A
in the cleantech sector over the next three years will be:
Sector focus Chinese wind turbine firms are emerging to become
highly competitive across the globe thanks to improving
technology and lower overheads. It is now home to four
of the world’s top ten wind turbine firms. Nonetheless,
The “globality” of cleantech Government targets impacting Solar’s future uncertain we expect European turbine players to continue to excel
internationally especially in regions such as Latin America
cleantech where they can leverage their financial resources and
The deployment of technology and capital (both In Europe the solar industry is facing somewhat of
a mini-crisis due to increased competition from Asia, industry experience.
corporate and institutional) in cleantech has had a Renewable targets are driving cleantech sector
distinctly international flavour since the industry’s development. One of the more sweeping initiatives is the overcapacity and a significant reduction in government
inception. Nonetheless, there has been a slight EU’s 20-20-20 directive. It mandates a change in energy support. This is especially apparent in Italy, Spain, France
reduction in cross-border activity over the past 18 consumption and efficiency habits and for renewables to and Germany. We expect heightened M&A activity as Waste management transforms
months which can be largely attributed to ongoing constitute 20% of energy generation by 2020. China’s European companies look to expand their geographical
global economic concerns and contracting government reach in an effort to maintain the same growth they have We expect investment flow into the waste management
Renewable Energy Law aims for 15% renewable energy
support. This trend should reverse as balance sheets become accustomed to domestically. industry to accelerate which should result in a rise in M&A
usage by 2020. South Africa, whose domestic cleantech
strengthen and as investors start looking for targets in activity. Market optimism in this sector can be attributed
industry is currently almost nonexistent, is targeting an M&A in the solar sector was characterised by
developing economies with strong macro fundamentals to the increasing attractiveness of vertical integration,
ambitious 37% by 2030. Such initiatives will underpin three factors:
and robust support mechanisms. We expect interest to legislative and fiscal incentives and the push for ever
investment decisions and help ensure deals get
stretch beyond the BRIC countries to include nascent rising recycling rates in developed nations. Consolidation
completed, even in the face of global economic Overcapacity and market saturation has lead firms,
cleantech markets with high-growth potential such as is driving M&A in the more traditional collection and
uncertainty. who are looking to lock in higher margins, to focus
South Africa and Poland. processing sectors which includes acquiring advanced
on improving efficiency, specifically through materials
material recycling facilities (MRF’s). Investment is also
innovation and light management technologies.
being channeled into energy from waste whether
Specific policies having direct advanced thermal plants or anaerobic digestion.
Countries to capitalise on their affect on M&A
A decrease in state support, mostly in Europe, has
diminished the business viability of many solar players.
comparative advantage Reduced feed-in-tariffs in particular have caused
Certain legislative and fiscal policies are directly affecting financial difficulties for smaller firms. There was a Certain cleantech sectors viable
Each country will capitalise on their comparative natural the volume of M&A transactions. The National Biodiesel marked increase in major solar firms entering
strengths; the UK with offshore wind, South Africa with Program in Brazil, which mandates a 5% biodiesel blend
without state support
non-EU markets.
solar, Sweden with biomass. Equally, countries such as in diesel, has triggered a number of deals, the recently
the Netherlands with its water industry and Germany and Cash heavy Asian firms acquiring foreign companies Thanks to reduced costs, innovation and logistical
implemented feed-in-tariffs in the UK was the catalyst
Japan with their manufacturing capabilities will be looking as they aim to achieve technological internalisation maneuvering, a number of sub-sectors in certain
behind some of the most notable transactions in the
to entrench and further develop their respective as well as technological parity. countries have emerged to become economically viable
UK. Conversely, regressive policies have also been the
competitive advantages. without the helping hand of government. These include
driving force behind a string of deals; the reductions in
wind power in Brazil, re-refining in the USA and the water
photovoltaic subsidies in Italy being a good case in point.
treatment industry across a number of regions.
