The power and renewables industry is positioned for a sustained period of strong deal activity as the US focuses on hitting net zero carbon emissions by 2050
Within six months of coming into office, President Joe Biden has already made important policy decisions to accelerate energy transition away from hydrocarbons. Biden has re-joined the Paris climate agreement and outlined a timetable for reaching zero emissions. The Biden administration wants to cut greenhouse gas emissions to at least 50 percent of 2005 levels by 2030 and create a carbon free power sector by 2035 en route to delivering net zero carbon emissions by 2050.
According to figures from the Energy Transitions Commission, a global coalition of leaders from across the energy industry, achieving net zero 2050 will require between US$1 trillion and US$2 trillion of investment per annum. M&A into renewables and green energy will be a key factor for delivering investment at this scale.
The value of 63 deals targeting the US power and renewables sector in H1 2021
These long-term drivers already appear to be driving M&A growth in the power and renewables industry.
There were 63 deals in the power and renewables industry in the first half of this year, worth US$16.9 billion in total. This represents a 169 percent rise in deal value on H1 2020 and an increase in volume of 15 percent over the same period. Deal value for H1 2021 has also topped pre-pandemic levels and is 30 percent above total value recorded in H1 2019.
Percentage increase in deal value compared to H1 2020
Foreign buyers see opportunities
Institutional investors and sovereign wealth funds have been at the forefront of the deal push in the renewables space. The US has lagged behind Europe and Asia-Pacific in renewables development and this has attracted investment from experienced investors from those regions.
The Qatar Investment Authority and Iberdrola made investments totaling US$4 billion in Avangrid, the US-based sustainable energy company controlled by majority owner Iberdrola, a Spanish-based utility group. The proceeds from the investment have been allocated to funding a proposed merger between Avangrid and US utility PNM Resources. The merger will support investment in offshore wind energy projects and other renewable energy projects.
Singaporean sovereign wealth fund GIC, meanwhile, paid US$2.1 billion for a 19.9 percent stake in Duke Energy Indiana, a subsidiary of Duke Energy. Duke plans to use the proceeds from the deal to fund a five-year plan to accelerate Duke's clean energy transition.
Clean energy technologies developed in the US have also proven attractive for international corporates. SK Group, the third largest industrial conglomerate in South Korea, for example, paid US$1.5 billion for a 10.2 percent stake in Plug Power, a US provider of hydrogen fuel cells used for transportation and mobility. The deal will see Plug Power work with SK Group to roll out hydrogen fueling systems across South Korea and other Asian markets.
Top power & renewables deals H1 2021
- Qatar Investment Authority and Iberdrola made investments in Avangrid, Iberdrola's majority-owned subsidiary, of US$4 billion
- GIC bought a 19.9 percent stake in Duke Energy Indiana for US$2.0 billion
- SK Holdings acquired a 10.2 percent stake in Plug Power for US$1.5 billion