Private equity investment companies have seen renewable energy sector as an attractive sector for quite a few years now. A number of PE firms have made notable investments in renewable energy companies around the world, especially in emerging solar and wind energy markets. Global PE investment giant KKR has furthered this trend by investing in one of the largest renewable energy developers in the world.
KKR will pick up a 33% stake in Acciona Energy International, the renewable energy arm of the European energy giant Acciona Energía. The PE firm will pay €417 million ($567 million) for the one-third stake while Acciona Energía will continue to hold the remainder of the stake. AEI owns an impressive 2,300 MW renewable energy assets across 14 countries, including some of the most attractive markets. This is probably one of the reasons KKR saw the justification to make such an investment.
Some of the high potential markets where AEI has assets include US, Mexico, Australia and South Africa. All these countries, with the exception of Australia, are on the cusp of implementing historic low-carbon policy initiatives.
The US is already among the leading renewable energy markets in the world, and with the impending implementation of carbon emission standards in the power sector, the US renewable energy sector is set to become even more attractive to investors.
South Africa is set to implement a carbon tax on energy-intensive industrial sectors. The government would allow industries to purchase offsets (possibly from renewable energy projects) to meet their obligations under the carbon tax scheme. The African country also has ambitious long-term renewable energy capacity additions.
Under the Integrated Resources Plan, South Africa aims to install 9.4 GW of solar energy capacity and 8.4 GW of wind energy capacity by 2030. The government has already auctioned a number of solar and wind energy projects that are to be completed by 2016. Renowned international companies including Sunpower Corporation, Enel and EDF are associated with these projects.
This deal, involving major players in their respective domains, could rejuvenate the corporate private equity transactions in the renewable energy sector. In 2013, the private equity investments in renewable energy companies fell by 46% year-on-year to about $2 billion.
KKR had last year announced plans to invest in six solar power projects in California and Arizona in partnership with Google.
Image credit: Acciona Energy
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