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The European solar PV market saw around 11 GW of projects and
pipelines changing hands in 2019, and the positive trend is
expected to last as investors continue being optimistic on the
future of the industry. Project acquisition activity is often
considered a key indicator of the financial health in many sectors,
including the solar PV market. It reflects optimism among
investors, and a dynamic sector with a high degree of
liquidity.
Installed PV capacity in Europe to surpass 170 GW by the
end of 2020
New annual PV installations give an important indication of the
size of the pool of operating assets that are available for M&A
deals today and that will be available for future M&A
deals.
After the PV market declined in 2013, Europe saw a renaissance
in
2019, when more than 24 GW were installed, almost double 2018
installations. As a result, the cumulative installed PV capacity in
Europe surpassed 150 GW in 2019. Nearly 40% of the capacity added
in 2019 derives from utility-scale projects greater than 20 MW. New
installations are set to surpass 20 GW in 2020, with Germany and
Spain accounting for 36% of the capacity additions.
Moreover, throughout the past decade, PV installations in Europe
have been supported by feed-in tariffs and green certificates, and
lately by tenders and PPAs, making these assets attractive to
investors in the M&A market today.
Major increase in M&A activity after
2017
Over time the number of MWs transacted in the European PV market
has increased. In 2019 and 2020 around 19GW of assets or pipelines
were transacted. However, the number of transactions has generally
decreased as larger PV plants or pipelines are being
transacted.
Until 2017, the majority of transactions carried out focused on
operating assets installed under feed-in tariffs and green
certificate schemes. To give a few examples, the United Kingdom's
Renewable Obligation Certificate (ROC) program made UK assets an
attractive investment option up to 2017. Several UK assets were
transferred multiple times from pre-construction to operation and
have then been acquired further by companies that seek to
consolidate their positions in the market. In Italy, many operating
assets are benefitting from previous support schemes such as Conto
Energia, therefore also attracting abundant M&A activity. A
large portion of French operating assets were supported by generous
feed-in tariffs and subsequently by tenders and have therefore also
been the focus of many M&A deals throughout the last
decade.
The situation changed in 2018, when investors started buying
project pipelines in anticipation of a renaissance of the European
PV market.
Spain is the hottest market for M&A
activity
Spain continues to dominate the 2019-20 M&A
landscape for both operating assets and pipelines with around 9.4
GW of assets transacted over the last two years.
Specifically, Spanish pipelines accounted for 68% of all
early-stage pipeline transaction in Europe between 2019 and 2020
due to the scale of its utility-scale market in 2019-20 and its
expected growth in the next five years making it a key target
market. Notable Spanish pipeline transactions include the 1.5 GW
Bester Generacion pipeline acquisition by InfraRed Capital Partners
in 2019 and the 1.2 GW pipeline acquisition by Total from Solarbay
in 2020.
Spain was also the largest target country for deals involving
advanced-stage projects (operating, under construction and
permitted assets): Spanish assets accounted for 39% of all assets
transacted in Europe over the past two years. Most of the
transacted assets in Spain were built in 2019 or targeting
completion in 2020 and 2021. For example, the Galp-ACS deal at the
beginning of this year involved around 900 MW of projects in
operation. Also in 2020, China Three Georges agreed to acquire
around 500 MW of operational projects in Spain from developer
X-Elio.
The Iberian country has nearly 11 GW of cumulative installed PV
capacity. It had the highest annual installed PV capacity in 2019
of 5 GW, an impressive market revival after years of stagnation. It
also has a significant amount of pipeline activity and assets under
development, making it one of the top target countries for M&A
deals.
Ireland enters the M&A landscape
A new market attracting attention in 2020 is Ireland. It
recently had its first renewable energy auction which saw around
800 MW of solar projects assigned, as part of the Renewable
Electricity Support Scheme (RESS). This resulted in several
acquisitions as international players entered the market. One of
the largest deals includes Statkraft acquiring 275 MW of permitted
assets owned by Lightsource BP and several projects from local
developer JBM, accounting for more than 300 MW. Four more rounds of
the RESS auction will take place in the following years so further
acquisitions are expected as the solar PV market in Ireland finally
takes off.
Developers, EPCs and IPPs are selling to
utilities
Similar to previous years, developers, EPCs, and IPPs were the
major PV asset sellers in 2019 and 2020, and a significant portion
of assets sold were pipelines. The two biggest transactions
include: Spanish Bester Generacion sold its portfolio of projects,
around 1.5 GW in Spain, to InfraRed Capital Partners, a global
investment manager focused on infrastructure and real estate, and
French PV company Urbasolar was acquired by Swiss company Axpo
(Urbasolar's portfolio includes a 1 GW pipeline).
The top PV asset buyers for 2019 and 2020 are utilities,
followed by IOCs and financial companies, and the top ten account
for 60% (11 GW) of all M&A activity. The analysis on which this
article is based includes transactions up to October 2020; the
percentage of activity captured by the top ten buyers increases
significantly once the November deal between Statkraft and
Solarcentury is taken into account.
Beyond 2020
In the last two years, European PV markets saw record numbers
for M&A transactions in GW terms. IHS Markit expects the
positive M&A trend to continue over the coming years, as the
majority of European markets transition away from wide-spread
support schemes, and investors continue being optimistic on the
resiliency of the sector.
