The report presents the results of the KPMG poll of director-level executives across more than 200 global power and utilities companies, suppliers, distributors and investors. According to Andy Cox, energy partner at KPMG, it shows that: “in the face of adversity, the global energy industry is feeling positive about the future of renewables. Indeed, 78% of senior executives from across the industry believe renewable energy projects are economically viable despite collapsing fossil fuel and commodity prices and the credit crunch”.
After the
Results of the KMPG poll also show that over 60% of respondents consider that onshore wind and solar power will grow by over 5% in 2009, while only 38% forecast similar levels of growth in offshore wind, and only 19% in marine technologies.
44% think the Copenhagen conference (COP 15) to find a successor to the Kyoto Treaty will mark a significant turning point and will generate an increase in investment, compared to just 18% who disagree.
Respondents were also optimistic about future investment opportunities, with 63% of respondents believing
Global recession hitting renewables
KPMG found that renewable energies have been significantly affected by the economic downturn, with the NEX index of renewable companies posting a drop of 65% from January 2008 to March 2009; most of which was recorded in Q4 2008.
“The size of deals looks set to change and the age of the multi-billion dollar deal seems to be at an end, at least in the short term; almost four times as many respondents arguing that these are likely to decrease in number as those expecting an increase. Furthermore, less than a quarter (24%) of companies expect to invest in excess of US$100 million in renewables M&A in the next 12 months compared to 39% last year,” stated Cox.
It appears that larger utilities and power companies are weathering the storm better than smaller renewable energy developers. According to Cox, 57% of executives from large companies (more than $10 billion in revenue) said finance is now more difficult to obtain compared with 70% of executives from smaller companies (less than US$500m in revenue).
Cox also highlighted that, “the respondents also predicted a fall in activity originating from hedge funds, infrastructure funds and private equity houses. Our research suggests that, while third party financing is proving difficult to secure, those able to leverage off strong corporate balance sheets - such as the large power companies - are well positioned to pick up bargains”.
KPMG also examined the implications of economic downturn on M&A activity, finding that 58% of respondents expect to make significant cuts in planned or ongoing projects because of the economic downturn, while 58% will be spending less than US$50m on M&A this year.
