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What price is wind energy?

First published in Cleantech magazine, Volume 6, Issue 2. Copyright Cleantech Investor Ltd

Wind Project M&A Activity

By Anne McIvor

Valuing wind assets is perhaps as much art as science, depending upon a wide variety of factors. The market value of wind farm assets varies widely according to the stage of the project lifecycle. Other influences on the value of transactions in the wind sector include the market in which the assets are based (taking into account local factors such as subsidies and prevailing prices in that market), meteorological conditions, power price agreements – and a host of other factors.

A study by Deloitte in August 2011 adopted a ‘market approach’ to estimate value, alongside traditional cashflow analysis. The study concludes that transaction values of wind assets are significantly affected by the stage of the project (i.e. whether the project has already installed capacity, or if capacity is under construction – or is in late stage development). Deloitte estimates of EV/MW multiples for capacity in each stage of the project are summarised below.


Wind Asset Valuations

€m

EV(€m)/MW multiple

Late-stage pipeline

0.4x

Under construction

1.0x

Installed MW

1.7x

Source: Deloitte

The availability of statistics on valuations varies widely in the sector. However, we have summarised some of the recent merger deals in the wind sector in the following tables, organised according to geography and type of project (European offshore project deals are included in a separate table from the onshore projects). All of the figures we quote for transaction values are based on US$ valuations (rather than euros). This can be a distorting factor depending on the currency rate used.

The table below includes two Australian deals, both from 2011, both relating to onshore wind – and both valued at US$2.3 million per MW of installed capacity.


Selected Onshore Wind Project M&A Activity, Australia - 2011 and 2012

       
Seller Target Buyer Summary Project Size (MW) Deal Value (US$m) US$m/MW

RES Group  

Taralga wind farm (New South Wales, Australia)

CBD Energy 

CBD Energy (and partners) acquisition, in 2011, of Taralga onshore wind project, due for completion in 2013, from RES Group.  100 225 2.3

Emu Downs Wind Farm

Emu Downs farm and adjacent site, Australia

APA Group

APA Group acquired the onshore Emu Downs wind farm and adjacent site for US$171m and acquisition costs of US$9m in 2011. 80 180 2.3
Source: Cleantech Investor/Various

We have divided the European deals into onshore and offshore projects, for purposes of comparison. Prices disclosed in Europe for onshore assets have ranged between US$1.7 million to US$2.6 million per MW. (Table below)

 Selected Onshore Wind Project M&A Activity, Europe - 2011 and 2012

Seller Target Buyer Summary Project Size (MW) Deal Value (US$m) US$m/MW

Auxiliar de Construccion y Servicios (ACS) 

Portfolio of wind assets in Castilla Leon, Spain.

Funds advised by Bridgepoint 

Acquisition of Spain's largest independent portfolio of 11 onshore wind farms in 2011 by funds advised by Bridgepoint from Auxiliar de Construccion y Servicios (ACS) for EUR596.5M (US$850M).  443 850 1.9

Scottish and Southern Energy plc (SSE) 

Dalswinton (Scotland), Minsca (Scotland) and Slieve Divena (Ireland) wind farms.

Infinis (a Terra Ferma company)

SSE sale of three onshore wind farms in Ireland and Scotland to Infinis for £173.6m (US$251m) in 2011. 96.8 251 2.6

Infigen Energy

German wind energy portfolio

 

Infigen Energy sale, in 2011, of portfolio of German onshore wind assets to a renewable energy fund for EUR154.6m (US$222m). 128.7 222 1.7

Martifer Renewables 

Leki Dukielskie (10 MW), Bukowsko (18 MW) and Rymanow (26 MW), Poland

IKEAGroup

Martifer Renewables reached agreement on the sale of three onshore wind projects to the IKEA Group in 2011.  54 116 2.1

Verbund

Poweo portfolio of 10 wind farms in France

AXA Private Equity / Kallista

AXA Private equity and Neoen acquisition of a portfolio of 10 onshore farms, valued at EUR50m (US$67m), in 2011. 102 67 0.7

Austrian Raiffeisen Bank International

Bulgarian projects

LUKEG Renew (a joint venture between ERG and Lukoil)

LUKEG Renew agreed the purchase of Bulgarian onshore projects in February 2012 at  a price of EUR52m (US$68.4m).  40 68.4 1.7

n.a.

