The UK renewable energy market is experiencing a new class of investors emerging. These are the real estate players, logistics companies and infrastructure owners– entities that have suffered from the recession massively.
These players see entering the renewable energy sector as a way of maximising their assets after the financial crisis hit their core businesses. In particular, these companies are targeting photovoltaic solar and small-scale wind projects, which they are able to integrate easily into their core business.
These smaller players could represent less risk for some investors and bring more competition in the race to secure sparse project finance. The nature of these renewable energy projects should be really attractive to some investors because you get decent returns and some of the off-take risk disappears.
However, to do so effectively, the new players need to bring about in change in culture. They need to realise this is not quite the same as what they already do and put the right schemes in place.
It would be interesting to note that we are experiencing a similar trend in India. Infact I would need to just change the country name from “UK” to “India” in the above lines.
One example was DLF which ventured into wind farms. They entered the business before recession kicked in and were forced to sell off to concentrate on their core strengths. But currently I have come across many real estate and infrastructure companies entering the power sector with focus on renewable energy.
British Government expects these small players to contribute not more than 2% of its renewable energy targets. Do we have any numbers/expectations for the Indian market?
An interesting trend for M&A activities to follow soon.