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Renewables Deals, the first edition of an annual review by PwC. Solar overtook hydro as the second largest renewables deal category after wind, accounting for 20% of total renewables deals.

The impact of the credit crisis was felt in terms of value of deals dropping even though number of deals held up and some key findings of the report were:

• A quarter of deals in the power sector are for renewable assets or technology.
• Renewable energy now accounts for one tenth of M&A value in the wider power sector.
• During 2007 and 2008, 441 renewables deals were announced with reported value totalling US$70.3bn.
• Solar deals quadrupled in number and more than quadruped in total value in 2008 compared to the previous year. Average solar deal size also rose - from US$76.7 million in 2007 to US$89.3 million in 2008.

Around the world, governments are implementing measures to increase the share of rewnewables in the power mix. In Europe, the EU has set a target of 20% of final energy consumption to come from renewable sources by 2020. In the US, President Obama is keen to "harness the sun and the winds and the soil to fuel cars and run factories."

Deal makers
The sale of a 25% stake in EDP Renováveis, the wind power arm of Portuguese power group EDP, to institutional investors headed the list of rewewables deals in 2008. The EDP float raised US$2.8bn. Scottish & Southern Energy (SSE) were involved in another big deal acquiring Airtricity Holdings in Ireland in a deal worth US$2.1bn, making SSE the largest owner of wind power assets in the UK. The two deals outside Europe in the top ten were both hydro power assets. The importance of players from outside the sector is highlighted by the fact that only 16% of all 2008 renewables purchases were by alternative energy companies themselves.

Deal places
The focus for renewables deals became increasingly concentrated on Europe during 2007 and 2008 with a value of US$17bn whereas deal value in the rest of the world fell year on year by 63%. North America's share of worldwide renewables volume held broadly level with just under a quarter of worldwide deal value. Asia Pacific's year on year deal activity increased from 53 to 64 in 2008. Deal numbers rose everywhere, with the exception of Russia, South America and Africa.

Eight of the ten largest 2008 solar deals were announced in the second half of the year with seven of them in the last four months, suggesting that momentum was unaffected by the Autumn 2008 intensification of the banking crisis.

Ronan O'Regan, Director Energy & Utilities, PricewaterhouseCoopers, observes:
"Interest in solar deals is coming not just from within the energy sector. The solar sector is attracting increased interest from wider industrial players seeking to play a part in the scaling up of the technology. Despite the credit crunch, interest in the sector is likely to remain lively especially as valuations fall making targets more attractive."

Technology and manufacturing deals
Renewables Deals reports a growing trend of deals for manufacturing and technology assets higher up the renewables value chain. Between a quarter and a third (29.5%) of all 2008 renewables deals were for such assets - much higher than their 11% share in 2007. In many cases, these are moves by companies who are seeking to secure an end to end supply chain footprint. The trend is also being driven by the increasing interest of industrial groups and investment funds seeking to step up their presence in the sector.

Manfred Wiegand, global utilities leader, PricewaterhouseCoopers said:
"The renewable energy sector is an increasingly important arena as companies and investors respond to the growing role of renewable sources in meeting global energy demands - 2009 will be a watershed year. Falling energy prices are casting doubt on the viability of some renewable energy schemes out there however, governments have a chance to set a more certain framework for the industry."