Battered Clean Energy a Focus as Tariffs Spur Take-Private Push

(Bloomberg) -- Clean energy dealmakers are anticipating a new wave of take-private opportunities in the sector as US President Donald Trump’s tariffs rattle global public markets. 

Private funds and lenders see some publicly-traded renewable energy and clean technology companies as prime targets for acquisition and de-listing. Valuations have already been under pressure from Trump’s bullish fossil-fuel agenda, and now a global trade war is expected to wreak havoc on their international supply chains. 

“Public markets have been particularly punishing over the last couple of years, especially for companies that are pre-profit or scaling capital-intensive technologies,” said Khan Yow, managing director at Seraya Partners, a Singapore-based private equity firm managing $1.3 billion. “These are the types of firms that may be undervalued right now.”

The S&P Global Clean Energy Transition Index has fallen more than two-thirds from a peak in early 2021. The sector has been bruised by a political backlash against climate investing and rising interest rates, which marked the end of cheap debt for wind and solar projects. Now, tariff increases are likely to have outsized impacts on China and Southeast Asian nations critical to clean energy supply chains, exacerbating worries about financing costs. 

While some private equity firms have lamented the performance of holdings they bought during the clean energy bubble, the possibility of acquiring companies in the sector at a discount is interesting investors with long-term outlooks and a belief the green transition is inevitable.

Seraya Partners is looking to take stakes in undervalued infrastructure businesses in Asia with contracted cash flows, and said some beaten-down companies in battery storage, hydrogen and solar manufacturing have strong growth trajectories.

A number of take-private deals have been announced in clean energy in recent months, including Brookfield Asset Management Ltd.’s €6.1 billion ($6.6 billion) acquisition of French developer Neoen SA, which owns solar, wind and energy storage assets. KKR & Co. agreed last year to buy renewable energy producer Encavis AG in a deal that values the German firm at about €2.8 billion ($3 billion).

Other clean energy companies due to soon delist include Canada-based Innergex Renewable Energy Inc., following an all-cash offer from pension manager Caisse de Depot et Placement du Quebec, and India’s ReNew Energy Global Plc, which is set to exit its US listing after an investor buyout.

Future take-private targets could include companies with complex supply chains, such as Canadian Solar Inc. and US energy storage firm Fluence Energy Inc., said Minotaur Capital co-founder Armina Rosenberg. Canadian Solar had declined more than 39% this year to Tuesday’s close, while Fluence shares have tumbled 75%. 

Those companies could “benefit from a take-private to allow for restructuring to realign operations and invest in domestic capacity,” Rosenberg said. There could also be opportunities in firms involved in energy management software, grid optimization or smart energy systems “that have solid underlying tech, but face market volatility,” she added.

Canadian Solar and Fluence didn’t immediately respond to requests for comment.

Venture capital, private equity and infrastructure funds had close to $86 billion of dry powder ready to deploy in climate tech investments at the end of last year, according to Sightline Climate, a market intelligence firm. 

Benedicte de Giafferri, global head of real assets at Natixis SA’s corporate and investment banking arm, “wouldn’t be surprised” that companies may be keen to delist in the current climate. Private markets “have been more stable and attractive because you have less volatility and it’s less reactive to some news,” she said.

There are some notes of caution. Edward Lees, co-manager of BNP Paribas Energy Transition fund, said the timing may be fortuitous for take-privates as renewable companies have typically been delisted at a share-price premium.

Yet, he warned buyers should remain aware: “There are a number of things that got listed that shouldn’t have been — is their technology good enough?” 

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