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Global Cleantech
Sector Report 2012




                     www.mergers-alliance.com
Sector Report 2012

Contents
              Report                            2

              Introduction                      3

              Report Highlights                 4

              Deal Focus by Country

                 Americas
                 Brazil                          8
                 Mexico                         10
                 USA                            12

                 Asia, Africa and Middle East
                 China                          14
                 India                          16
                 Japan                          18
                 South Africa                   20
                 Turkey                         22

                 Europe
                 France                         24
                 Germany                        26
                 Italy                          28
                 The Netherlands                30
                 Poland                         32
                 Russia                         34
                 Scandinavia                    36
                 Spain                          38
                 United Kingdom                 40

              Contacts                          43

              Transactions                      44
Sector Report 2012                                                                                                                         Sector Report 2012

    Report                                                                                                                                     Introduction
    About the report                                                                                                                                                   Whilst the major economies of the world continue
                                                                                                                                                                       to navigate a difficult credit environment and weaker
    This sector report was edited by Andre Johnston                     For more information on this report please                                                     growth prospects, the cleantech industry remains
    of the Mergers Alliance central team. To compile                    contact Andre Johnston, Mergers Alliance
    our findings we conducted interviews with our                       Research Manager.                                                                              somewhat unique in that it continues to develop strongly
    sector experts from each member firm within the                                                                                                                    in almost all countries. As you will see from our sector
    Mergers Alliance partnership. We also surveyed                      Andre Johnston
    owners and senior executives within cleantech                       Mergers Alliance                                                                               experts across the world whilst each country may be at
    sector organisations and private equity investors                   +44 207 881 2967                                                                               different points in their development trajectory, prospects
    worldwide.                                                          andrejohnston@mergers-alliance.com
                                                                                                                                                                       in almost all are compelling.

    Deal Focus                                                                                                                                 This development is being driven by the need
                                                                                                                                               for governments to tackle climate change on a
                                                                                                                                                                                                    As the global recovery takes hold, we at Mergers
                                                                                                                                                                                                    Alliance are ideally placed to help you. Whether
                                                                                                                                               multi-lateral basis and ensure security of energy    you seek growth through acquisition, wish to
    Within each country’s Deal Focus we review                          Additionally, we provide an overview of the                            supply for their populations and industries over     restructure or realise value in your business,
    merger and acquisition (M&A) activity, focusing                     cleantech sector as a whole, highlighting the                          the long term. Legislation and attractive fiscal     our international advisors are in a unique position
    on key deals and trends within the cleantech                        market structure as well as commenting on the                          incentives are key to much of the recent growth      to help you. Our member firms have a prominent
    sector. Cleantech is a shortened form of clean                      key trends and the factors influencing M&A. We                         and in most countries these levers will drive        position in boardrooms across the world and are
    technologies. We define cleantech as those                          provide our own insight on how we think the                            investment for decades to come.                      renowned for delivering award winning partner-
    activities relating to renewable power generation:                  market might play out over the coming 18                                                                                    led advisory service with seamless international
    Wind farms, solar, hydro, waste to energy,                          months and attempt to identify key investment                          You will find in our report a great deal of          cooperation.
    geothermal, biogas, biomass and tidal. Our                          opportunities. We also provide a summary of                            market-leading insight into the key issues
    report also includes transactions relating to                       two government policies from each country                              facing the sector in 2011 and beyond: how            We hope you enjoy reading our report and
    energy efficiency and resource management:                          that we believe has, or will, influence M&A                            the industry needs to operate on a global basis,     welcome any thoughts or additions you might
    Recycling, air & environment management,                            activity in cleantech.                                                 why geographical comparative strengths are           like to contribute.
    energy infrastructure, water treatment /                                                                                                   focusing investment in each country and how
    conservation. We have included tables of                            Key terminology: PV (Photovoltaic), GW                                 broad state initiatives and targets are ensuring
    recent transactions where the target company                        (Gigawatt), MW (Megawatt), KW (Kilowatt),                              that transactions get done. Our work also
    is located in the country under review.                             Mwh (Megawatt hour), kWh (Kilowatt hour)                               highlights the key developments in different
                                                                                                                                               cleantech sectors and how this is shaping the
                                                                                                                                               M&A strategies of mid-cap companies,
                                                                                                                                               global corporates and the private equity
                                                                                                                                               industry alike.




                                                                                                                                               Andy Currie
    Disclaimer
                                                                                                                                               Chairman of Mergers Alliance
    This publication contains general information and is not intended   reasonable effort has been made to ensure the accuracy of              Managing Partner of Catalyst Corporate Finance LLP
    to be comprehensive nor to provide financial, investment, legal,    the information contained in this publication, this cannot be
    tax or other professional advice or services. This publication is   guaranteed and neither Mergers Alliance nor any of its member          + 44 207 881 2960
    not a substitute for such professional advice or services, and it   firms or other related entity shall have any liability to any person   andycurrie@catalystcf.co.uk
    should not be acted on or relied upon or used as a basis for any    or entity which relies on the information contained in this
    investment or other decision or action that may affect you or       publication, including incidental or consequential damages
    your business. Before taking any such decision you should           arising from errors of omissions. Any such reliance is solely
    consult a suitably qualified professional adviser. Whilst           at the user’s risk.
2                                                                                                                                                                                                                                                         3
Sector Report 2012

