Morgan Stanley Unit in $330 Million Deal for Wind Farm Operator

Morgan Stanley Unit in $330 Million Deal for Wind Farm Operator (Bloomberg)

• According to Bloomberg, Morgan Stanley’s infrastructure arm agreed to buy German wind farm operator PNE Wind AG for EUR300m (US$331m).
• The deal, which still needs to meet a minimum acceptance threshold of 50% of the shares plus one to be finalised, clearly highlights investor appetite for renewable energy.

Analysis and Comments

• With BNEF analysis suggesting that in 2/3s of the world wind and solar are now the cheapest option for adding new power generating capacity & with forecasts of total electricity demand to grow such that global generating capacity will have to triple between 2018 & 2050, it is not surprising that wind farm operators such as PNE wind are attracting interest.
• This is not just a long term play – in the UK, the share of renewables in the generation mix rose to 40% in the 3rd quarter, making it a larger contributor than fossil fuels for the first time.
• The UK has an extra carbon surcharge, over & above the main European carbon tax, which takes the total impact of carbon to c. E50/t. This is seen as an important driver of the shift away from coal, which is now c. 1% of UK electricity generation.
• Many analysts have a bullish view on carbon, arguing that the European Union carbon market will be in structural deficit for the next decade, pushing the carbon price to c. E65/t next year. At this level coal generation would no longer make economic sense, and those companies generating electricity via renewables could see a material boost to earnings.
• According to Yahoo Finance, the PNE Wind AG share price is up c. 65% ytd, which is not a bad return. This is a similar level to Encavis (c. EUR1.2bn market cap), the largest German independent power producer, that acquires and operates renewable energy plants – and yes, we do cover Encavis, latest research here.