Wind energy: The surge continues
Scope of private equity interest broad We should see a new round of incentives, particularly
from countries with healthy current account surpluses,
The past 18 months saw a record number of M&A
Unlike in many industries, private equity investors have as they attempt to emerge from the renewables arms
transactions in wind. Importantly, there was a decline
been involved across the whole financing cycle from pre- race endowed with a healthy green portfolio.
in the average purchase price of running wind plants.
revenue venture finance, through traditional MBO’s, to This was partially due to project developers disposing of
investing into large-scale generating assets. It should be their already built wind farms to secure capital to finance
noted that there was a slight increase in investments into The impact of Fukushima their future/current wind developments.
more mature businesses which have clearer paths to exit.
The nuclear renaissance has seemingly slowed as a result Installations grew in all the major markets, albeit at a
Our research shows that PE/VC investment in 2010 of the Great East Japan earthquake creating conditions more modest pace compared to 2009. China experienced
increased by 19% compared to 2009 and 2011 is set to for the meltdown of nuclear reactors in Fukushima. It is the largest growth (48% of the new total wind installations
achieve similar growth numbers. We expect this number clear now that Fukushima has had a substantive effect over the past year took place in China). The UK lead the
to continue to increase over the coming years due to the on the policies of both governments and energy way in offshore installations thanks to multi-billion dollar
emergence of a growing number of specialist PE funds conglomerates. The biggest news was arguably investments into the sector. We expect Germany and
that focus exclusively on cleantech. Interestingly within Germany’s decision to shut down all of its nuclear power China to also emerge as important bastions of offshore
PE circles, the definition of cleantech has been plants by 2022. Just weeks after the Japan earthquake wind over the coming years.
broadened to include sectors such as water, waste nuclear energy giant EDF bought out the remaining
management and industrial process efficiency. shares it does not already own of its renewable energy
4 subsidiary EDF Energies Nouvelles; a possible indication 5
that the disaster is influencing corporate decision making.
5. Sector Report 2012
Country Highlights
Mergers Alliance partners highlight some
interesting observations. Russia
Netherlands Russian energy giants Inter Rao UES and
UK Rushydro are expanding their geographical
A strong private equity tradition
The rise in landfill taxes and recycling reach to include Vietnam, Georgia and Armenia.
is manifesting itself in the cleantech
targets continues to stimulate M&A industry with a number of firms
France activity by overseas and domestic setting aside funds aimed at the
buyers in the waste sector.
M&A volumes in biomass will renewable segments. China
increase as both large strategic buyers and
industry newcomers look to capitalise on The government’s decision to repeal
the new tax on polluting rates. legislation that required that 70% of the
components used to build a wind turbine are
domestically produced should encourage
fresh foreign investment into the wind sector.
Norway
USA Norway’s Statoil and France’s Technip
have partnered to build large capacity
Even without state support the
floating wind turbines. Stronger offshore India
biofuel re-refining sub-sector has
winds should offset increased installation The merchant power market in
seen a number of deals take place.
and infrastructure costs. India should attract renewable
Improving green technology will make Spain firms seeking more flexibility in
this space even more attractive.
After buying out its renewable arm, their energy generating operations.
Iberdrola Renovables SA is expected to
move towards diversifying its renewable
portfolio, both domestically and abroad.
Japan
Japan is reassessing its energy
Germany
Mexico provision, which is still highly dependent
International firms have been actively on foreign oil. Japanese corporations are
Spanish based firm Iberdrola
buying German solar firms. We expect looking to increase their exposure to
Renovables SA has been actively
this trend to continue as foreign Poland international markets.
buying up Mexican wind, lifting its
companies seek access to premium Reforms in government legislation
total capacity in the country to
German technology. will create better conditions in the
106 MW.
Polish wind sector, which is expected
to grow almost threefold by 2015.
Turkey
The considerable wind potential in Turkey has
yet to be fully realised. The US$1.1bn purchase
Brazil of a portfolio of Turkish wind farm power projects
Expect to see prominent South Africa by UK based Renewable Energy Systems may
Ethanol players Cosan, ETH, prove to be an indicator of things to come.
Large renewable energy players
Bunge and Guarani to start looking
Renewable Energy Systems, Mainstream
for global M&A opportunities.
Renewable Power and Suntech Power
Italy
Holdings have entered the South African The auspicious new state
market in the past three years. energy efficiency scheme should
prove to be highly beneficial for
domestic firms.
