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Robust valuation multiples and deal activity supported unprecedented renewable roll-out in 2022

xFigureFinance is an independent financial advisory firm that focuses on project financing and M&A in Bulgaria and the region. A core industry for us is renewable energy and energy transition, where we have advised local and foreign investors as well as domestic financial institutions. Our team members have 10+ years of experience and have worked on solar, onshore wind, biogas and more recently on storage projects with 600+ MW of installed capacity.

We are constantly tracking global deal activity in the industry, while further focusing our attention on the EU and the CEE region. In this material, we will be discussing some interesting developments in the RES sector and specific transactions that grabbed our attention.

And what better way to kick-off 2023 than a quick review of the renewables sector in 2022, its driving forces, dealmaking activity and implications for the foreseeable future.

Solar and Wind Development in 2022

Considering the improved economics of renewable energy assets development combined with strong political messages, it comes as no surprise that solar and wind projects in Europe have picked up quite the momentum post-pandemic. Solar is proving to be the initial winner of the developments discussed above. In total, early estimates place Solar installations to record a 47% Y/Y growth this year (totalling 41.4 GW of installed capacity in Europe in 2022 alone).

New Solar Capacity Installed in 2022


Image Originally From: SolarPower Europe

Wind development also showed some promising signs, as some sources estimate that the EU added 33% more wind generating capacity in 2022 as compared to 2021. This estimate can be further supported by offshore wind development, where wind installation vessels (used as proxy for development activity) spent 30% more days working on projects in 2022 compared to 2021.

Increased Appetite for Renewable Developers

Seeing the growth numbers and considering the time & effort it takes to develop a quality pipeline of renewable projects, it comes as no surprise to us that investor sentiment towards renewable energy developers remained robust throughout the first half of 2022. This increase in investor appetite is mostly reflected in the transaction multiples which remained steady across the time period and in the total deal value which has rapidly increased throughout the years, signalling more ambitious pipelines and strong fundamentals.

Deal Multiples for Renewable Developers


The figures presented above are, by definition, average for the industry and should be taken with a grain of salt. The key takeaway from this graph is that in the current times of depressed valuation multiples and reduced dealmaking across industries, a significant attention and capital has been shifted towards renewable energy. The abovementioned valuations can differ due to traditional concerns such as size, liquidity etc., and due to sector-specific features such as difference in energy markets across geographies, technologies employed and size of growth opportunities relative to the current portfolio of renewable assets. At present, we are seeing widely different multiples based on operational capacity, plants under construction and credible long-term pipeline of projects.

As this article is included in the pilot edition of our newsletter, we have decided to establish a baseline in terms of expected valuations and provide further context. We have chosen the IPO of the Spanish developer Acciona Energia to provide a further context into the multiples rationale as we see them. The selected company debuted on 01/07/2021 with a market capitalization of EUR 8.8 billion. The market capitalization implied that the Enterprise Value of the company stood at 6.2x Revenue and 12.6x EBITDA which represents an incremental premium to the averages recorded for the year. We believe that this company provides a good trading comparable for the universe of renewable developers due to several reasons. First, it is a pure-play independent power producer, as well a relatively liquid company with significant scale. Secondly, it is reasonably diversified in terms of geographies and technology. Finally, the company has a good mix of currently operating assets (11 GWp) and growth prospect through an ambitious pipeline. These factors make Acciona Energia a good valuation comp for other developers in Europe.

Robust multiples and significant growth of M&A activity

Overall, development pace for RES projects in Europe marked a significant increase in 2022 compared to prior years, with both solar and wind recording notable strides despite the disruptions in the supply chains early in the year. Trading multiples in the sector remained high in a year that saw most other industries register decline in their valuations. Moreover, disclosed nominal transaction amount in H1 of 2022 was already higher than for the whole 2021, hinting to a shift of capital and interest towards the industry on a global scale.

xFigure has advised on number of M&A transactions related to the energy transition. Whether you are an institutional investor or a corporate looking for opportunities in the Bulgarian and CEE markets, we can support you with local insight, great partner network and understanding of the region’s key advantages .

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