    Report Highlights
    We at Mergers Alliance believe the main factors to shape M&A
    in the cleantech sector over the next three years will be:
                                                                                                                                   Sector focus                                                   Chinese wind turbine firms are emerging to become
                                                                                                                                                                                                  highly competitive across the globe thanks to improving
                                                                                                                                                                                                  technology and lower overheads. It is now home to four
                                                                                                                                                                                                  of the world’s top ten wind turbine firms. Nonetheless,
    The “globality” of cleantech                                  Government targets impacting                                     Solar’s future uncertain                                       we expect European turbine players to continue to excel
                                                                                                                                                                                                  internationally especially in regions such as Latin America
                                                                  cleantech                                                                                                                       where they can leverage their financial resources and
    The deployment of technology and capital (both                                                                                 In Europe the solar industry is facing somewhat of
                                                                                                                                   a mini-crisis due to increased competition from Asia,          industry experience.
    corporate and institutional) in cleantech has had a           Renewable targets are driving cleantech sector
    distinctly international flavour since the industry’s         development. One of the more sweeping initiatives is the         overcapacity and a significant reduction in government
    inception. Nonetheless, there has been a slight               EU’s 20-20-20 directive. It mandates a change in energy          support. This is especially apparent in Italy, Spain, France
    reduction in cross-border activity over the past 18           consumption and efficiency habits and for renewables to          and Germany. We expect heightened M&A activity as              Waste management transforms
    months which can be largely attributed to ongoing             constitute 20% of energy generation by 2020. China’s             European companies look to expand their geographical
    global economic concerns and contracting government                                                                            reach in an effort to maintain the same growth they have       We expect investment flow into the waste management
                                                                  Renewable Energy Law aims for 15% renewable energy
    support. This trend should reverse as balance sheets                                                                           become accustomed to domestically.                             industry to accelerate which should result in a rise in M&A
                                                                  usage by 2020. South Africa, whose domestic cleantech
    strengthen and as investors start looking for targets in                                                                                                                                      activity. Market optimism in this sector can be attributed
                                                                  industry is currently almost nonexistent, is targeting an        M&A in the solar sector was characterised by
    developing economies with strong macro fundamentals                                                                                                                                           to the increasing attractiveness of vertical integration,
                                                                  ambitious 37% by 2030. Such initiatives will underpin            three factors:
    and robust support mechanisms. We expect interest to                                                                                                                                          legislative and fiscal incentives and the push for ever
                                                                  investment decisions and help ensure deals get
    stretch beyond the BRIC countries to include nascent                                                                                                                                          rising recycling rates in developed nations. Consolidation
                                                                  completed, even in the face of global economic                     Overcapacity and market saturation has lead firms,
    cleantech markets with high-growth potential such as                                                                                                                                          is driving M&A in the more traditional collection and
                                                                  uncertainty.                                                       who are looking to lock in higher margins, to focus
    South Africa and Poland.                                                                                                                                                                      processing sectors which includes acquiring advanced
                                                                                                                                     on improving efficiency, specifically through materials
                                                                                                                                                                                                  material recycling facilities (MRF’s). Investment is also
                                                                                                                                     innovation and light management technologies.
                                                                                                                                                                                                  being channeled into energy from waste whether
                                                                  Specific policies having direct                                                                                                 advanced thermal plants or anaerobic digestion.
    Countries to capitalise on their                              affect on M&A
                                                                                                                                     A decrease in state support, mostly in Europe, has
                                                                                                                                     diminished the business viability of many solar players.
    comparative advantage                                                                                                            Reduced feed-in-tariffs in particular have caused
                                                                  Certain legislative and fiscal policies are directly affecting     financial difficulties for smaller firms. There was a        Certain cleantech sectors viable
    Each country will capitalise on their comparative natural     the volume of M&A transactions. The National Biodiesel             marked increase in major solar firms entering
    strengths; the UK with offshore wind, South Africa with       Program in Brazil, which mandates a 5% biodiesel blend
                                                                                                                                                                                                  without state support
                                                                                                                                     non-EU markets.
    solar, Sweden with biomass. Equally, countries such as        in diesel, has triggered a number of deals, the recently
    the Netherlands with its water industry and Germany and                                                                          Cash heavy Asian firms acquiring foreign companies           Thanks to reduced costs, innovation and logistical
                                                                  implemented feed-in-tariffs in the UK was the catalyst
    Japan with their manufacturing capabilities will be looking                                                                      as they aim to achieve technological internalisation         maneuvering, a number of sub-sectors in certain
                                                                  behind some of the most notable transactions in the
    to entrench and further develop their respective                                                                                 as well as technological parity.                             countries have emerged to become economically viable
                                                                  UK. Conversely, regressive policies have also been the
    competitive advantages.                                                                                                                                                                       without the helping hand of government. These include
                                                                  driving force behind a string of deals; the reductions in
                                                                                                                                                                                                  wind power in Brazil, re-refining in the USA and the water
                                                                  photovoltaic subsidies in Italy being a good case in point.
                                                                                                                                                                                                  treatment industry across a number of regions.
                                                                                                                                   Wind energy: The surge continues
    Scope of private equity interest broad                        We should see a new round of incentives, particularly
                                                                  from countries with healthy current account surpluses,
                                                                                                                                   The past 18 months saw a record number of M&A
    Unlike in many industries, private equity investors have      as they attempt to emerge from the renewables arms
                                                                                                                                   transactions in wind. Importantly, there was a decline
    been involved across the whole financing cycle from pre-      race endowed with a healthy green portfolio.
                                                                                                                                   in the average purchase price of running wind plants.
    revenue venture finance, through traditional MBO’s, to                                                                         This was partially due to project developers disposing of
    investing into large-scale generating assets. It should be                                                                     their already built wind farms to secure capital to finance
    noted that there was a slight increase in investments into    The impact of Fukushima                                          their future/current wind developments.
    more mature businesses which have clearer paths to exit.
                                                                  The nuclear renaissance has seemingly slowed as a result         Installations grew in all the major markets, albeit at a
    Our research shows that PE/VC investment in 2010              of the Great East Japan earthquake creating conditions           more modest pace compared to 2009. China experienced
    increased by 19% compared to 2009 and 2011 is set to          for the meltdown of nuclear reactors in Fukushima. It is         the largest growth (48% of the new total wind installations
    achieve similar growth numbers. We expect this number         clear now that Fukushima has had a substantive effect            over the past year took place in China). The UK lead the
    to continue to increase over the coming years due to the      on the policies of both governments and energy                   way in offshore installations thanks to multi-billion dollar
    emergence of a growing number of specialist PE funds          conglomerates. The biggest news was arguably                     investments into the sector. We expect Germany and
    that focus exclusively on cleantech. Interestingly within     Germany’s decision to shut down all of its nuclear power         China to also emerge as important bastions of offshore
    PE circles, the definition of cleantech has been              plants by 2022. Just weeks after the Japan earthquake            wind over the coming years.
    broadened to include sectors such as water, waste             nuclear energy giant EDF bought out the remaining
    management and industrial process efficiency.                 shares it does not already own of its renewable energy
4                                                                 subsidiary EDF Energies Nouvelles; a possible indication                                                                                                                                      5
                                                                  that the disaster is influencing corporate decision making.
Sector Report 2012

     Country Highlights
      Mergers Alliance partners highlight some
      interesting observations.                                                                                                                                                Russia
                                                                                                                                Netherlands                                    Russian energy giants Inter Rao UES and
                                                                                     UK                                                                                        Rushydro are expanding their geographical
                                                                                                                                A strong private equity tradition
                                                                                     The rise in landfill taxes and recycling                                                  reach to include Vietnam, Georgia and Armenia.
                                                                                                                                is manifesting itself in the cleantech
                                                                                     targets continues to stimulate M&A         industry with a number of firms
                         France                                                      activity by overseas and domestic          setting aside funds aimed at the
                                                                                     buyers in the waste sector.
                         M&A volumes in biomass will                                                                            renewable segments.                                          China
                         increase as both large strategic buyers and
                         industry newcomers look to capitalise on                                                                                                                            The government’s decision to repeal
                         the new tax on polluting rates.                                                                                                                                     legislation that required that 70% of the
                                                                                                                                                                                             components used to build a wind turbine are
                                                                                                                                                                                             domestically produced should encourage
                                                                                                                                                                                             fresh foreign investment into the wind sector.
                                                                                                                                  Norway
    USA                                                                                                                           Norway’s Statoil and France’s Technip
                                                                                                                                  have partnered to build large capacity
    Even without state support the
                                                                                                                                  floating wind turbines. Stronger offshore                                         India
    biofuel re-refining sub-sector has
                                                                                                                                  winds should offset increased installation                                        The merchant power market in
    seen a number of deals take place.
                                                                                                                                  and infrastructure costs.                                                         India should attract renewable
    Improving green technology will make                       Spain                                                                                                                                                firms seeking more flexibility in
    this space even more attractive.
                                                               After buying out its renewable arm,                                                                                                                  their energy generating operations.
                                                               Iberdrola Renovables SA is expected to
                                                               move towards diversifying its renewable
                                                               portfolio, both domestically and abroad.



