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Enerdatics' recent analysis of M&A activity for solar assets in Europe reveals divergent strategies between private equity (PE) firms and listed Independent Power Producers (IPPs). Here are some key insights:
PE Firms Shift Focus to Operational Projects:
In 2023, private equity firms significantly increased their acquisitions of operational solar projects and portfolios, with a 110% year-over-year increase. This marked shift from previous trends, which focused more on early- and late-stage projects, appears driven by a strategy to avoid the growing operational challenges in major European markets. These challenges include permitting hurdles, interconnection delays, supply chain bottlenecks, and macroeconomic factors such as rising interest rates and commodity price volatility.
Listed IPPs and Utilities Eye Pre-operational Assets:
Conversely, major IPPs and utilities have ramped up their acquisitions of early- and late-stage development projects by 41% year-over-year in 2023. This increase comes even as their deal activity for operating assets, which remained stable during 2021-2022, saw a 30% decline over the year. Enerdatics notes that this strategic pivot is facilitated by the vertically integrated nature of these players, enabling them to acquire pre-operational projects at favorable valuations, advance them through in-house development, and ultimately divest at significant premiums.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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