New Italian market framework to spur mergers

ITALY: A new market framework for Italian wind energy should spur a round of mergers and acquisitions, as some firms reconsider strategies for the country's wind market and others scout out opportunities.

Over 5MW: Fewer projects will receive subsidies (ABN Wind Energy)
Over 5MW: Fewer projects will receive subsidies (ABN Wind Energy)

As of 1 January wind projects over 5MW will need to compete in an auction process to receive a fixed-price incentive, with projects seeking a lower tariff favoured. Now, portfolios of operational wind farms with combined capacity exceeding 1.2GW are being marketed while developers are also looking to sell wind farm projects, particularly ones that are fully authorised.

While none of the companies involved are commenting, sources say the International Power division of Gaz de France has put up for sale a 550MW portfolio of operational Italian wind farms. International Power broke into Italy's wind market in 2007, when it acquired a portfolio of primarily Italian wind assets from Irish investor Trinergy.

Edison, which helped start Italy's wind business in the 1990s and is now owned by French utility EDF, is also marketing its 468MW Italian wind farm portfolio, according to sources. Swiss energy group Alpiq, in August announced plans for sales of its renewable energy assets outside Switzerland, including 300MW in wind farms, 200MW of which are in Italy. While Italian renewables firm Falck Renewables is not looking to divest, a source says it is looking for a partner. Falck, primarily a wind energy player, has wind farms not only in Italy but also in the UK, France and Spain.

"Wind energy development in Italy is now a high-risk business," explained Giuseppe Mastropieri, head of renewable energy sources at consultancy Nomisma. "After a period in which about 1GW was installed each year, the prospects for the market are now for growth of between 300-400MW annually. Project financing has become more difficult and there will be a consolidation of assets."

Investor appetite

Luckily for those selling both operating wind farms and authorised projects, there also appears to be investor appetite for acquiring them. "There are some companies looking to get out of the Italian market but there are others looking for opportunities," said Christof Stork, Italy manager at GL Garrad Hassan. "There is a certain balance between those interested in buying and selling, with some investors already present in the market looking at expanding their portfolio."

One company reportedly interested in expanding is Erg Renew, the renewables unit of Italian refinery Erg. Erg Renew, which already has 488MW in operational Italian wind farms, has not commented on talk that it has been evaluating both International Power and Edison Italian wind portfolios.

The focus on authorised projects makes sense. The new auctions are for authorised projects only and the incentive price will be assigned to a maximum 500MW onshore projects of over 5MW each year. Projects to receive the FIT are expected to be well below the annual growth rate of recent years.

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