                                                                                                                                                                                                Japan
                                                                                                                                                                                                Japan is reassessing its energy
                                                                                 Germany
         Mexico                                                                                                                                                                                 provision, which is still highly dependent
                                                                                International firms have been actively                                                                          on foreign oil. Japanese corporations are
         Spanish based firm Iberdrola
                                                                                buying German solar firms. We expect                                                                            looking to increase their exposure to
         Renovables SA has been actively
                                                                                this trend to continue as foreign                 Poland                                                        international markets.
         buying up Mexican wind, lifting its
                                                                                companies seek access to premium                  Reforms in government legislation
         total capacity in the country to
                                                                                German technology.                                will create better conditions in the
         106 MW.
                                                                                                                                  Polish wind sector, which is expected
                                                                                                                                  to grow almost threefold by 2015.

                                                                                                                                                                                     Turkey
                                                                                                                                                                                     The considerable wind potential in Turkey has
                                                                                                                                                                                     yet to be fully realised. The US$1.1bn purchase
                          Brazil                                                                                                                                                     of a portfolio of Turkish wind farm power projects
                          Expect to see prominent                                  South Africa                                                                                      by UK based Renewable Energy Systems may
                          Ethanol players Cosan, ETH,                                                                                                                                prove to be an indicator of things to come.
                                                                                   Large renewable energy players
                          Bunge and Guarani to start looking
                                                                                   Renewable Energy Systems, Mainstream
                          for global M&A opportunities.
                                                                                   Renewable Power and Suntech Power
                                                                                                                                Italy
                                                                                   Holdings have entered the South African      The auspicious new state
                                                                                   market in the past three years.              energy efficiency scheme should
                                                                                                                                prove to be highly beneficial for
                                                                                                                                domestic firms.

6                                                                                                                                                                                                                                                         7
Deal Focus                                                            Capital City: Brasília
                                                                          Area: 8,511,965 sq km
                                                                                                        Population: 198,739,269
                                                                                                        Time zone: GMT -3




    Brazil
            “While consolidation in the including sugarcane residues, wood and charcoal,
                                        is predicted to reach 4.3% by 2013. Biomass energy,                                                                        Market forces drive wind expansion                           Recent transactions
            ethanol sector dominated represents around 30% of the country’s energy matrix.                                                                         A number of the smaller firms that have developed wind       Date        Target               Description         Acquirer          Deal Value
                                                                                                                                                                                                                                                                                                        (US$m)
            cleantech activity over the                                                                                                                            farms have lacked the balance sheet strength needed          Apr 11      Jantus SL            Wind farms          CPFL                 960
                                        M&A activity settling after                                                                                                to obtain long term financing from BNDES (Brazilian
            past several years, and     expansive growth
                                                                                                                                                                   Development Bank), forcing them to sell to larger            Apr 11      ERSA                 Wind / small
                                                                                                                                                                                                                                                                 hydro / biomass
                                                                                                                                                                                                                                                                                     CPFL                 n/d

                                                                                                                                                                   players. Furthermore, the emergence of medium sized
    with more still to come, M&A                                                                                                                                   independent players has attracted attention from the
                                                                                                                                                                                                                                Mar 11      Cavo Saneamento Waste
                                                                                                                                                                                                                                                            Management
                                                                                                                                                                                                                                                                                     Estre Ambiental      375

                                        M&A activity in the Brazilian cleantech market boomed in
    transactions involving large wind 2009 and although there was a slight contraction in 2010,                                                                    larger strategic companies requiring scale to enter          Dec 10      ETH Bioenergia       Biofuel             Petroleo            1760
                                                                                                                                                                                                                                                                                     Brasiliero S
                                                                                                                                                                   the segment.                                                 Sep 10      Omega Energia        Small Hydro         Warburg Pincus       215
                                        total volume and average deal value has remained fairly
    players are beginning to occur,     constant over the past four years. In April 2011 local                                                                     Even without any tariff subsidies, Brazil has huge           Aug 10      Biooleo Industrial
                                                                                                                                                                                                                                                                 Plants
                                                                                                                                                                                                                                                                 Biodiesel
                                                                                                                                                                                                                                                                                     and Tarpon
                                                                                                                                                                                                                                                                                     Petrobras            10
    as independent players become       integrated player CPFL Energia acquired financial                                                                          potential for wind energy usage as capacity factors range
                                                                                                                                                                                                                                Feb 10      Amyris Brasil        Celulosic Ethanol
                                                                                                                                                                                                                                                                                     Biocombustiveis
                                                                                                                                                                                                                                                                                     Stratus              54
                                        investor-backed Jantus SL for US$960m. The deal                                                                            from 36-55%. Importantly, the 2004 PROINFA subsidies
    large enough to attract strategic   involved four wind farms with a 210 MW wind farm                                                                           -see inset- are no longer necessary as construction costs    Nov 09      Brenco               Ethanol             ETH Bioenergia       n/d

    acquirers or in order to gain more project andforportfolio of 732 MW energy auctions. CPFL
                                        are eligible
                                                     a
                                                        participation in the
                                                                             certified projects that                                                               have come down to approximately US$2.5m per MW.
                                                                                                                                                                   The fact that the market alone can sustain the Brazilian     Oct 09      Santelisa            Sugar / Ethanol     Louis Dreyfus        630
                                                                                                                                                                                                                                            Bioenergia                               Commodities
    scale in the face of challenging    is now in talks with ERSA, a large independent player that                                                                 wind sector has alerted investors looking for viable         Aug 09      Energimp             Wind Farms          CEMIG                115
                                        is backed by various private equity funds and banks.                                                                       business propositions.
    IPO prospects.”
                                                                    In the middle market, Brazilian private equity firm
                                                                    Stratus acquired a 40% stake in Amyris Brasil, a unit of
    Derek Gallo, Broadspan
                                                                    US-based Amyris Biotechnologies for US$54m. Stratus’                                           Biodiesel: An industry waiting for
                                                                    strategy is to support Amyris’ plans to transform                                              government support                                             Government Support
    Macro growth driving clean tech M&A                             sugarcane into renewable feedstock, at an industrial
                                                                    scale, for the domestic production of chemicals by 2014.                                       Despite a spate of recent deals, the biodiesel sector will     PROINFA:
    Brazilian GDP growth remains strong, at 7.4% in 2010                                                                                                           likely remain somewhat stagnant until the government
                                                                    The National Biodiesel Program, which mandates                                                                                                                  The Incentive Program for Alternative Energy
    and 4.1% expected for 2011, which has encouraged                                                                                                               releases a new regulatory framework elevating the
                                                                    a 5% biodiesel blend in diesel, was the impetus behind a                                                                                                        Sources, otherwise known as the PROINFA
    consolidation and also attracted international strategic                                                                                                       minimum share of biodiesel in the diesel blend.
                                                                    number of M&A deals. For example, the merger of Brasil                                                                                                          Programme, was promulgated in 2002 to stimulate
    investors seeking high growth markets. The need for                                                                                                            Independent producers might be sold to players
                                                                    Ecodiesel and a Spanish owned agribusiness firm                                                                                                                 renewable energy generation by providing
    investment in energy generation to produce this growth                                                                                                         with crushing facilities and agricultural operations
                                                                    demonstrated the attraction of a vertically integrated                                                                                                          government (through Eletrobras) Power Purchase
    has attracted foreign operators and investors with                                                                                                             to guarantee a steady supply of oil.
                                                                    production model. Petrobras also strengthened its                                                                                                               Agreements.
    experience in the renewable energy sectors.
                                                                    position in the sector with the acquisition of a 50% stake                                                                                                           The sector that benefited the most was the wind
    Relatively high interest rates leave many smaller
                                                                    in a greenfield biodiesel plant. By and large, however,
    companies vulnerable to larger players endowed with
                                                                    most of the recent M&A activity emanated from the
                                                                                                                                                                   Cross-border opportunities in wind                                    energy sector, which jumped from 22 to 414 MW
                                                                                                                                                                                                                                         of installed capacity from 2002 to 2007.
    both lower costs of capital and the corporate guarantees
                                                                    ethanol sector, accounting for about half of all deals.                                        and ethanol
    required during construction in project finance structures.
                                                                                                                                                                                                                                         Because the programme has been targeted at small
                                                                                                                                                                   Although there are a handful of dedicated private equity              independent producers who do not have the
    The cleantech industry in Brazil has historically been
                                                                    M&A activity                                                                                   and venture capital funds that have invested in recycling,            financial strength to secure long term financing from
    dominated by biofuel, specifically ethanol and more
                                                                                                                                                                   biomass generation, and water treatment, there is still a             local development banks, many of the recipients
    recently a growing biodiesel programme, as well as
                                                                                                                                                                   distinct lack of involvement in the market. The solar                 have been forced to sell their projects to larger
    renewable generation which includes hydro and more                                   16                                          600
                                                                                                                                                                   thermal and energy efficiency sub-sectors have still not              players therefore stimulating overall M&A activity.
    recently biomass (e.g. sugar cane cogeneration) and                                  14
                                                                                                                                     500                           fully matured, mainly due to the high cost of capital in
    onshore wind farms. Hydro represents 68% of installed
                                                                                                                                           Average deal value $m