Polish assets

Taiga Mistral

Spain's Taiga Mistral agreed to acquire a 40 MW Polish farm in February 2012. No price was disclosed. 40 n.a. n.a.
Source: Cleantech Investor/Various

The European wind industry is being buoyed by offshore projects, which are driving growth. Although still in its early days, there has been merger and acquisition activity in the offshore project space. DONG Energy was a participant in four of the selection of five deals in the table on offshore projects. DONG was a seller of three later stage projects, typically a 50% stake to institutional investors, which were based on relatively high valuations: US$5.7 million, US$3.8 million and US$6.1 million per MW of installed capacity respectively. In contrast, the very early stage deal in which DONG was an investor was valued at a much lower per MW price (based on ‘potential’ capacity of the project) of just US$0.1 million – for an initial investment. That deal involved an option for DONG to acquire the entire project at a later stage for an undisclosed price. See following table:


 Selected Offshore Wind Project M&A Activity - 2011 and 2012


Seller Target Buyer Summary Project Size (MW) Deal Value (US$m) US$m/MW

DONG Energy 

Anhold offshore wind farm, Denmark (50% stake).

Pension Danmark (30% interest) and PKA (20% interest)

Pension Danmark and PKA acquisition of 50% of Anholt offshore wind farm for c. DKK 6bn (US$1.13bn) in 2011. 400 1,130 5.7

DONG Energy

Gunfleet Sands Offshore Wind Farm, UK (49.9% stake)

Marubeni Corporation 

Marubeni Corporation (Japan) acquisition of 49.9% stake in DONG Energy's Gunfleet Sands offshore wind farm in 2011 for £200m (US$324.4).  172 324.4 3.8

PNE WIND AG

PNE Gode Wind II GmbH, Danish offshore wind farm project.

HYSSING Vermögensver -waltungs -gesellschaft GmbH

An investment in the PNE Gode offshore wind project, in 2011, by Hyssing (held by Danish Brancor Capital Partners APS) was based on a valuation of EUR0.427m/MW (US$0.413m/MW). n.a. n.a. 0.4

Smart Wind

Heron Wind Ltd. and Njord Ltd. offshore projects in the Hornsea zone, UK

DONG Energy

DONG Energy acquisition of 33.3% stake in first two Hornsea zone offshore projects, with potential capacity of up to 1GW, for UK£15m (US$23.3m) in 2011. DONG has option to acquire remaining 66.7% from the seller, Smart Wind (50/50 joint venture, Mainstream Renewable Power and Siemens Project Ventures GmbH).   1000 23.2 0.1

DONG Energy

Borkum Riffgrund 1, Germany (involving installation of 77 Siemens offshore turbines)

Oticon Foundation - 18% / KIRKBI (parent company of Lego) - 32%

DONG Energy agreed the sale of a 50% stake in the Borkum Riffgrund 1 offshore project, due for completion in 2015, for DKK4.7bn (US$848.9m), in early 2012. Construction expected to commence 2013.  277 848.9 6.1
Source: Cleantech Investor/Various

Prices for North American transactions are listed in the table following table:

Selected Onshore Wind Project M&A Activity, North America - 2011 and 2012

Seller Target Buyer Summary Project Size (MW) Deal Value (US$m) US$m/MW

EDF EN Canada Inc.

Lac Alfred Wind Project, Bas-Saint-Laurent (400km north of Quebec City), Canada (50% stake). 

Enbridge Inc 

Enbridge Inc. purchase of a 50% interest in the LacAlfred Wind project for US$330m in 2011. The onshore project is deploying 150 Repower turbines. 300 330 2.2

Gamesa

Four farms in Pennsylvania, Iowa, Texas and Illinois (USA)

Algonquin

Gamesa agreed to sell four onshore farms in the US to Algonquin in February 2012 at a price of US$888m 480 888 1.9

E.ON

Iroquois County project, USA

JP Morgan and Wells Fargo

Institutional investment led by JP Morgan in February 2012 involved an equity investment in exchange for a stake in the E.ON Iroquois County onshore Project. The size of the stake was not disclosed. 150 122.2 n.a.

