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Financing Corporate Growth in the Renewable Energy Industry


Christoph Ettenhuber

Financing constraints have been central to the political and economic debate about renewable energy development. This book addresses four related corporate finance questions. The first chapter reviews theoretical considerations and empirical evidence on so-called funding gaps. Chapters two and three analyze the genuine structures of equity and convertible debt offerings in the industry. The final part investigates to what extent business combinations are perceived as a valuable means to company growth. The analysis contains a variety of empirical findings that are novel to existing emerging industry and corporate finance research. It shows that many investors perceive the level of asymmetric information and regulatory risk, as well as the industry’s structure, to be detrimental to renewable energy finance.


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5 M&A-Success in the Renewable Energy Industry


87 5 M&A-Success in the Renewable Energy Industry The renewable energy industry has seen rapid growth over the last decade. Fuelled by growing concerns about climate change and dwindling fossil fuel re- sources, governments have put aggressive stimulus packages in place to grow new businesses and support established players in the industry. The use of solar, wind, hydro, geothermal and tidal energy sources as well as biomass is widely regarded as a key element of future energy supply. In 2008 more power capacity was added from renewable energy sources than from conventional means in both the European Union and the United States (REPN, 2009). The growth of the industry has induced a wide range of companies, new ven- tures and established companies alike, to enter the market. Utility companies are buying into renewable energy to decrease their carbon footprint and diversify their energy sources; big industrials are increasing their exposure to benefit from the attractive growth rates associated with the sector; innovative technologies are being picked up by rivals to increase efficiency in business models that are yet largely dependent on government stimulus. These developments have led to a strong increase in mergers and acquisitions (M&A) activity. While the five years from 2000 to 2004 saw an aggregate of 216 deals, this number was rec- orded in 2008 alone. Wind and Solar account for the bulk of transactions, but activity in biogas and hydro has accelerated as business models mature. In the light of this growing M&A-activity,...

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