                                                                                         12                                                                        Brazil. Wind and ethanol will continue to dominate the
                                                                    Transaction volume




    capacity and 87% of the electric energy generation in                                                                                                                                                                         National Biodiesel Program:
                                                                                                                                     400                           M&A landscape.
    the country.                                                                         10                                                                                                                                         The programme requires the mandatory use of a
                                                                                          8                                          300                                                                                            biodiesel blend in diesel. It started with a 2% blend
                                                                                                                                                                   Due to their prominence in the ethanol industry look for
    Renewable energy generation and biofuels are expanding                                6                                                                                                                                         in 2008, which increased to 4% in July 2009 and
                                                                                                                                     200                           Brazilian firms such as Cosan, ETH, Guarani or Bunge
    at a rapid pace, driven by Brazil’s economic growth and                                                                                                                                                                         then to 5% in January 2010. There are plans to
                                                                                          4                                                                        to begin searching for opportunities abroad whilst we
    the success of government programmes that have                                                                                   100                                                                                            reach a 20% mandatory blend in 2020. The
                                                                                          2                                                                        also expect to see an inflow of M&A in the Brazilian
    pushed for the proliferation of biodiesel and wind.                                                                                                                                                                             programme has been the driver behind a number
                                                                                          0                                          0                             wind space.
    Although the ethanol sector has experienced a lot of                                                                                                                                                                            of M&A deals.
                                                                                              2008   2009      2010        H1 2011
    consolidation in recent times, the market is still relatively
    fragmented so expert further consolidation. Wind energy,
                                                                                                                      Total deal volume
8   which accounts for 0.5% of the electric generation,                                                                                                                                                                                                                                                             9
                                                                    Source: Capital IQ, Mergermarket                  Average deal value $m
Deal Focus                                                             Capital City: Mexico City
                                                                            Area: 1,972,550 sq km
                                                                                                            Population: 111,211,789
                                                                                                            Time zone: GMT -6




     Mexico
              “The need for alternative                               well as the reduced government support in the industry
                                                                      up until recently. The bulk of the deals completed have
                                                                                                                                                                      Large foreign involvement in                                  Recent transactions
                                                                                                                                                                      wind power
              sources of energy has                                   been in wind power.                                                                                                                                           Date        Target             Description        Acquirer           Deal Value
                                                                                                                                                                                                                                                                                                          (US$m)
              accelerated in recent                                   In early 2011 Spanish based firm Iberdrola Renovables’                                          Mexico has the potential to equal, if not surpass Brazil as   Apr 11      Eolia
                                                                                                                                                                                                                                                Revovables
                                                                                                                                                                                                                                                                   Portfolio of two
                                                                                                                                                                                                                                                                   Wind Farms
                                                                                                                                                                                                                                                                                      EDF Energy Mexico
                                                                                                                                                                                                                                                                                      (Spain)
                                                                                                                                                                                                                                                                                                             n/d

                                                                      SA purchased the Mexican Bill Nee Stipa wind farm from                                          the dominant wind player in Latin America. The logistical
              times due to a reduction                                Gamsea Corporación Tecnológica. This was Iberdrola                                              demands of such an endeavour will mean progress will be
                                                                                                                                                                                                                                    Jan 11      Bill Nee Stipa
                                                                                                                                                                                                                                                Wind Farm
                                                                                                                                                                                                                                                                   Wind Energy        Iberdrola Renovables n/d
                                                                                                                                                                                                                                                                                      SA (Spain)
                                                                                                                                                                      gradual. Nonetheless, in the short term we expect
     in oil reserves. The government                                  Renvables’s second operational wind farm purchase in
                                                                      Mexico, lifting its overall capacity to 106 MW. The deal                                        escalating government support mechanisms to
                                                                                                                                                                                                                                    Oct 10      Repsol             Bio-energy         KUO
                                                                                                                                                                                                                                                                                      (Spain)
                                                                                                                                                                                                                                                                                                             Joint
                                                                                                                                                                                                                                                                                                            Venture
                                                                                                                                                                                                                                    Jul 10      Baja Aquafarms     Sustainable        Lions Gate Lighting     17
     has been increasingly active in                                  was in line with Iberdrola’s strategy of extending its Latin                                    encourage foreign players.                                                                   Farming            (Canada)
                                                                      American coverage and establishing growth in countries                                                                                                        Feb 09      Promotora          Recycling          Double V Holding        11
     supporting the sector through                                    with increasingly favourable regulatory frameworks.
                                                                                                                                                                      In July 2011 Canon Power Group, a US based renewable                      Ambiental          Services           SA
                                                                                                                                                                      energy firm, announced its intention to invest US$2.5bn       Dec 08      Gamesa             Wind Energy        Iberdrola Renovables 100

     various initiatives, which has                                   In late 2010 Spanish oil and gas giants Repsol joined                                           into the Mexican wind market. The sizable investment will     Jul 08      Earth Tech         Waste Water
                                                                                                                                                                                                                                                                                      SA (Spain)
                                                                                                                                                                                                                                                                                      Mitsui & Co             55
                                                                                                                                                                      comprise of three wind farms located in Zacatecas, Baja
     attracted foreign companies to                                   forces with one of Mexico’s biggest conglomerates KUO
                                                                      to establish KUOSOL, a company dedicated to the                                                 California and Quintana Roo for a combined power
                                                                                                                                                                                                                                                Mexican Holdings   Treatment          (Japan)



