Renewable Energy M&A: German renewables developer PNE explores sale of its US business amid rising costs, squeezed margins

published on 31 March 2023
German renewables developer PNE explores sale of its US business amid rising costs, squeezed margins-q1jq8

The company has retained Nomura Greentech for the sale, according to a teaser accessed by Reuters. As of Dec’22, PNE US holds ~1.1 GW of renewables capacity in the early-to-intermediate stages of development, comprising 700 MW of solar PV and 435 MW of onshore wind. The company aims to install more than 500 MW of renewable energy during 2023-2030. 

PNE has highlighted several factors that have contributed to its decision to divest the US business unit. Specifically, the company called out challenges in securing financing and marketing the produced electricity via long-term power purchase agreements (PPAs). These include the financial requirements for participation in tenders for grid connections, which can often exceed the project’s investment. Further, off-takers are now demanding extremely stringent contractual safeguards, which raise the construction risk for developers. The resulting landscape squeezes profit margins for companies like PNE - which de-risk projects and divest them in the late-stage developments or ready-to-build (RtB) phases - and shifts the scope of monetizing the asset to the pre-operational and operational phase. This phenomenon enables larger, integrated energy companies - which have technical capabilities across the entire renewable energy value chain - to take advantage of the full scope of incentives offered under the recently approved Inflation Reduction Act (IRA). PNE has cited the interest that large development pipelines have received recently in the US and seeks to reinvest the proceeds from the potential sale towards its European assets.

As per Enerdatics’ data, the US witnessed the highest number of portfolio-scale consolidations in the renewables space in 2022, with independent power producers (IPPs), oil majors, and private equity (PE) firms acquiring large pipelines of onshore wind and solar assets. RWE’s takeover of Con Edison’s clean energy business for $6.4bn and TotalEnergies’ acquisition of a 50% stake in Clearway Energy for $4.6bn were the year’s largest deals. Additionally, Brookfield invested nearly $3bn in onshore wind and solar development platforms, while Blackstone made a $3bn commitment to wind developer Invenergy. Enerdatics expects the trend of consolidations to continue in 2023, as developers and utilities with mounting debt or lower leverage capacity partially or fully divest their capital-intensive renewables portfolios to companies with the expertise and liquidity to tap the US market.

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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