A GLOBAL renewables bubble may be developing as bidders compete for assets and send prices up sharply, a survey of more than 200 industry executives compiled by accountants KPMG found.
One-half of the respondents polled for this report agreed that a bubble in the renewable energy sector was a “real risk”, with high valuations noted as being the main cause for the failure of M&A efforts in the last three years.
Valuations have continued to rise and there have been a number of deals recently completed where enterprise value per operating MW acquired has hit the $4-5million mark, representing a willingness by many acquirers to pay significant premiums for their targets.
Despite the fears that assets may be overvalued, about 60% of executives surveyed said they expected to see further consolidation in wind, solar and biofuels.
Almost a third expect to purchase such a company between now and 2010.
Fears over climate change have boosted interest in renewable energy, and Government incentives such as mandates that green sources should account for a portion of the total motor fuel or power markets have helped make the industry more economically viable.