     invest in Mexican cleantech, with                                production of bio-energy. The new company will be                                               output of 312 MW and will bring total installed wind
                                                                      headquartered in Mexico and its main operations will be                                         capacity in Mexico to over 1 GW.
     wind power especially favoured.”                                 the industrial scale cultivation of the jatropha plant. It is
                                                                                                                                                                      Siemens made its first foray into the Latin American wind
                                                                      hoped that the biofuel crop will generate 16 MW per year                                                                                                        Government Support
                                                                                                                                                                      market by supplying 70 wind turbines to Mexican wind
     Luis Garcia, Sinergia Capital                                    for consumption.
                                                                                                                                                                      power firm Grupo Soluciones en Energias Renovables.
                                                                                                                                                                                                                                      Energy Transition Fund
                                                                                                                                                                      The turbines will be installed in the Tamaulipas region
                                                                                                                                                                                                                                        In 2009 the state enacted the Energy Transition
                                                                                                                                                                      of Mexico and will supply over 160 MW. The cost of the
     Diminishing oil reserves driving                                 M&A activity                                                                                    order totalled US$270m and marked one the largest
                                                                                                                                                                                                                                        Fund in an effort to promote green energy start-ups
                                                                                                                                                                                                                                        and to help facilitate the flow of capital and
     cleantech                                                                                                                                                        investments by a Mexican firm into the wind energy
                                                                                                                                                                                                                                        resources into renewable projects.
                                                                                                                                                                      market to date.
                                                                                          3                                              90
     Mexican GDP grew at 5.5% in 2010, its fastest rate of                                                                                                                                                                                   Over the course of three years, starting in 2009,
                                                                                                                                         80
     growth for ten years. A sharp rise in manufacturing was                                                                                                                                                                                 3bn pesos (US$240m) will have been spent to help
                                                                     Transaction volume




                                                                                                                                              Average deal value $m
                                                                                                                                         70
     the main attributing factor. Despite fast growth, inflation
                                                                                          2                                              60
                                                                                                                                                                      Small-scale moves into solar                                           support the renewable sectors. Although the fund
     has actually dropped to 3.8%, down from 4.4% in 2010.                                                                                                                                                                                   has so far created more favourable business
                                                                                                                                         50
     Growth, however, is putting a strain on energy                                                                                                                   There has not been much interest in solar to date,                     parameters, it is questionable whether it has
     requirements.                                                                                                                       40
                                                                                                                                                                      primarily due to the prohibitively high costs of solar                 helped boost M&A activity.
                                                                                          1                                              30
                                                                                                                                                                      panels relative to other technologies. No major
     One of the most important macroeconomic drivers of                                                                                  20
                                                                                                                                                                      large-scale projects are planned; however companies             Fonaga Verde
     Mexican cleantech in recent years has been Mexico’s                                                                                 10                           such as Abengoa, a Spanish conglomerate with                      In 2010 in support of sustainability projects and
     dwindling oil reserves. Oil reserves have fallen nearly                              0                                              0                            significant operations in renewable energy, are starting          renewable energy, the Mexican government opened
     50% since 2000. Although the state has made attempts                                     2008   2009         2010        H1 2011
                                                                                                                                                                      to make incremental encroachments into the Mexican                up a guarantee fund called Fonaga Verde.
     to finesse its way out of its reliance on fossil fuels and
                                                                                                                                                                      photovoltaic (PV) space. This is certainly a sub-sector
     nuclear energy, the renewables industry has been                                                                    Total deal volume                                                                                                   The start-up and operation costs of the fund will be
                                                                      Source: Mergermarket,                                                                           waiting to be exploited by foreign firms that possess
     relatively slow to get off the ground. Despite this, industry                                                                                                                                                                           200m pesos (US$16m). The fund will have around
                                                                      Capital IQ                                         Average deal value $m                        lower costs of production, especially considering Mexico
     analysts look upon Mexico’s cleantech potential with                                                                                                                                                                                    2.5bn pesos (US$200m) to finance sustainable
                                                                                                                                                                      has the third largest solar potential in the world.
     great sanguinity. In a regulatory and institutional context,                                                                                                                                                                            projects in the agriculture, forestry and fishery
     Mexico is much more favourable to M&A in renewable                                                                                                                                                                                      industries.
     energy than it was just two years ago.
                                                                                                                                                                      The industry waits for firmer
                                                                                                                                                                      government intervention
     Spanish interest
                                                                                                                                                                      Although policies, initiatives and subsidies have
     Total volume in cleantech has been relatively low over                                                                                                           progressed over recent years, the state still offers more
     the past 18 months. Underlying this has been the                                                                                                                 monetary and legislative support to the fossil fuel
     monopolised ownership of the electricity sector as                                                                                                               industries. The aforementioned dwindling oils reserves
                                                                                                                                                                      should reverse this over time. We expect M&A in
                                                                                                                                                                      cleantech to increase once the synergy between what the
                                                                                                                                                                      market can offer and what the state can offer reaches a
10                                                                                                                                                                    suitable equilibrium.
                                                                                                                                                                                                                                                                                                                      11
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012
Mergers brochure cleantech 2012

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Mergers brochure cleantech 2012

