Decarbonizing Canada's electricity grid could lead to a significant uptick in mergers and acquisitions in the renewable energy sector, a new report says.
But the report also suggests deal activity could pick up again in the next six months, with the renewable energy sector poised to be a potential bright spot."The opportunity for M&A will likely increase as we build out ," said PwC deals partner Derek Chu. M&A activity across all industries has been sluggish recently due to rapidly increasing interest rates, which has led to a valuation expectation gap between sellers and buyers, said Chu.
The government's draft clean electricity regulations, which aim to get Canada's electricity grid to net-zero by 2035, are meant to ensure this investment is directed toward greener sources of energy.Chu said renewable energy projects, such as wind and solar farms, often change hands multiple times between the development, construction and operational phases. A flurry of new green energy development could spark a wave of M&A activity, he said.
He said many related businesses will also prosper with an expanding and evolving Canadian electricity grid. While most renewable energy facilities will be owned by infrastructure investors, he said they will likely outsource maintenance, repair and operations services to external providers.