DACH Solar Energy Preview
Technology lights the way.
The DACH region is poised to see a technology-focused boom in investment and M&A across the solar energy value chain, with panel manufacturers, project owners and developers, and solar-tech firms all taking advantage of the energy transition.
While the global market downturn caused by the coronavirus pandemic will continue to affect all sectors, power generation must be maintained, and the sector may yet become a safe haven for investment.
At a local level, the region's market dynamics are increasingly robust, with panel production on the rise and independent power producers (IPPs) keen to take advantage of new technologies. This year looks set to be particularly promising, with the introduction of carbon pricing in the German buildings sector likely to increase the popularity of home energy storage, which in turn increases the value of roof-mounted solar.
Amid this change, the pace of M&A is increasing, as smaller firms look for investors and larger players seek to snap up attractive targets. For example, solar film producer Heliatek is seeking financing to commercialise its industrial-grade solar film offering, while smaller solar tech firms such as Swiss Insolight and German ecoligo are seeking growth funding to enter into new markets.
The relentless technological progress seen in the space has brought down the cost of installation and means that solar energy can be deployed economically in new areas, such as for city heating. Innovation in the way we handle demand and supply of electricity is also breathing new life into the solar industry, with digitisation and automation keen areas of growth. For example, German virtual power plants (VPP) operator Next Kraftwerke is scanning competitors for acquisitions, having itself attracted interest from strategic investors.
Meanwhile, the green-and-brown-field project M&A market remains as robust as ever, with financial investors and asset managers vying with trade players to build scale and critical mass.
German IPP Encavis [ETR:CAP] is one such strategic leading the way, having acquired a portfolio of solar and wind parks from Nordex [ETR:NDX1] and Vestas [CPH:VWS] for around EUR 40m in February 2019, according to Mergermarket data.
Moreover, as installation costs are reduced, the investment case for solar moves away from subsidised, grid-scale projects, and to economically viable standalone projects. Investors are increasingly attracted to commercial-scale solar projects with long-term power purchase agreements (PPA), Felix Grolman, chief commercial officer at Greencom Networks said, noting that these projects typically provide an IRR of between 4% to 8%.
However, traditional IPPs and utilities have to contend with new entrants to the space, such as oil majors keen to demonstrate diversification away from fossil fuels. These strategics are often outgunned by financial investors, which are able to hoover up operational capacity through their low cost of capital, and so the easiest way to gain exposure to the solar industry is through adjacent parts of the value chain.
For example, in February 2019 Anglo-Dutch oil and gas company Royal Dutch Shell [AMS:RDSA] acquired Sonnen, a German provider of energy storage solutions that boost the efficiency of roof-mounted solar, for an undisclosed amount, as reported.
Other trade names have likewise sought to acquire adjacent technologies that boost solar efficiency and application. In May 2019, innogy [ETR:IGY] acquired the entire share capital of Greenergetic, a German solar e-commerce startup, from eCAPITAL, Gruenderfonds Bielefeld Ostwestfalen, Howaldt Energies and its founder.
While portfolio rotation of operational capacity will continue to provide an undercurrent of M&A, increasingly large and noteworthy deals are likely around the technology that underpins the sector, particularly from buyers seeking a competitive edge in a crowded market. The future is bright.
