Solar photovoltaic (PV) and biomass continue to be the preferred renewable energy sectors for acquisitions as the preceding year, according to the annual survey report- ‘Green Power: 2012’- by international consultancy firm, KPMG.
The report, which was released some time back, reveals the interest of the investors in solar PV and biomass, however, there has been a change in position between the two as compared to the last year. This year solar PV jumps to the top spot replacing biomass, and the reason for this exchange could be attributed to significant decreases in solar PV generating costs, an abundance of recent installations, and ever increasing confidence in the technology.
According to the report, this year, 49 per cent of the corporates and investors plan to acquire in the solar PV sector, compared with 39 per cent in 2011. Despite the fall in solar PV prices, there has been disastrous effect on the supply chain, as many major European and US solar PV equipment manufacturers are struggling to survive in the face of subsidy cuts in Europe and overcapacity in Asia. According to Arturo Herrero, JinkoSolar Holding Co, the year 2011 saw a dramatic reduction in ASPs for solar PV modules with very few of the major companies managing to generate a profit.
As far as biomass is concerned, it continues to maintain its sheen with around 49 per cent of corporates and investors still targeting the sector, which is slightly ahead of last year that stood at 46 per cent. Over 60 M&A deals totalling US$4.3 billion were announced in 2011, a significant increase on the 48 deals totalling US$1.6 billion announced during the previous year.
Lenders are becoming increasingly comfortable with financing biomass plants, especially banks are finding ways of mitigating risks associated with feedstock prices and operational performance, issues that have plagued the sector in the past. Concerns over feedstock shortages may result in M&A and financing activity being centred around projects with large equity sponsors.