Green Energy Sector Weekly Update: Traction Building in Renewable Energy M&A

If the dark cloud that is the Great Recession has a silver lining, it is that companies across America have accumulated huge stockpiles of cash. Now, nearly two years after the implosion of global financial markets, companies may finally be motivated to spend some of that cash in this buyer's market.

This uptick in M&A activity is impacting all industries, including the cleantech and renewable energy sector. On Friday, as we were writing The Week In Green Energy, we learned that IT giant Cisco Systems would pay an undisclosed amount for smartgrid startup Arch Rock. Days earlier, Cisco said it was going to work with smart meter maker Itron to develop a communication platform for smart grids.

Earlier in the week, word came from South Korean steel maker POSCO that it was considering spending up to $1 billion to buy Elkem, the Norwegian maker of  silicon for solar panels. Discussions between the two companies are far enough along for POSCO to have hired investment bank Moelis & Co. as an advisor, while Citi is advising Orkla, Elkem's parent company. With this acquisition POSCO is taking the long view on the solar business, confident that the growing pain it is experiencing right now are just temporary. The potential acquisition comes as some of the world's largest solar markets, including Germany, Italy and Spain, are cutting some key subsidies that helped make this once expensive source of energy more competitive with its main rival, wind power.

Amidst all the talk, only one substantial deal was announced this week. Deere & Company, the world's largest farm-equipment maker, announced it was exiting the wind business and selling its John Deere Renewables wind energy business to Chicago-based Exelon for $900 million. The sale was surprising considering that Deere had been one of the sector's pioneer investors. But as the industry ponders whether some of the stimulus-funded subsidy programs, implemented more than a year ago, are going to be extended, Deere opted to re-focus on its farming equipment business. With this latest acquisition Exelon now controls 1,067 megawatts in wind power capacity. The transaction is expected to close within the 2010 calendar year.

When you think that the Senate's climate change and energy bill has all but flatlined, it gets resurrected (again). Senate Majority Leader Harry Reid (D. Nev.) told reporters this week that he might push some sort of energy bill, without a cap-and-trade provision, during Congress's lame duck session after the midterm election. Reid knows polls are not favoring his party and isn't sure he'll still be majority leader after November. He likely sees the lame duck session as his best chance to get this crucial bill to the President's desk. Replacing the divisive cap-and-trade would be a much more palatable Renewable Electricity Standard or RES, which would force utilities to generate a portion of their electricity from renewables. An RES, Reid told reporters, could bring a couple of Republican senators on board.

VC and PE Watch

British private equity firm 3i Group is looking to sell Global Energy Services, the Spanish wind company, and has hired Citi to help it find a buyer.

A week ago today, Solazyme, a research and development-focused algae-based biofuel company in San Francisco, Calif, announced that Bunge, a White Plains, N.Y., food company, invested an undisclosed amount in its Series D round.

Rambling

Wind and solar technology  is now able to produce large amounts of electricity, not quite on par with conventional generation but almost. However, next on the agenda is finding ways to better control all of this clean electricity. Right now for the most part, solar and wind depend on a hot sun and some good and consistent wind patterns to generate power, when there's no sun or its a windless day, that power dries  up but demand doesn't. One solution is developing storage devices able to store wind and solar electricity and offload all of that power at night or during windless days. It's a difficult technology to harness but one that is crucially needed if renewable power is to become a serious source of electricity. That's why this week California passed AB 2514, a cornerstone legislation that mandates state utilities to store a portion of the electricity they generate. The state, a trailblazer on everything green,  knows that wind and solar are just part of the equation and that green power will only take off once we're able develop effective and cheap storage technology.

Source: Green Energy Reporter