  • 1. Global Cleantech Sector Report 2012 www.mergers-alliance.com
  • 2. Sector Report 2012 Contents Report 2 Introduction 3 Report Highlights 4 Deal Focus by Country Americas Brazil 8 Mexico 10 USA 12 Asia, Africa and Middle East China 14 India 16 Japan 18 South Africa 20 Turkey 22 Europe France 24 Germany 26 Italy 28 The Netherlands 30 Poland 32 Russia 34 Scandinavia 36 Spain 38 United Kingdom 40 Contacts 43 Transactions 44
  • 3. Sector Report 2012 Sector Report 2012 Report Introduction About the report Whilst the major economies of the world continue to navigate a difficult credit environment and weaker This sector report was edited by Andre Johnston For more information on this report please growth prospects, the cleantech industry remains of the Mergers Alliance central team. To compile contact Andre Johnston, Mergers Alliance our findings we conducted interviews with our Research Manager. somewhat unique in that it continues to develop strongly sector experts from each member firm within the in almost all countries. As you will see from our sector Mergers Alliance partnership. We also surveyed Andre Johnston owners and senior executives within cleantech Mergers Alliance experts across the world whilst each country may be at sector organisations and private equity investors +44 207 881 2967 different points in their development trajectory, prospects worldwide. andrejohnston@mergers-alliance.com in almost all are compelling. Deal Focus This development is being driven by the need for governments to tackle climate change on a As the global recovery takes hold, we at Mergers Alliance are ideally placed to help you. Whether multi-lateral basis and ensure security of energy you seek growth through acquisition, wish to Within each country’s Deal Focus we review Additionally, we provide an overview of the supply for their populations and industries over restructure or realise value in your business, merger and acquisition (M&A) activity, focusing cleantech sector as a whole, highlighting the the long term. Legislation and attractive fiscal our international advisors are in a unique position on key deals and trends within the cleantech market structure as well as commenting on the incentives are key to much of the recent growth to help you. Our member firms have a prominent sector. Cleantech is a shortened form of clean key trends and the factors influencing M&A. We and in most countries these levers will drive position in boardrooms across the world and are technologies. We define cleantech as those provide our own insight on how we think the investment for decades to come. renowned for delivering award winning partner- activities relating to renewable power generation: market might play out over the coming 18 led advisory service with seamless international Wind farms, solar, hydro, waste to energy, months and attempt to identify key investment You will find in our report a great deal of cooperation. geothermal, biogas, biomass and tidal. Our opportunities. We also provide a summary of market-leading insight into the key issues report also includes transactions relating to two government policies from each country facing the sector in 2011 and beyond: how We hope you enjoy reading our report and energy efficiency and resource management: that we believe has, or will, influence M&A the industry needs to operate on a global basis, welcome any thoughts or additions you might Recycling, air & environment management, activity in cleantech. why geographical comparative strengths are like to contribute. energy infrastructure, water treatment / focusing investment in each country and how conservation. We have included tables of Key terminology: PV (Photovoltaic), GW broad state initiatives and targets are ensuring recent transactions where the target company (Gigawatt), MW (Megawatt), KW (Kilowatt), that transactions get done. Our work also is located in the country under review. Mwh (Megawatt hour), kWh (Kilowatt hour) highlights the key developments in different cleantech sectors and how this is shaping the M&A strategies of mid-cap companies, global corporates and the private equity industry alike. Andy Currie Disclaimer Chairman of Mergers Alliance This publication contains general information and is not intended reasonable effort has been made to ensure the accuracy of Managing Partner of Catalyst Corporate Finance LLP to be comprehensive nor to provide financial, investment, legal, the information contained in this publication, this cannot be tax or other professional advice or services. This publication is guaranteed and neither Mergers Alliance nor any of its member + 44 207 881 2960 not a substitute for such professional advice or services, and it firms or other related entity shall have any liability to any person andycurrie@catalystcf.co.uk should not be acted on or relied upon or used as a basis for any or entity which relies on the information contained in this investment or other decision or action that may affect you or publication, including incidental or consequential damages your business. Before taking any such decision you should arising from errors of omissions. Any such reliance is solely consult a suitably qualified professional adviser. Whilst at the user’s risk. 2 3
  • 4. Sector Report 2012 Report Highlights We at Mergers Alliance believe the main factors to shape M&A in the cleantech sector over the next three years will be: Sector focus Chinese wind turbine firms are emerging to become highly competitive across the globe thanks to improving technology and lower overheads. It is now home to four of the world’s top ten wind turbine firms. Nonetheless, The “globality” of cleantech Government targets impacting Solar’s future uncertain we expect European turbine players to continue to excel internationally especially in regions such as Latin America cleantech where they can leverage their financial resources and The deployment of technology and capital (both In Europe the solar industry is facing somewhat of a mini-crisis due to increased competition from Asia, industry experience. corporate and institutional) in cleantech has had a Renewable targets are driving cleantech sector distinctly international flavour since the industry’s development. One of the more sweeping initiatives is the overcapacity and a significant reduction in government inception. Nonetheless, there has been a slight EU’s 20-20-20 directive. It mandates a change in energy support. This is especially apparent in Italy, Spain, France reduction in cross-border activity over the past 18 consumption and efficiency habits and for renewables to and Germany. We expect heightened M&A activity as Waste management transforms months which can be largely attributed to ongoing constitute 20% of energy generation by 2020. China’s European companies look to expand their geographical global economic concerns and contracting government reach in an effort to maintain the same growth they have We expect investment flow into the waste management Renewable Energy Law aims for 15% renewable energy support. This trend should reverse as balance sheets become accustomed to domestically. industry to accelerate which should result in a rise in M&A usage by 2020. South Africa, whose domestic cleantech strengthen and as investors start looking for targets in activity. Market optimism in this sector can be attributed industry is currently almost nonexistent, is targeting an M&A in the solar sector was characterised by developing economies with strong macro fundamentals to the increasing attractiveness of vertical integration, ambitious 37% by 2030. Such initiatives will underpin three factors: and robust support mechanisms. We expect interest to legislative and fiscal incentives and the push for ever investment decisions and help ensure deals get stretch beyond the BRIC countries to include nascent rising recycling rates in developed nations. Consolidation completed, even in the face of global economic Overcapacity and market saturation has lead firms, cleantech markets with high-growth potential such as is driving M&A in the more traditional collection and uncertainty. who are looking to lock in higher margins, to focus South Africa and Poland. processing sectors which includes acquiring advanced on improving efficiency, specifically through materials material recycling facilities (MRF’s). Investment is also innovation and light management technologies. being channeled into energy from waste whether Specific policies having direct advanced thermal plants or anaerobic digestion. Countries to capitalise on their affect on M&A A decrease in state support, mostly in Europe, has diminished the business viability of many solar players. comparative advantage Reduced feed-in-tariffs in particular have caused Certain legislative and fiscal policies are directly affecting financial difficulties for smaller firms. There was a Certain cleantech sectors viable Each country will capitalise on their comparative natural the volume of M&A transactions. The National Biodiesel marked increase in major solar firms entering strengths; the UK with offshore wind, South Africa with Program in Brazil, which mandates a 5% biodiesel blend without state support non-EU markets. solar, Sweden with biomass. Equally, countries such as in diesel, has triggered a number of deals, the recently the Netherlands with its water industry and Germany and Cash heavy Asian firms acquiring foreign companies Thanks to reduced costs, innovation and logistical implemented feed-in-tariffs in the UK was the catalyst Japan with their manufacturing capabilities will be looking as they aim to achieve technological internalisation maneuvering, a number of sub-sectors in