RPM Access

Vienna project, Marshall and Tama counties, Iowa, USA

MidAmerican Energy

MidAmerican energy agreed to acquire the Vienna onshore wind project from RPM Access in January 2012. 103.5 n.a. n.a.

Clipper Windpower Development Company

200.1 MW Eclipse wind project (Guthrie and Audubon counties, Iowa, USA) and the 101.2 MW Morning Light project (Adair County, Iowa). 

MidAmerican Energy

MidAmerican energy agreed to acquire several projects from Clipper Wind power in the State of Iowa in early 2012. 301.3 n.a. n.a.

Volkswind

The Muscleshell projects in Montana, USA; two farms with 10 MW capacity each

Goldwind Science & Technology

China's Goldwind agreed, in the first quarter of 2012, to acquire two projects in the US, which will be built with Goldwind PMDD turbines. 20 n.a. n.a.
Source: Cleantech Investor/Various

Prices for Latin American deals have varied widely. CPFL has been an important player in Brazil. Its purchase of Jantus, in 2011, valued the entire portfolio (a mix of operational assets and projects under development) at US$0.8 million/MW (based on current US$/R$ exchange rates). A more recent deal by CPFL in Brazil, the purchase of Bon Ventos, valued this portfolio at an average of US$3.7 million/MW. See table below:


Selected Onshore Wind Project M&A Activity, Latin America - 2011 and 2012

Seller Target Buyer Summary Project Size (MW) Deal Value (US$m) US$m/MW

Preneal, S.A.

Energia Alterna Istmena, S. de R.L. de C.V. and Energia Eolica Marena, S.A. projects, Oaxaca, Mexico

Macquarie Mexican Infrastructure Fund (32.5%),  Fomento Económico Mexicano, S.A.B. de C.V. (FEMSA) (45%); Macquarie Capital (22.5%). 

Macquarie Mexican Infrastructure Fund (leader) investment in 396 MW late stage onshore wind project in 2011: enterprise value MXN$1.06bn (US$89m). Vestas supplying 132 V90-3.0 MW wind turbines to the project.  396 89 0.2

Liberty Mutual Insurance Company, Citi Participações e Investimentos, a Black River Asset Management fund and Carbon Capital Markets Limited.

Four operational parks (Formosa, Icaraizinho, Paracuru and SIIF Cinco) in the State of Ceará, Brazil, with capacity of 210 MW; the Quintanilha Machado project in Rio de Janeiro, capacity 135 MW; portfolio of projects with capacity of 732 MW in Ceara and Piaui (of which 412 MW approved for participation in auction).

CPFL Renováveis

CPFL Renováveis acquired Jantus in 2011 for R$950m and R$544.2m in debt (for the operational parks and portfolio of projects). It paid an additional R$70m for Jantus II (the Rio de Janeiro project). The combined Enterprise Value was R$1.56bn (US$860). 1077 860 0.8

Suzlon

Faísa complex in Trairi, Ceará state, Brazil. Includes five contracts approved in the 2009 auction, which are due to come online by July 2011.

FIB BB Votorantim funds and Enerplan Participações (Oleoplan Group)

Suzlon purchased the rights to the Faísa complex from Martifer in 2011 and subsequently agreed to sell the project, which it will continue to manage, in 2012, for R$540m (US$. 134.4 297.8 2.2

Cobra Instalaciones y Servicios

Four wind parks in Palmares do Sul, Rio Grande do Sul, Brazil: Atlântica I, II, IV and V, expected to become operational in 2013, with licenses awarded under the 2010 auctions, at prices of R$135 per MWh.

CPFL Renováveis

CPFL Renováveis agreed to acquire a group of onshore projects in Rio Grande do Sul, from Cobra Instalaciones, in January 2012, subject to regulatory approval.  120 n.a. n.a.

Fundo de Investimento em Participações Brasil Energia, Servtec Investimentos e Participações Ltda., Fundo de Investimento em Participações Progresso

Bons Ventos Geradora de Energia S.A.: four projects in the State of Ceará, Brazil.

CPFL Renováveis

The total consideration agreed was R$1.06bn (US$585m), comprised of a R$600 m to the seller and the assumption of short term debt of R$462m. 157.5 585 3.7
Source: Cleantech Investor/Various

 
 

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