Michael Ebner, Head of Infrastructure at investment firm KGAL GmbH, told Clean Energy Pipeline: “Prices of renewable energy projects are going up to all-time high levels. In the wind sector, where feed-in tariffs are relatively stable, prices have increased by 10%-15% during the past two years.”
Mergers and acquisitions (M&A) in the German wind farm sector increased significantly in 2012, with 27 German wind projects acquired for a total of $1.6 billion, a significant increase on the 19 projects totalling $971 million transacted in 2011, according to Clean Energy Pipeline data.
A recent Clean Energy Pipeline survey of more than 200 senior executives active in the German renewable sector concluded that operational onshore wind farms are currently being sold at between Eur1.5 million and Eur2.2 million per megawatt, depending on the characteristics of the location.
One of the main sources of demand that is driving up prices for clean energy projects, most notably onshore wind and solar farms, is the need for municipal utilities to acquire new generation assets to replace the coal and nuclear plants that are coming offline in Germany over the next two decades.
Baden-Wuerttemberg-based utility EnBW said in 2011 that it would invest Eur8 billion in clean power through to 2020 and closed a Eur822 million capital increase in June 2012 to achieve this goal.
Mannheim-based MVV Energie has committed to invest Eur3 billion by 2020 in renewable energy, efficient cogeneration of power and heat, and the maintenance and modernisation of existing power plants and grid infrastructure, by 2020.
Bavarian utility Stadtwerke Muenchen aims to power the entire city of Munich from renewable sources by 2025 and has earmarked a budget of Eur9 billion to do so.
The appetite for renewables among municipal utilities is more urgent than their large national counterparts such as RWE and E.ON, due in part to the fact that the major players are more advanced in building out their own renewable capacity.
Another major factor is that national players are not under as much pressure to meet political clean energy targets as utilities that are owned by federal states. EnBW, for example, is 46.55% indirectly owned by the federal state of Baden-Wuerttemberg, which is currently governed by a coalition between the Green Party and the Social Democrats.
“Utilities are one of the major acquirers of renewable energy assets,” said Ebner. “It’s not the big four German utilities such as E.ON and RWE, but the smaller municipality-owned utilities. They are very keen right now to acquire onshore wind and solar photovoltaic (PV) assets in Germany and even abroad. Their appetite has definitely increased in the past two years. There are political reasons for this as their owners want them to offer renewable energy to clients. The Munich utility for example has set a goal that 100% of its electricity will be produced by renewable sources by 2025. So they have to acquire.”
The municipal utilities face an array of other new entrants seeking to acquire German onshore wind farms. Due to a strong economy, stable feed-in tariff and enduring financial support from state bank KfW, Germany remains a safe haven for investors fleeing from other European markets, which are enduring economic and regulatory pressures.
For long-term, low-risk institutional investors in particular, onshore wind assets are preferred ahead of every other renewable energy asset – 78% of respondents in a Clean Energy Pipeline survey of more than 200 industry executives said they believe that operational German onshore wind projects are attractive to long-term, low-risk institutional investors rather than operational solar PV (70%) and offshore wind projects (61%).
David Jones, Head of Renewables at Allianz Capital Partners, an investment unit of insurance giant Allianz, told Clean Energy Pipeline: “There is a lot of competition in the German onshore wind market as new entrants have come to the market that were not there a few years ago. This includes municipal utilities, Swiss utilities, retail funds and also a lot of international investors such as ourselves.
“Appetite to acquire German onshore wind farms is currently very high. This is in part driven by a retreat to safety from the more peripheral countries in Europe. It is definitely a sellers’ market at moment. Prices are going up and returns are going down.”
The sheer demand for German onshore wind farms means that traditional developers are dominating the sellers’ market, with most utilities and investors disinclined to sell stable, long-term revenue-generating assets, according to Jones.
“There are some secondary sales by utilities and funds that are looking for liquidity, but the main sellers of onshore wind farms in Germany are still the developers,” he said.
Michael Ebner and David Jones spoke to Clean Energy Pipeline in connection with the Clean Energy Germany Investment Guide, a desktop reference source that includes a detailed analysis of survey data provided by 200+ clean energy executives on the prospects for clean energy in Germany. It also includes an extensive directory of investors, advisors and project developers active in the German clean energy sector in 2012, as well as detailed league tables that rank the most active venture capital funds, banks, law firms and project sponsors during the same period.
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