Canada’s Brookfield Renewable Partners has its eye on deals in India, “pockets” of the US, and southern Europe, as the company struggles to find good-value acquisition targets across most of North America and Europe amid intense competition for wind and solar assets.
In India, in particular, Brookfield Renewable sees “significant opportunities” after waiting years for such a moment, chief executive Sachin Shah told analysts in a call on Friday. “There’s been a bit of a dry-up of capital in that market recently, especially around renewable power assets.”
“We’ve been patient in that market, not really building out over the last five to seven years given how strong the bid has been. I’d say all of a sudden within the last six or eight months the market has really turned in our favour.”
"We spent the last six years looking at every renewable power opportunity in India that’s come across our desks and come across our group in India," Shah says. "Valuations were just very, very high for what we felt the risk profile was. And so that valuation dynamic really just had not abated until very, very recently."
Toronto-based Brookfield Renewable is one of the world’s largest publicly listed renewables operators, with three-quarters of its 17GW operating fleet tied up in hydroelectric plants. But it has rapidly grown into wind and solar in recent years, including through its majority ownership of US-based TerraForm Power, formerly owned by SunEdison.
Brookfield Renewable is itself majority owned by Canadian investment behemoth Brookfield Asset Management. Its shares trade in both Toronto and New York.
Last year Brookfield swooped on the southern European market, with TerraForm acquiring Spanish renewables operator Saeta Yield. There may be more such deals in the company’s near-term future.
Although competition for wind and solar farms is intense in the US, Shah says that a number of American developers – some of them privately owned – are showing “cracks” of financial distress, offering an opportunity. The US repowering market also looks ripe for some deals.
Rising interest rates have added pressure on developers, and ongoing weakness in the share price of some operators is making it harder for them to pull off big acquisitions. The recent bankruptcy filing of PG&E has put a cloud over operators who have PPAs with the California utility.
“Many of our competitors in the US face significant headwinds in their business and have limited, I’d say, capital for growth,” Shah says.
“We think we are really well positioned to execute on a few of those opportunities – but obviously it’s going to be dependent on how these markets play out and what alternatives those groups have.”
With opportunities now on the horizon in India, southern Europe and the US, "we are building our liquidity war chest in anticipation", Shah says.