Mergers and acquisitions in the solar sector register an increase of 92%

As mergers and acquisitions (M&A) in the Brazilian market solar energy had 92% growth in 2022, compared to 2021, with 25 transactions completed, almost double the previous year, which recorded 13.

The data comes from a survey carried out by Redirection International, a consultancy specialized in advising on mergers and acquisitions, and takes into account all M&A negotiations and asset acquisitions involving photovoltaic generation and distribution companies, not including startups, related services or formations of joint ventures in the segment.

According to economist Adam Patterson, partner at Redirection, the good performance in M&A activity is a result of the growth of the sector, which already accounts for 11,2% of all electrical energy produced in the country and has recently become the second main source of the Brazilian energy matrix, according to data from ABSOLAR (Brazilian Photovoltaic Solar Energy Association).

“The distributed solar generation industry is going through a phase of marked growth and will be increasingly marked by M&A transactions, both from local and foreign companies, and from large investment funds”, he highlighted.

Among the factors that boosted the attraction of investments in the sector, according to the report, are the Legal Framework for distributed micro and minigeneration and tax incentives for the installation of photovoltaic systems.

Patterson recalls that the search for clean energy and the ESG agenda are a global trend and Brazil has great potential for this type of generation. “Current legislation has brought legal certainty to investors and mergers and acquisitions bring great opportunities to accelerate this transition of the energy matrix”.

The survey also points out that the macro energy sector in Brazil — which encompasses all generation sources — also showed growth in the volume of mergers and acquisitions. “This demonstrates the resilience of this segment, which is going against the national market, which recorded a 7,8% drop in total M&A volume in 2022”, he highlighted.

Operations involving energy companies represented 10% of the total transactions registered in Brazil last year, with 114 consolidated negotiations, an increase of 81% compared to 2021, when there were 63.

Expanding market

With the solar energy market expanding, the expectation is that mergers and acquisitions of photovoltaic projects will follow this trend, especially with the entry of global investors in search of energy security and high profitability.

In Redirection International's view, the startup market should also boost the sector in the coming years. A survey carried out by the Distrito innovation platform reported that energytechs attracted, in the first 11 months of 2022 alone, around US$288 million in contributions, growth of 134% compared to 2021.

“The sector has everything to grow with the entry of more private investments and foreign capital. Large players seek quality projects in solar energy, including Brazilians such as Ômega Geração and AES Tietê, as well as large global players such as Total, Dutch Shell, Royal and Equinor. Furthermore, traditional energy companies are increasingly paying attention to this type of generation”, concluded the executive.