|Announced Date||Target Company||Target Description||Bidder Company||Seller Company||Financials (EUR)|
|*07-Dec-19||MES Solar XXI GmbH & Co KG; and MES Solar XXXII GmbH & Co KG||Germany-based company engaged in photovoltaic power station project ; and Germany-based company engaged in photovoltaic power station project||Obton Solenergi Stabil P/S|
|Clenergy (Xiamen) Technology Co Ltd|
|03-Sep-19||Mobisol GmbH||German-based company that provides engineering, developing and delivering rent-to-own solar home and business systems, appliances and services||ENGIE SA|
|DEG - Deutsche Investitions- und Entwicklungsgesellschaft mbH; and Investec Asset Management Limited|
|06-Aug-19||Soventix GmbH||Germany-based company that develops and builds solar projects and also provides the operation and maintenance services for it||Management Vehicle|
|Vorndran Mannheims Capital Advisors GmbH|
|09-Jul-19||ABB Ltd (solar inverter business)||Switzerland-based solar inverter business of ABB Ltd||FIMER SpA|
|15-Jun-19||Ralek Mobiliengesellseharft mbh & Co KG; and Langur Mobiliengesellseharft mbh & Co KG||Germany-based owner and operator of solar plants; and Germany-based owner and operator of solar plants||Global Bering SL|
|KGAL GmbH & Co KG|
|14-May-19||Opvius GmbH||Germany-based integrator of flexible OPV (organic photovoltaic) solar technology||Armor SA|
|*11-Apr-19||SoWiTec group GmbH (25.1% stake)||Germany-based company engaged in developing solar and wind farms||Vestas Wind Systems A/S|
|*08-Mar-19||Enerthing GmbH (Undisclosed Stake)||360 Energy S.A.; Fraunhofer Gesellschaft; and NRW.Bank|
|*04-Mar-19||GP Joule Service GmbH & Co. KG (50% Stake)||Germany-based provider of technical and commercial control management services for the operation of PV and wind power powerplants||ENERTRAG Aktiengesellschaft|
|GP Joule GmbH|
|*21-Feb-19||Vestas Wind Systems A/S (Korbeldorf wind turbines) (Undisclosed stake); Nordex SE (Baar wind farm) (Undisclosed stake); and Friedmannsdorf solar park (Undisclosed stake)||Germany-based solar park; Germany-based wind farms of Nordex SE; and Germany-based wind turbines of Vestas Wind Systems A/S||Encavis AG|
|Nordex SE; and Vestas Wind Systems A/S|
*Represents transactions that falls outside Mergermarket's official inclusion criteria
Companies to follow
German solar company Soventix could consider taking on an external investor and would be open to discussions, owner and CEO Thorsten Preugschas said. The Wesel-based company is looking to accelerate its growth in emerging markets, and would be receptive to talks with strategic players interested in developing renewable energy projects, particularly in sub-Saharan Africa. Soventix, which anticipates generating roughly EUR 50m revenue in 2020, would be open to selling either a minority to a majority stake. Preugschas became Soventix's sole owner in August 2019 following a management buyout of previous majority owner VM Capital.
Next Kraftwerke, a German large-scale virtual power plants (VPP) operator, has attracted interest from strategic investors, CEO and co-founder Hendrik Saemisch said. It has been in contact with both local and international investors. Considering the company is 10 years old and backed by financial investors, a “next step” could happen, and theoretically, a decision could be taken this year, but he did not suggest a timeframe or a trigger for such a move. Its investors include Dutch energy utility Eneco, Neuhaus Partners and the High-Tech Gruenderfonds. The company is growing organically by 10%-15% annually, reaching 2018 sales of EUR 627.7m.
Lition, a German energy marketplace, is planning a Series A financing round for 2H21, once it has reached a minimum valuation of EUR 50m, head of business development Stephan Vogel said. The company will offer a minority stake, and will aim to scale the business and grow with the money. It is seeking venture capital and energy-provider trade investors that can bring expertise and offer valuable strategic partnerships for the business. It has a strong advisory network, including SAP’s [ETR:SAP] chief technology officer Juergen Mueller, who is Lition’s tech adviser. It just closed a bridge financing round, targeted at friends and family, raising around EUR 2m.
Insolight, a Swiss solar tech company, is aiming to close a Series A funding round of up to EUR 5m within the next two months, CEO and co-founder Laurent Coulot said. The Lausanne-based company is holding talks with new and existing investors to raise between EUR 4m and EUR 5m in return for an undisclosed minority stake. Insolight aims to conclude the round by the end of April, he added. The company is open to approaches from financial sponsors as well as strategic investors such as PV manufacturers or agritech firms if it makes sense operationally. Funding from the Series A would be for new market entries and producing its first PV units with contract manufacturers.
