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PE powers into Europe’s renewable energy sector

By David Stevenson

Private equity investment in Europe’s renewable energy sector has been on the rise in recent years, as GPs tap into growing demand for energy alternatives in the region.

PitchBook data shows that in 2021, PE firms invested around €12.8 billion (about $13 billion) in European renewable energy companies across 189 deals. Since the start of 2016, investment has exceeded €60 billion in total.

While dealmaking has slowed in the first half of 2022—a total of €4.4 billion was invested across 24 deals—investment is still expected to grow in the coming years, in line with the EU’s commitment to the UN goal of being carbon neutral by 2050. 

Moreover, a recent report from law firm Reed Smith on PE investment in energy transition notes how a decade of low returns generated by traditional energy providers is also pushing private markets investors to up their renewables exposure.

Among the largest deals in recent years is KKR‘s 2020 buyout of Viridor Waste Management for £4.2 billion (about $5 billion). Part of Viridor’s offering is its biomass operations, which convert waste materials into energy.

At the time of the deal, Viridor’s then-CEO, Phil Piddington, said the KKR acquisition would enable the company to increase its ability to hit the market’s demand for landfill-diversion facilities that produce low-carbon heat and power, contributing to clean energy efficiency.

LPs are also driving investment in the sector amid an increasing focus on sustainability. Many pension and endowment funds are less willing to invest sizable equity in non-renewable energy, as their investment mandates now more commonly have ESG at their core.

Some managers will continue to target oil & gas investments—particularly those seeking to capitalize on the recent spike in fossil fuel prices—yet increasing returns from the renewables sector, along with government subsidies, are expected to continue driving interest in renewable energy.

Source: PitchBook