M&A heating up in renewables sector

Bnamericas Published: Wednesday, September 22, 2021
M&A heating up in renewables sector

Mergers and acquisitions in Latin America's renewable energy sector are heating up, despite concerns from bankers about the political climate and structural weakness in the region's main economies.

Data compiled by Transactional Track Record (TTR) for January-August 2021 shows the number of sector M&A growing 40.5% year-on-year, while deal value jumped 243%. 

“We see growth in the energy sector in LatAm, especially when it comes to renewables,” Marcela Chacón, TTR analyst for Latin America, tells BNamericas. “A record uptick was seen that was totally unrelated to the recent health crisis, and this sector could gain a significant market share, at least through the medium term.” 

That uptick, however, was not evident in the outlook of dealmakers in the region, with the Intralinks-Acuris Energy M&A Report 2021, released on Monday, painting a much dimmer outlook, with only 12% of Latin America and Caribbean-based dealmakers expecting an uptick in the region's M&A and 72% believing at deal activity would fall. Only 24% of Latin America-based respondents expect to do a deal in the year ahead. 

Also, more than half (60%) of North America-based dealmakers expect the fundraising environment to improve in the year ahead, whereas, just 8% of LAC-based firms see fundraising improving. 

And as shown below, 76% of LAC-based respondents expect to carry out an energy M&A deal in the next year.

Source: Intralinks-Acuris


“The bearish sentiment among Latin America-based respondents is somewhat surprising,” says the Q1 report from data room specialists SS&C Intralinks and Acuris, even though “the region certainly has its fair share of political worries and structural weaknesses.” 

IMF data indicates that LAC countries were hit harder than those in any other region in 2020, as regional GDP plummeted by 7%. The IMF estimates a 4.6% rebound in 2021 making it the only region that will still be worse off after the pandemic than it was beforehand.

“On top of this is the question of Venezuela, which has the world’s largest oil reserves, but which has yet to embark on the reforms needed to reverse plunging output,” the report read, adding that other issues hitting regional sentiment include volatility in exchange rates with the US dollar, interest rates and general economic and market stress. 

A major upside risk, however, is China and its interest in strategic Latin American energy assets, the report adds.

“To put this in context, China poured US$29.5bn into Latin American energy M&A between 2016 and Q1 2021 – accounting for more than a fifth of the regions’ total energy sector M&A over that period,” read the report. “Looking ahead, China’s interest in Latin American energy assets is only likely to increase.”


Even though only 20% of LAC respondents said ESG will become significantly more important in M&A and investment decisions in the coming 12 months, interest in renewables is growing as investors “pivot their capital allocations away from oil, gas and coal.” 

PV solar garnered the most interest among global respondents at 68%, followed by onshore wind with 59%, with hydroelectric, battery storage, hydrogen and geothermal rounding out the list (as shown below). 

Source: Intralinks-Acuris

“Interestingly, biofuels/biomass receives a strong vote of support from Latin America-based respondents (74%),” read the report. “Investors here could be betting on an improvement in the fortunes of the region’s long-established biofuels sector, which will benefit if oil prices continue to recover.”

With respect to government policy incentives, 37% of respondents considered direct grants the most important factor for driving investment in renewable energy, though this rises to 52% of LAC-based respondents.

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