Greentech eyes wind, solar mergers by 2013

Danish renewable energy developer Greentech Energy Systems hopes to merge with two European wind or solar companies by 2013 to help boost its capacity to one gigawatt by 2014, the firm's chief executive told Reuters on Tuesday. Greentech, which is listed on NASDAQ OMX, has 290 megawatts (MW) of installed wind and solar power capacity in Denmark, Germany, Italy, Poland and Spain which it wants to double by the summer and increase to 1 GW by 2014.
"Ideally I would prefer aggregate mergers to acquisitions. You cannot build more than 100 MW on your own around the world," Sigieri Diaz della Vittoria Pallavicini said in an interview. "We want to be a public company so we have no problem with getting diluted - merging and merging again," he added. Some experts are predicting more consolidation in renewable energy as the market matures, and a leap in clean energy investment fuelled a record number of deals last year.
Greentech merged with Italy's GWM Renewable SpA in August last year. It reported a 2011 annual profit of 11.3 million euros ($14.85 million), against a 2.9 million euro loss in 2010. Earnings before interest, taxes, depreciation and amortisation (EBITDA) jumped to 19 million euros from 2.3 million in 2010. In a three-stage plan, the company is aiming to build up its installed wind and solar capacity. It will then diversify into other green technologies such as mini-hydro or thermal power. Finally, the firm aims to sell the electricity it generates directly to the consumer and industrial market.
Pallavicini hopes a merger will help double Greentech's installed capacity by this summer. "We are already in talks with a couple of groups. And there should be another transaction by the first quarter of 2013," he said, without giving further details.
Although the firm is looking at both private and public companies as potential targets, Pallavicini favours private firms which might be suffering from constrained capital markets amid the euro zone crisis. "They are in a difficult situation because they have no access to capital and the financial markets. So they are stuck in a position with no growth," he said.
They have to have a minimum return of 9 percent, he said. But the company will focus on building its presence in Europe before looking further afield at assets in East and Far Eas, Pallavicini said. Greentech is involved in 25 renewables projects in six European countries, with 86 percent of its portfolio in the wind sector and 13 percent in solar.
The firm is currently developing two 30 MW wind projects in Poland - one is a joint venture with Polish energy group PGE and the other is with a French utility. Construction on both should be finished by the end of this year. Greentech is keen to find potential merger targets in Poland but would favour developing companies rather than those with assets already in operation.
"Poland is one of the few countries in eastern Europe growing with a strong GDP. Incentives are attractive even though there are rumours of a change in law for 2017," Pallavicini said, referring to possible amendments to Poland's regulatory framework governing green certificates after that year Even if changes reduce incentives for producing green electricity, energy prices are still climbing every year in Poland and the country has high energy demand, he added.
Greentech's main shareholders, including pharmaceutical group Rottapharm-Madaus, tyre group Pirelli, Italian bank Intesa Sanpaolo and financial group GWM, should support raising any cash required for M&A activity. "We are delivering results and they are happy. If we needed to raise cash our main shareholders would follow us easily," the chief executive said.