Canada poised for M&A surge in renewables sector - study

TORONTO (ICIS)--Canada is poised to see a surge in mergers and acquisitions (M&A) activity in its renewables energy industry, driven by the country’s “aggressive regulation” and support for the sector, according to a study released on Friday.

The study, carried out by consultancy PricewaterhouseCoopers (PwC), said Canada’s regulatory framework and subsidies for renewables would spur venture capital and private investment activity.

“Government subsidies and sector support provide clarity on a renewable energy project's economic return,” PwC said. “This, in turn, tends to spur venture capital, corporate and private investment activity.”

Another factor that would help drive M&A activity in Canada's renewables sector was its increasing maturity, which made it “ripe for consolidation”, said PwC.

Equally important were commitments by high-profile Canadian retailers to renewable energy and the sector’s long-term growth prospects in the country, which would prompt Canada’s many oil and gas producers to diversify into renewables, PwC said.

“The future of the Canadian renewable sector does indeed look bright.” said PwC consultant Kristian Knibutat.

"With the right long-term policies and continued access to capital, [Canada] is set to be a cornerstone of one of the most critical global sectors of the millennium,” he said. “[Canada’s] market is ready for a significant change of events in global renewable deal making.”

But PwC also noted that Canada had not been as active as other countries in renewables M&A lately, as most deals occurred outside North America, favouring companies in Europe and Asia.

In fact, year to date, only 22% of North American renewable deals had a Canadian target, compared with 34% in 2009 and 30% in 2008, the consultancy said.

This was far below the average for the energy and mining sectors, where global deals with Canadian targets were much higher.

PwC's bullish forecast for M&A in Canada’s renewables sector comes amid some doubt about the outlook for M&A and foreign investment in the country after the government earlier this month blocked BHP Billiton’s $39bn (€28bn) hostile takeover bid for PotashCorp.

That decision has been heavily criticised, and the government has yet to fully disclose the reasons for its finding that the deal had “no net benefit for Canada”.

($1 = €0.73)