German solar company ecoligo could mandate advisers for a Series B funding round to open later this year, CFO and co-founder Markus Schwaninger said. The Berlin-based company is determining how much it would seek to raise in the round, which will be concluded either in 4Q20 or early next year. Ecoligo is looking to sell an undisclosed minority stake, and management could consider mandating advisers with connections to investors with expertise in the energy industry or in emerging markets in Africa, Latin America and Southeast Asia. Ecoligo’s crowdfunding platform for emerging markets enables businesses to generate electricity at affordable prices and establish solar PV generation projects at below-market interest rates.
German IBC Solar, which provides PV and energy-storage systems, could consider taking on investors for its subsidiary IBC Solar Energy in the medium term, CEO Udo Moehrstedt said. IBC Solar will consider opening its wholly owned subsidiary to investors in a year or two, to raise growth financing. The option to take on board investors for IBC Solar has not been ruled out, and the company could consider this option to finance growth if the market accelerates. Moehrsted and his son own the company, which can finance its growth with its own resources at the moment, generating approximately EUR 320m revenue in 2019.
PV-Invest, an Austrian operator and acquirer of solar parks, is looking to make opportunistic acquisitions of solar PV plants to expand its footprint across Europe, co-founder and CEO Günter Grabner said. The company, based in Klagenfurt am Wörthersee, is aiming to grow its fleet by acquiring existing PV plants, constructing its own plants and obtaining project rights for new facilities. PV-Invest is looking to move into new geographies as well as invest further in markets it already has a presence in. The company considers Hungary, Spain and Italy as markets where it expects to see “increased activity” in 2020.
Encavis [ETR:CAP], a German operator and acquirer of solar and wind parks, is looking to increase its energy portfolio over the next few years through a mix of opportunistic acquisitions and organic growth, CEO Dierk Paskert said. Encavis could pursue potential targets that complement Encavis’ existing fleet of parks or cover new services in solar or segments such as rooftops. Targets should have market cap value of at least EUR 100m. Countries high on Encavis’s agenda for expansion include Spain, Italy, Denmark and Ireland. Encavis’s home market of Germany is also increasingly important, with growing demand for green energy from corporates and utilities.
3U HOLDING [ETR:UUU], a German IT and renewables holding company, is looking to make acquisitions over the next months to grow and list its Weclapp subsidiary, CEO Michael Schmidt said. The Marburg-based holding company has identified a list of potential targets and is in talks with at least one candidate. 3U would aim to sell a 28% stake in Weclapp in an initial public offering (IPO), with the proceeds from the listing to be used to finance more acquisitions. The company expects to list Weclapp in Frankfurt, tentatively scheduled for 2020 or 2021.
Germany’s Heliatek, a German producer of organic solar films, is looking to raise EUR 35m by 1Q20, advised by BNP Paribas, chief executive officer Guido van Tartwijk said. The EUR 35m will complete a EUR 50m Series E-1 round; Heliatek has already received EUR 10m and commitments of an additional EUR 5m-EUR 6m from existing and new investors. Talks with investors are underway and the company has interest from European-based family offices and venture capital firms. Ideally, van Tartwijk would like a strategic investor from the Middle East and a financial investor from Asia to complete the round, to have investors located in all Heliatek’s main markets.
DZ-4, a German solar power company, is planning to return to the market in 2020 for a Series C funding round as part of its wider plan of on-boarding a strategic investor, CEO Tobias Schuett said. The Hamburg-based energy company is looking to raise EUR 5m in the funding round, and proceeds would be used for product development, and further digitizing DZ-4’s business model and operations. The company is looking to give a mandate to advisers for the Series C round and is open to receiving approaches. It is not pursuing an immediate sale, but the company plans to complete an exit later on in 2021 or 2022.
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