Imagine “Houston” and “alternative energy” in the same sentence—even in the same setting. That’s exactly what came together during the ASA Houston’s recent Energy Valuation conference (and thanks to chapter president, Tim Stuhlreyer, Convergent Capital Appraisers, for pointing out the convergence).
“The renewable energy sector continues to have a broad appeal and is attracting the full mix of industrials, utilities, and financial acquirers worldwide,” Joseph Omoworare (Duff & Phelps), told ASA attendees in Houston. There were 141 deals announced globally as of Q1 2011, totaling $11.2 billion, according to a recent industry publication. As the industry gradually shifts to lower-carbon options, by 2035 electricity generation from renewables (measured in kilowatts per hour) is projected to increase 75% from 2009 levels, Omoworare said. Natural gas generation is expected to rise by 40% while dependency on coal will continue to decrease.
In the renewable sector, the focus is now on wind and solar, which accounted for most if not all of the recent surge in M&A activity. “I’m positive about solar,” Omoworare said. Solar companies are trading at low multiples right now, due largely to competition from the Chinese. But this competition is also reducing costs of production, predicted to decrease by 50% over the next three to four years, Omoworare noted, and “there’s enough motivation to keep driving those costs down” to help build domestic solar capacity in the future.
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