6 7
6. Deal Focus Capital City: Brasília
Area: 8,511,965 sq km
Population: 198,739,269
Time zone: GMT -3
Brazil
“While consolidation in the including sugarcane residues, wood and charcoal,
is predicted to reach 4.3% by 2013. Biomass energy, Market forces drive wind expansion Recent transactions
ethanol sector dominated represents around 30% of the country’s energy matrix. A number of the smaller firms that have developed wind Date Target Description Acquirer Deal Value
(US$m)
cleantech activity over the farms have lacked the balance sheet strength needed Apr 11 Jantus SL Wind farms CPFL 960
M&A activity settling after to obtain long term financing from BNDES (Brazilian
past several years, and expansive growth
Development Bank), forcing them to sell to larger Apr 11 ERSA Wind / small
hydro / biomass
CPFL n/d
players. Furthermore, the emergence of medium sized
with more still to come, M&A independent players has attracted attention from the
Mar 11 Cavo Saneamento Waste
Management
Estre Ambiental 375
M&A activity in the Brazilian cleantech market boomed in
transactions involving large wind 2009 and although there was a slight contraction in 2010, larger strategic companies requiring scale to enter Dec 10 ETH Bioenergia Biofuel Petroleo 1760
Brasiliero S
the segment. Sep 10 Omega Energia Small Hydro Warburg Pincus 215
total volume and average deal value has remained fairly
players are beginning to occur, constant over the past four years. In April 2011 local Even without any tariff subsidies, Brazil has huge Aug 10 Biooleo Industrial
Plants
Biodiesel
and Tarpon
Petrobras 10
as independent players become integrated player CPFL Energia acquired financial potential for wind energy usage as capacity factors range
Feb 10 Amyris Brasil Celulosic Ethanol
Biocombustiveis
Stratus 54
investor-backed Jantus SL for US$960m. The deal from 36-55%. Importantly, the 2004 PROINFA subsidies
large enough to attract strategic involved four wind farms with a 210 MW wind farm -see inset- are no longer necessary as construction costs Nov 09 Brenco Ethanol ETH Bioenergia n/d
acquirers or in order to gain more project andforportfolio of 732 MW energy auctions. CPFL
are eligible
a
participation in the
certified projects that have come down to approximately US$2.5m per MW.
The fact that the market alone can sustain the Brazilian Oct 09 Santelisa Sugar / Ethanol Louis Dreyfus 630
Bioenergia Commodities
scale in the face of challenging is now in talks with ERSA, a large independent player that wind sector has alerted investors looking for viable Aug 09 Energimp Wind Farms CEMIG 115
is backed by various private equity funds and banks. business propositions.
IPO prospects.”
In the middle market, Brazilian private equity firm
Stratus acquired a 40% stake in Amyris Brasil, a unit of
Derek Gallo, Broadspan
US-based Amyris Biotechnologies for US$54m. Stratus’ Biodiesel: An industry waiting for
strategy is to support Amyris’ plans to transform government support Government Support
Macro growth driving clean tech M&A sugarcane into renewable feedstock, at an industrial
scale, for the domestic production of chemicals by 2014. Despite a spate of recent deals, the biodiesel sector will PROINFA:
Brazilian GDP growth remains strong, at 7.4% in 2010 likely remain somewhat stagnant until the government
The National Biodiesel Program, which mandates The Incentive Program for Alternative Energy
and 4.1% expected for 2011, which has encouraged releases a new regulatory framework elevating the
a 5% biodiesel blend in diesel, was the impetus behind a Sources, otherwise known as the PROINFA
consolidation and also attracted international strategic minimum share of biodiesel in the diesel blend.
number of M&A deals. For example, the merger of Brasil Programme, was promulgated in 2002 to stimulate
investors seeking high growth markets. The need for Independent producers might be sold to players
Ecodiesel and a Spanish owned agribusiness firm renewable energy generation by providing
investment in energy generation to produce this growth with crushing facilities and agricultural operations
demonstrated the attraction of a vertically integrated government (through Eletrobras) Power Purchase
has attracted foreign operators and investors with to guarantee a steady supply of oil.
production model. Petrobras also strengthened its Agreements.
experience in the renewable energy sectors.
position in the sector with the acquisition of a 50% stake The sector that benefited the most was the wind
Relatively high interest rates leave many smaller
in a greenfield biodiesel plant. By and large, however,
companies vulnerable to larger players endowed with
most of the recent M&A activity emanated from the
Cross-border opportunities in wind energy sector, which jumped from 22 to 414 MW
of installed capacity from 2002 to 2007.
both lower costs of capital and the corporate guarantees
ethanol sector, accounting for about half of all deals. and ethanol
required during construction in project finance structures.
