Abu Dhabi’s state-backed renewable energy powerhouse, Masdar, is actively pursuing additional acquisitions in Europe following its recent purchase of Greece’s largest renewables company, Terna Energy.
Financial pressures in the sector have lowered valuations, creating a ripe environment for strategic deals.
Ambitious European Expansion
Masdar’s CEO, Mohamed Jameel Al Ramahi, revealed to the Financial Times that the €3.2 billion acquisition of Terna Energy is just the initial step in a broader expansion plan targeting central and eastern Europe.
The company aims not only to acquire existing assets but also to inject substantial capital into Greece and the wider European market.
This strategic move strengthens Masdar’s presence in Greece while also solidifying its foothold in eastern Europe, building on its existing operations in Serbia, Montenegro, and Poland, and leveraging its robust pipeline of projects in the region.
Renewables Industry Facing Headwinds
After a decade of rapid growth, the renewables sector is now grappling with challenges stemming from rising interest rates, particularly in Europe where several companies have scaled back or canceled projects. However, Al Ramahi believes that higher interest rates have brought a dose of realism to the sector, compelling companies to re-evaluate deal valuations.
The era of zero or negative interest rates, where companies could easily secure cheap financing and demand high valuations, has come to an end.
The current environment has forced a recalibration of market expectations regarding valuations. As a result, cash-rich investors from the US and the Gulf states are seizing opportunities in this capital-intensive sector.
Masdar’s Growing Portfolio
Masdar, backed by the UAE’s sovereign wealth fund Mubadala, its power and water company Taqa, and its national oil company Adnoc, has accumulated a $30 billion portfolio of renewable energy projects.
In addition to Terna, Masdar recently acquired a 49% stake in the UK’s £11 billion Dogger Bank wind project, a €1.6 billion share in a Baltic Sea wind farm, and a 50% stake in US wind, solar, and energy storage group Terra-Gen.
The renewables sector’s growth trajectory necessitates substantial capital investments to meet the increasing demand for renewable electricity. As Connor Teskey, head of renewable power at Brookfield, emphasized, businesses in this space require the support of well-capitalized shareholders to fuel their expansion plans.
Masdar’s Ambitious Growth Target
To achieve its goal of 100GW of renewable capacity by 2030, Masdar has accelerated its dealmaking activities. The company currently boasts roughly 20GW of projects in operation, under construction, or in development. This strategic shift involves evaluating and pursuing large-scale opportunities, including significant acquisitions.
Despite growing concerns in some European governments regarding foreign ownership of critical energy infrastructure, Al Ramahi asserts that Masdar has not encountered any obstacles thus far. The company maintains a neutral stance on utilizing Chinese-made solar panels or wind turbines, emphasizing its commitment to an open and liberal market.