certain behind some of the most notable transactions in the to entrench and further develop their respective as well as technological parity. countries have emerged to become economically viable UK. Conversely, regressive policies have also been the competitive advantages. without the helping hand of government. These include driving force behind a string of deals; the reductions in wind power in Brazil, re-refining in the USA and the water photovoltaic subsidies in Italy being a good case in point. treatment industry across a number of regions. Wind energy: The surge continues Scope of private equity interest broad We should see a new round of incentives, particularly from countries with healthy current account surpluses, The past 18 months saw a record number of M&A Unlike in many industries, private equity investors have as they attempt to emerge from the renewables arms transactions in wind. Importantly, there was a decline been involved across the whole financing cycle from pre- race endowed with a healthy green portfolio. in the average purchase price of running wind plants. revenue venture finance, through traditional MBO’s, to This was partially due to project developers disposing of investing into large-scale generating assets. It should be their already built wind farms to secure capital to finance noted that there was a slight increase in investments into The impact of Fukushima their future/current wind developments. more mature businesses which have clearer paths to exit. The nuclear renaissance has seemingly slowed as a result Installations grew in all the major markets, albeit at a Our research shows that PE/VC investment in 2010 of the Great East Japan earthquake creating conditions more modest pace compared to 2009. China experienced increased by 19% compared to 2009 and 2011 is set to for the meltdown of nuclear reactors in Fukushima. It is the largest growth (48% of the new total wind installations achieve similar growth numbers. We expect this number clear now that Fukushima has had a substantive effect over the past year took place in China). The UK lead the to continue to increase over the coming years due to the on the policies of both governments and energy way in offshore installations thanks to multi-billion dollar emergence of a growing number of specialist PE funds conglomerates. The biggest news was arguably investments into the sector. We expect Germany and that focus exclusively on cleantech. Interestingly within Germany’s decision to shut down all of its nuclear power China to also emerge as important bastions of offshore PE circles, the definition of cleantech has been plants by 2022. Just weeks after the Japan earthquake wind over the coming years. broadened to include sectors such as water, waste nuclear energy giant EDF bought out the remaining management and industrial process efficiency. shares it does not already own of its renewable energy 4 subsidiary EDF Energies Nouvelles; a possible indication 5 that the disaster is influencing corporate decision making.
  • 5. Sector Report 2012 Country Highlights Mergers Alliance partners highlight some interesting observations. Russia Netherlands Russian energy giants Inter Rao UES and UK Rushydro are expanding their geographical A strong private equity tradition The rise in landfill taxes and recycling reach to include Vietnam, Georgia and Armenia. is manifesting itself in the cleantech targets continues to stimulate M&A industry with a number of firms France activity by overseas and domestic setting aside funds aimed at the buyers in the waste sector. M&A volumes in biomass will renewable segments. China increase as both large strategic buyers and industry newcomers look to capitalise on The government’s decision to repeal the new tax on polluting rates. legislation that required that 70% of the components used to build a wind turbine are domestically produced should encourage fresh foreign investment into the wind sector. Norway USA Norway’s Statoil and France’s Technip have partnered to build large capacity Even without state support the floating wind turbines. Stronger offshore India biofuel re-refining sub-sector has winds should offset increased installation The merchant power market in seen a number of deals take place. and infrastructure costs. India should attract renewable Improving green technology will make Spain firms seeking more flexibility in this space even more attractive. After buying out its renewable arm, their energy generating operations. Iberdrola Renovables SA is expected to move towards diversifying its renewable portfolio, both domestically and abroad. Japan Japan is reassessing its energy Germany Mexico provision, which is still highly dependent International firms have been actively on foreign oil. Japanese corporations are Spanish based firm Iberdrola buying German solar firms. We expect looking to increase their exposure to Renovables SA has been actively this trend to continue as foreign Poland international markets. buying up Mexican wind, lifting its companies seek access to premium Reforms in government legislation total capacity in the country to German technology. will create better conditions in the 106 MW. Polish wind sector, which is expected to grow almost threefold by 2015. Turkey The considerable wind potential in Turkey has yet to be fully realised. The US$1.1bn purchase Brazil of a portfolio of Turkish wind farm power projects Expect to see prominent South Africa by UK based Renewable Energy Systems may Ethanol players Cosan, ETH, prove to be an indicator of things to come. Large renewable energy players Bunge and Guarani to start looking Renewable Energy Systems, Mainstream for global M&A opportunities. Renewable Power and Suntech Power Italy Holdings have entered the South African The auspicious new state market in the past three years. energy efficiency scheme should prove to be highly beneficial for domestic firms. 6 7
  • 6. Deal Focus Capital City: Brasília Area: 8,511,965 sq km Population: 198,739,269 Time zone: GMT -3 Brazil “While consolidation in the including sugarcane residues, wood and charcoal, is predicted to reach 4.3% by 2013. Biomass energy, Market forces drive wind expansion Recent transactions ethanol sector dominated represents around 30% of the country’s energy matrix. A number of the smaller firms that have developed wind Date Target Description Acquirer Deal Value (US$m) cleantech activity over the farms have lacked the balance sheet strength needed Apr 11 Jantus SL Wind farms CPFL 960 M&A activity settling after to obtain long term financing from BNDES (Brazilian past several years, and expansive growth Development Bank), forcing them to sell to larger Apr 11 ERSA Wind / small hydro / biomass CPFL n/d players. Furthermore, the emergence of medium sized with more still to come, M&A independent players has attracted attention from the Mar 11 Cavo Saneamento Waste Management Estre Ambiental 375 M&A activity in the Brazilian cleantech market boomed in transactions involving large wind 2009 and although there was a slight contraction in 2010, larger strategic companies requiring scale to enter Dec 10 ETH Bioenergia Biofuel Petroleo 1760 Brasiliero S the segment. Sep 10 Omega Energia Small Hydro Warburg Pincus 215 total volume and average deal value has remained fairly players are beginning to occur, constant over the past four years. In April 2011 local Even without any tariff subsidies, Brazil has huge Aug 10 Biooleo Industrial Plants Biodiesel and Tarpon Petrobras 10 as independent players become integrated player CPFL Energia acquired financial potential for wind energy usage as capacity factors range Feb 10 Amyris Brasil Celulosic Ethanol Biocombustiveis Stratus 54 investor-backed Jantus SL for US$960m. The deal from 36-55%. Importantly, the 2004 PROINFA subsidies large enough to attract strategic involved four wind farms with a 210 MW wind farm -see inset- are no longer necessary as construction costs Nov 09 Brenco Ethanol ETH Bioenergia n/d acquirers or in order to gain more project andforportfolio of 732 MW energy auctions. CPFL are eligible a participation in the certified projects that have come down to approximately US$2.5m per MW. The fact that the market alone can sustain the Brazilian Oct 09 Santelisa Sugar / Ethanol Louis Dreyfus 630 Bioenergia Commodities scale in the face of challenging is now in talks with ERSA, a large independent player that wind sector has alerted investors looking for viable Aug 09 Energimp Wind Farms CEMIG 115 is backed by various private equity funds and banks. business propositions. IPO prospects.” In the middle market, Brazilian private equity firm Stratus acquired a 40% stake in Amyris Brasil, a unit of Derek Gallo, Broadspan US-based Amyris Biotechnologies for US$54m. Stratus’ Biodiesel: An industry waiting for strategy is to support Amyris’ plans to transform government support Government Support Macro growth driving clean tech M&A sugarcane into renewable feedstock, at an industrial scale, for the domestic production of chemicals by 2014. Despite a spate of recent deals, the biodiesel sector will PROINFA: Brazilian GDP growth remains strong, at 7.4% in 2010 likely remain somewhat stagnant until the government The National Biodiesel Program, which mandates The Incentive Program for Alternative Energy and 4.1% expected for 2011, which has encouraged releases a new regulatory framework elevating the a 5% biodiesel blend in diesel, was the impetus behind a Sources, otherwise known as the PROINFA consolidation and also attracted international strategic minimum share of biodiesel in the diesel blend. number of M&A deals. For example, the merger of Brasil Programme, was promulgated in 2002 to