September 10, 2007
Canada
Canada
Canada’s nascent wind power business has caught the attention of foreign players, who have been steadily buying up domestic companies as the industry consolidates into fewer and fewer hands.
While more buyouts are expected, wind energy executives say there is still room for small independent wind developers in an industry that is finding its feet in a burgeoning market for alternative energy sources.
This summer, two very different foreign players grabbed a foothold in the Canadian wind business. In June, U.S. investment bank Lehman Brothers bought a big stake in private Toronto wind and solar power developer SkyPower Corp. for an undisclosed sum.
Then at the end of July, French energy and gas giant Suez SA (soon to merge with state-owned Gaz de France) acquired Ventus Energy Inc. – which has two wind farms operating in P.E.I. and more planned in other provinces – for $124-million.
The purchases give Lehman, an investment firm with a desire to participate in the alternative energy sector, and Suez, a multinational with several wind investments in Europe, entries into the North American wind business.
These deals followed earlier purchases of Gale Force Energy Ltd. by Irish-based multinational wind power firm Airtricity Inc., and a takeover of AIM PowerGen Corp. by Britain’s Renewable Energy Generation Ltd.
These buyouts have left Canada with “an increasingly stratified market,” said Matthew Kaplan, an analyst at research firm Emerging Energy Research in Cambridge, Mass.
In a report, he says that the remaining companies are at opposite ends of the size spectrum. At one end are major energy players such as TransCanada Corp., Brookfield Power, Enbridge Inc. and Suncor Energy Inc., each of which has a significant wind energy division. These companies are too costly for any rivals to acquire, Mr. Kaplan says.
At the other end of the spectrum are tiny, private, players such as Sequoia Energy Inc., Green Breeze Inc., Schneider Power Inc. and Katabatic Power Corp.
Most of these firms are focused on small projects in one or two provinces, Mr. Kaplan says, and they could be “ripe targets for acquisition activity over the coming year.”
One of the key reasons for the consolidation, said Robert Hornung, president of the Canadian Wind Energy Association, is the shortage of wind turbine equipment. “It is very difficult for smaller players to get the attention of turbine manufacturers,” he said.
By linking up with a bigger player, wind companies can move up the line, and gain financial clout that will help them build their businesses.
Still, Mr. Hornung said, “I don’t think we’re near the point where there will be only large players,” particularly as several provinces are launching programs to encourage small wind companies.
Thomas Schneider, president of small Ontario wind developer Schneider Power, acknowledged that consolidation in the wind business will continue, mainly because “a lot of money is required.”
But Ontario’s “standard offer program,” where the province pays a set amount for renewable power generated by small producers, will help keep many smaller firms in business, he said.
Companies like Schneider “can do everything in-house, [including] our own financing, and we’ll continue to build projects … one wind turbine at a time,” Mr. Schneider said.
“Our focus has always been smaller-scale low-impact wind farms distributed across the province, close to demand centres,” he said. “That will be paying off and has positioned us in a good area.”
But what about the few independent mid-sized players left in the Canadian wind sector? Could they end up in the hands of foreign players?
The two most prominent players are both public companies: Calgary-based Canadian Hydro Developers Inc. and Boralex Inc. of Kingsey Falls, Que. Both have hydro and biomass assets in addition to their wind projects.
Cascades Inc. and two directors control about 75 per cent of Boralex, so it would be a tough takeover target. Canadian Hydro is more widely held, with less than 10 per cent in the hands of directors.
Canadian Hydro CEO John Keating said the company has every intention of executing its expansion plans under its own steam, although “we’re a Canadian public company and we’re highly visible, so from time to time … we will receive phone calls.”
Mr. Keating said that even as some players get taken over, there are many new, small wind companies popping up to take advantage of the high profile of the industry and the wide availability of venture capital.
By Richard Blackwell
9 September 2007
URL to article: https://www.wind-watch.org/news/2007/09/10/flurry-of-deals-carves-up-a-canadian-industry/