EDP’s acquisition of Horizon heats up wind energy’s M&A arena

With the global trend towards renewable energy, mergers and acquisitions have been significant in the wind turbine manufacturer arena, with the recent example the bidding war between AREVA and Suzlon Energy for REpower. But the M&A arena in wind energy is now extending beyond turbine manufacturers to project developers, as Energias de Portugal’s (EDP) acquisition of Horizon Energy demonstrates.

The $2.15 billion (US) EDP paid for Horizon is unprecedented. There have been a spate of purchases of smaller developers recently, including BP’s purchase of Greenlight and Orion, Babcock & Brown’s purchase of Superior Renewables, Iberdrola’s purchase of Community Energy and Midwest Renewables, NRG’s purchase of Padoma, and AES’s purchase of SeaWest.

However, EDP’s purchase of Horizon is much bigger than the other recent purchases of project developers. Horizon is expected to be the third-largest wind developer in the United States by the end of 2007. The acquisition gives the Portugal-based EDP an avenue into the incentive-laden U.S. market, buoyed by state-level mandates and tax credits from the federal government. EDP, which plans for the U.S. market to comprise 45 percent of its wind power production by 2010., becomes the fourth largest wind developer worldwide with the addition of Horizon’s assets.

 The worldwide market for renewable energies has expanded recently in response to global warming, rising fossil fuel costs, and a desire by many countries for increased energy self-reliance. While individual national markets rise and fall, the worldwide market has shown a consistent upward trend over the past decade. Therefore, many companies are striving to internationalize their reach so that they are less exposed to political and market risks associated with individual national markets. The combination of EDP and Horizon will have a significant presence in the United States and several European countries.

Mergers and acquisitions in the wind turbine-manufacturing sector have attested to the growth of the wind energy market. But the EDP acquisition of Horizon demonstrates that the heat in the M&A arena extends beyond turbine manufacturers to project developers as well.