stimulate investors seeking high growth markets. The need for Independent producers might be sold to players Ecodiesel and a Spanish owned agribusiness firm renewable energy generation by providing investment in energy generation to produce this growth with crushing facilities and agricultural operations demonstrated the attraction of a vertically integrated government (through Eletrobras) Power Purchase has attracted foreign operators and investors with to guarantee a steady supply of oil. production model. Petrobras also strengthened its Agreements. experience in the renewable energy sectors. position in the sector with the acquisition of a 50% stake The sector that benefited the most was the wind Relatively high interest rates leave many smaller in a greenfield biodiesel plant. By and large, however, companies vulnerable to larger players endowed with most of the recent M&A activity emanated from the Cross-border opportunities in wind energy sector, which jumped from 22 to 414 MW of installed capacity from 2002 to 2007. both lower costs of capital and the corporate guarantees ethanol sector, accounting for about half of all deals. and ethanol required during construction in project finance structures. Because the programme has been targeted at small Although there are a handful of dedicated private equity independent producers who do not have the The cleantech industry in Brazil has historically been M&A activity and venture capital funds that have invested in recycling, financial strength to secure long term financing from dominated by biofuel, specifically ethanol and more biomass generation, and water treatment, there is still a local development banks, many of the recipients recently a growing biodiesel programme, as well as distinct lack of involvement in the market. The solar have been forced to sell their projects to larger renewable generation which includes hydro and more 16 600 thermal and energy efficiency sub-sectors have still not players therefore stimulating overall M&A activity. recently biomass (e.g. sugar cane cogeneration) and 14 500 fully matured, mainly due to the high cost of capital in onshore wind farms. Hydro represents 68% of installed Average deal value $m 12 Brazil. Wind and ethanol will continue to dominate the Transaction volume capacity and 87% of the electric energy generation in National Biodiesel Program: 400 M&A landscape. the country. 10 The programme requires the mandatory use of a 8 300 biodiesel blend in diesel. It started with a 2% blend Due to their prominence in the ethanol industry look for Renewable energy generation and biofuels are expanding 6 in 2008, which increased to 4% in July 2009 and 200 Brazilian firms such as Cosan, ETH, Guarani or Bunge at a rapid pace, driven by Brazil’s economic growth and then to 5% in January 2010. There are plans to 4 to begin searching for opportunities abroad whilst we the success of government programmes that have 100 reach a 20% mandatory blend in 2020. The 2 also expect to see an inflow of M&A in the Brazilian pushed for the proliferation of biodiesel and wind. programme has been the driver behind a number 0 0 wind space. Although the ethanol sector has experienced a lot of of M&A deals. 2008 2009 2010 H1 2011 consolidation in recent times, the market is still relatively fragmented so expert further consolidation. Wind energy, Total deal volume 8 which accounts for 0.5% of the electric generation, 9 Source: Capital IQ, Mergermarket Average deal value $m
  • 7. Deal Focus Capital City: Mexico City Area: 1,972,550 sq km Population: 111,211,789 Time zone: GMT -6 Mexico “The need for alternative well as the reduced government support in the industry up until recently. The bulk of the deals completed have Large foreign involvement in Recent transactions wind power sources of energy has been in wind power. Date Target Description Acquirer Deal Value (US$m) accelerated in recent In early 2011 Spanish based firm Iberdrola Renovables’ Mexico has the potential to equal, if not surpass Brazil as Apr 11 Eolia Revovables Portfolio of two Wind Farms EDF Energy Mexico (Spain) n/d SA purchased the Mexican Bill Nee Stipa wind farm from the dominant wind player in Latin America. The logistical times due to a reduction Gamsea Corporación Tecnológica. This was Iberdrola demands of such an endeavour will mean progress will be Jan 11 Bill Nee Stipa Wind Farm Wind Energy Iberdrola Renovables n/d SA (Spain) gradual. Nonetheless, in the short term we expect in oil reserves. The government Renvables’s second operational wind farm purchase in Mexico, lifting its overall capacity to 106 MW. The deal escalating government support mechanisms to Oct 10 Repsol Bio-energy KUO (Spain) Joint Venture Jul 10 Baja Aquafarms Sustainable Lions Gate Lighting 17 has been increasingly active in was in line with Iberdrola’s strategy of extending its Latin encourage foreign players. Farming (Canada) American coverage and establishing growth in countries Feb 09 Promotora Recycling Double V Holding 11 supporting the sector through with increasingly favourable regulatory frameworks. In July 2011 Canon Power Group, a US based renewable Ambiental Services SA energy firm, announced its intention to invest US$2.5bn Dec 08 Gamesa Wind Energy Iberdrola Renovables 100 various initiatives, which has In late 2010 Spanish oil and gas giants Repsol joined into the Mexican wind market. The sizable investment will Jul 08 Earth Tech Waste Water SA (Spain) Mitsui & Co 55 comprise of three wind farms located in Zacatecas, Baja attracted foreign companies to forces with one of Mexico’s biggest conglomerates KUO to establish KUOSOL, a company dedicated to the California and Quintana Roo for a combined power Mexican Holdings Treatment (Japan) invest in Mexican cleantech, with production of bio-energy. The new company will be output of 312 MW and will bring total installed wind headquartered in Mexico and its main operations will be capacity in Mexico to over 1 GW. wind power especially favoured.” the industrial scale cultivation of the jatropha plant. It is Siemens made its first foray into the Latin American wind hoped that the biofuel crop will generate 16 MW per year Government Support market by supplying 70 wind turbines to Mexican wind Luis Garcia, Sinergia Capital for consumption. power firm Grupo Soluciones en Energias Renovables. Energy Transition Fund The turbines will be installed in the Tamaulipas region In 2009 the state enacted the Energy Transition of Mexico and will supply over 160 MW. The cost of the Diminishing oil reserves driving M&A activity order totalled US$270m and marked one the largest Fund in an effort to promote green energy start-ups and to help facilitate the flow of capital and cleantech investments by a Mexican firm into the wind energy resources into renewable projects. market to date. 3 90 Mexican GDP grew at 5.5% in 2010, its fastest rate of Over the course of three years, starting in 2009, 80 growth for ten years. A sharp rise in manufacturing was 3bn pesos (US$240m) will have been spent to help Transaction volume Average deal value $m 70 the main attributing factor. Despite fast growth, inflation 2 60 Small-scale moves into solar support the renewable sectors. Although the fund has actually dropped to 3.8%, down from 4.4% in 2010. has so far created more favourable business 50 Growth, however, is putting a strain on energy There has not been much interest in solar to date, parameters, it is questionable whether it has requirements. 40 primarily due to the prohibitively high costs of solar helped boost M&A activity. 1 30 panels relative to other technologies. No major One of the most important macroeconomic drivers of 20 large-scale projects are planned; however companies Fonaga Verde Mexican cleantech in recent years has been Mexico’s 10 such as Abengoa, a Spanish conglomerate with In 2010 in support of sustainability projects and dwindling oil reserves. Oil reserves have fallen nearly 0 0 significant operations in renewable energy, are starting renewable energy, the Mexican government opened 50% since 2000. Although the state has made attempts 2008 2009 2010 H1 2011 to make incremental encroachments into the Mexican up a guarantee fund called Fonaga Verde. to finesse its way out of its reliance on fossil fuels and photovoltaic (PV) space. This is certainly a sub-sector nuclear energy, the renewables industry has been Total deal volume The start-up and operation costs of the fund will be Source: Mergermarket, waiting to be exploited by foreign firms that possess relatively slow to get off the ground. Despite this, industry 200m pesos (US$16m). The fund will have around Capital IQ Average deal value $m lower costs of production, especially considering Mexico analysts look upon Mexico’s cleantech potential with 2.5bn pesos (US$200m) to finance sustainable has the third largest solar potential in the world. great sanguinity. In a regulatory and institutional context, projects in the agriculture, forestry and fishery Mexico is much more favourable to M&A in renewable industries. energy than it was just two years ago. The industry waits for firmer government intervention Spanish interest Although policies, initiatives and subsidies have Total volume in cleantech has been relatively low over progressed over recent years, the state still offers more the past 18 months. Underlying this has been the monetary and legislative support to the fossil fuel monopolised ownership of the electricity sector as industries. The aforementioned dwindling oils reserves should reverse this over time. We expect M&A in cleantech to increase once the synergy between what the market can offer and what the state can offer reaches a 10 suitable equilibrium. 11