By Ben Sills and Jeremy van Loon
March 19 -- Renewable energy companies may tap financial markets for more funds this year instead of looking to mergers with utilities as a way of funding expansion, said Morgan Stanley, manager of the most initial public offerings for the industry in 2009.
“The big utilities have significant capital spending plans so it’s unlikely they’ll be big contributors to M&A activity,” Chris Thiele, head of European power and utilities investment banking at Morgan Stanley, said in an interview. “Equity and debt capital markets could be busier areas.”
Morgan Stanley managed $2.85 billion in IPOs for wind, solar and biomass companies in 2009, surpassing the previous leader Credit Suisse Group AG, according to a study released today by Bloomberg New Energy Finance in London. Credit Suisse last year slipped to sixth with $539 million in IPOs, trailing UBS AG with $1.59 billion and Citigroup Inc. with $844 million.
European utilities may have to spend more than 1 trillion euros ($1.36 trillion) in the next decade to replace power stations, rebuild aging transmission networks and meet environmental targets, Citigroup estimates. Global investment in renewable energy fell 6 percent to $162 billion in 2009, New Energy Finance estimates.
A group of investment banks led by Morgan Stanley managed China’s Longyuan Power Group Corporation Ltd.’s $2.6 billion listing on the Hong Kong stock exchange in December. Morgan Stanley also managed offerings for Q-Cells SE and Gamesa Corp. Tecnologica SA.
M&A Advisers
In a separate ranking, Credit Suisse was first in 2009 among advisers to companies on mergers and acquisitions, handling transactions worth $2.54 billion. The industry, including wind power, solar and biofuels, remains ripe for further consolidation, said Robert Mansley, head of Credit Suisse’s European renewable energy investment banking unit.
“There are a lot of companies in some of these sectors, and it remains somewhat fragmented,” Mansley said. “For both IPOs and M&A, it is going to come down to which businesses have a differentiated offering.”
Goldman Sachs Group Inc. ranked second, advising on $1.61 billion of merger transactions, followed by JPMorgan Chase & Co. with $1.51 billion and HSBC Holdings Plc with $1.23 billion, the New Energy Finance league tables show.
China National Nuclear Corp., the country’s biggest operator of atomic power plants, may sell shares publicly to fund overseas expansion, President Sun Qin said this month. Green Plains Renewable Energy Inc., the fourth-biggest U.S. ethanol company, plans to sell 5 million shares and may use the funds to pay for acquisitions, Chief Executive Officer Todd Becker said last month.
Market Concern
Capital markets have been roiled by concern that the Greek government may struggle to finance its budget deficit, which reached 12.7 percent of its economy last year, the most in the euro nations. Renewable energy companies have been caught up in the market turmoil, which choked off credit to consumers and businesses worldwide.
EPV Solar Inc. filed for protection from creditors last month after it failed to refinance a $3.6 million loan. Silex Systems Ltd. this week bought A$20 million ($18.4 million) of solar assets from Solar Systems, which sought protection from creditors last year.
“Businesses were able to tick over last year but funding is still an issue,” Ronan O’Regan, director of energy and utilities at PricewaterhouseCoopers LLP in London. “The question is can they continue to do that. If you run out of money, you run out of money.”
Utility Interest
Utilities may also be competing with smaller renewable companies for investments, Thiele said. Enel SpA, Italy’s biggest power company, said in December it may hold an IPO for its clean-energy unit this year. Poland is considering the sale of a stake in Tauron Polska Energia SA, the country’s second- largest power utility.
“For the larger companies, these are stable businesses with predictable cash flows so the capital markets would be open to them,” Thiele said.
Michael Molnar, a partner at New York-based Greentech Capital Advisors, said utilities may still be in the market for acquisitions this year.
Solar power, including both photovoltaic and solar thermal, as well as geothermal energy and smart-grid equipment makers may be among the sectors experiencing the most M&A activity, he said.
“A lot of the smaller companies are coming up to commercialize and, if you want to make a dent in the energy space, you have a huge amount of capital needs,” Molnar said in an interview. “Often it makes sense to have a big strategic partner or be acquired.”
Source: http://www.bloomberg.com/apps/news?pid=20601103&sid=aIB17L8UY618
Comments
Post a Comment