Because the programme has been targeted at small
Although there are a handful of dedicated private equity independent producers who do not have the
The cleantech industry in Brazil has historically been
M&A activity and venture capital funds that have invested in recycling, financial strength to secure long term financing from
dominated by biofuel, specifically ethanol and more
biomass generation, and water treatment, there is still a local development banks, many of the recipients
recently a growing biodiesel programme, as well as
distinct lack of involvement in the market. The solar have been forced to sell their projects to larger
renewable generation which includes hydro and more 16 600
thermal and energy efficiency sub-sectors have still not players therefore stimulating overall M&A activity.
recently biomass (e.g. sugar cane cogeneration) and 14
500 fully matured, mainly due to the high cost of capital in
onshore wind farms. Hydro represents 68% of installed
Average deal value $m
12 Brazil. Wind and ethanol will continue to dominate the
Transaction volume
capacity and 87% of the electric energy generation in National Biodiesel Program:
400 M&A landscape.
the country. 10 The programme requires the mandatory use of a
8 300 biodiesel blend in diesel. It started with a 2% blend
Due to their prominence in the ethanol industry look for
Renewable energy generation and biofuels are expanding 6 in 2008, which increased to 4% in July 2009 and
200 Brazilian firms such as Cosan, ETH, Guarani or Bunge
at a rapid pace, driven by Brazil’s economic growth and then to 5% in January 2010. There are plans to
4 to begin searching for opportunities abroad whilst we
the success of government programmes that have 100 reach a 20% mandatory blend in 2020. The
2 also expect to see an inflow of M&A in the Brazilian
pushed for the proliferation of biodiesel and wind. programme has been the driver behind a number
0 0 wind space.
Although the ethanol sector has experienced a lot of of M&A deals.
2008 2009 2010 H1 2011
consolidation in recent times, the market is still relatively
fragmented so expert further consolidation. Wind energy,
Total deal volume
8 which accounts for 0.5% of the electric generation, 9
Source: Capital IQ, Mergermarket Average deal value $m
7. Deal Focus Capital City: Mexico City
Area: 1,972,550 sq km
Population: 111,211,789
Time zone: GMT -6
Mexico
“The need for alternative well as the reduced government support in the industry
up until recently. The bulk of the deals completed have
Large foreign involvement in Recent transactions
wind power
sources of energy has been in wind power. Date Target Description Acquirer Deal Value
(US$m)
accelerated in recent In early 2011 Spanish based firm Iberdrola Renovables’ Mexico has the potential to equal, if not surpass Brazil as Apr 11 Eolia
Revovables
Portfolio of two
Wind Farms
EDF Energy Mexico
(Spain)
n/d
SA purchased the Mexican Bill Nee Stipa wind farm from the dominant wind player in Latin America. The logistical
times due to a reduction Gamsea Corporación Tecnológica. This was Iberdrola demands of such an endeavour will mean progress will be
Jan 11 Bill Nee Stipa
Wind Farm
Wind Energy Iberdrola Renovables n/d
SA (Spain)
gradual. Nonetheless, in the short term we expect
in oil reserves. The government Renvables’s second operational wind farm purchase in
Mexico, lifting its overall capacity to 106 MW. The deal escalating government support mechanisms to
Oct 10 Repsol Bio-energy KUO
(Spain)
Joint
Venture
Jul 10 Baja Aquafarms Sustainable Lions Gate Lighting 17
has been increasingly active in was in line with Iberdrola’s strategy of extending its Latin encourage foreign players. Farming (Canada)
American coverage and establishing growth in countries Feb 09 Promotora Recycling Double V Holding 11
supporting the sector through with increasingly favourable regulatory frameworks.
In July 2011 Canon Power Group, a US based renewable Ambiental Services SA
energy firm, announced its intention to invest US$2.5bn Dec 08 Gamesa Wind Energy Iberdrola Renovables 100
various initiatives, which has In late 2010 Spanish oil and gas giants Repsol joined into the Mexican wind market. The sizable investment will Jul 08 Earth Tech Waste Water
SA (Spain)
Mitsui & Co 55
comprise of three wind farms located in Zacatecas, Baja
attracted foreign companies to forces with one of Mexico’s biggest conglomerates KUO
to establish KUOSOL, a company dedicated to the California and Quintana Roo for a combined power
Mexican Holdings Treatment (Japan)
invest in Mexican cleantech, with production of bio-energy. The new company will be output of 312 MW and will bring total installed wind
headquartered in Mexico and its main operations will be capacity in Mexico to over 1 GW.
wind power especially favoured.” the industrial scale cultivation of the jatropha plant. It is
Siemens made its first foray into the Latin American wind
hoped that the biofuel crop will generate 16 MW per year Government Support
market by supplying 70 wind turbines to Mexican wind
Luis Garcia, Sinergia Capital for consumption.
power firm Grupo Soluciones en Energias Renovables.
Energy Transition Fund
The turbines will be installed in the Tamaulipas region
In 2009 the state enacted the Energy Transition
of Mexico and will supply over 160 MW. The cost of the
Diminishing oil reserves driving M&A activity order totalled US$270m and marked one the largest
Fund in an effort to promote green energy start-ups
and to help facilitate the flow of capital and
cleantech investments by a Mexican firm into the wind energy
resources into renewable projects.
market to date.
3 90
Mexican GDP grew at 5.5% in 2010, its fastest rate of Over the course of three years, starting in 2009,
80
growth for ten years. A sharp rise in manufacturing was 3bn pesos (US$240m) will have been spent to help
Transaction volume
Average deal value $m
70
the main attributing factor. Despite fast growth, inflation
2 60
Small-scale moves into solar support the renewable sectors. Although the fund
has actually dropped to 3.8%, down from 4.4% in 2010. has so far created more favourable business
50
Growth, however, is putting a strain on energy There has not been much interest in solar to date, parameters, it is questionable whether it has
requirements. 40
primarily due to the prohibitively high costs of solar helped boost M&A activity.
1 30
panels relative to other technologies. No major
One of the most important macroeconomic drivers of 20
large-scale projects are planned; however companies Fonaga Verde
Mexican cleantech in recent years has been Mexico’s 10 such as Abengoa, a Spanish conglomerate with In 2010 in support of sustainability projects and
dwindling oil reserves. Oil reserves have fallen nearly 0 0 significant operations in renewable energy, are starting renewable energy, the Mexican government opened
50% since 2000. Although the state has made attempts 2008 2009 2010 H1 2011
to make incremental encroachments into the Mexican up a guarantee fund called Fonaga Verde.
to finesse its way out of its reliance on fossil fuels and
photovoltaic (PV) space. This is certainly a sub-sector
nuclear energy, the renewables industry has been Total deal volume The start-up and operation costs of the fund will be
Source: Mergermarket, waiting to be exploited by foreign firms that possess
relatively slow to get off the ground. Despite this, industry 200m pesos (US$16m). The fund will have around
Capital IQ Average deal value $m lower costs of production, especially considering Mexico
analysts look upon Mexico’s cleantech potential with 2.5bn pesos (US$200m) to finance sustainable
has the third largest solar potential in the world.
great sanguinity. In a regulatory and institutional context, projects in the agriculture, forestry and fishery
Mexico is much more favourable to M&A in renewable industries.
energy than it was just two years ago.
The industry waits for firmer
government intervention
Spanish interest
Although policies, initiatives and subsidies have
Total volume in cleantech has been relatively low over progressed over recent years, the state still offers more
the past 18 months. Underlying this has been the monetary and legislative support to the fossil fuel
monopolised ownership of the electricity sector as industries. The aforementioned dwindling oils reserves
should reverse this over time. We expect M&A in
cleantech to increase once the synergy between what the
market can offer and what the state can offer reaches a
10 suitable equilibrium.
11