Edison targets buyouts as Italy votes

The world is waiting for the result of Italy’s referendum on constitutional reforms, where Italians are due to vote on Sunday. This could lead to major change in the country’s political system – and in the economy in the rest of Europe too.

The reason for this is that prime minister Matteo Renzi has said he will resign if the changes are rejected. If that happens then it would spark political upheaval in Italy, and potentially an Italian banking crisis that would shake the whole of the Eurozone.

But it is not just in politics where Italy is potentially facing major change. In the wind market, we are seeing the first indications that the market could be on the cusp of a major period of consolidation, where large players will battle for a dominant position.

For example, this week, EDF’s Italian subsidiary Edison completed the acquisition of Alerion Clean Energy for a reported €107m. Alerion is a listed Italian firm focused on renewables generation, particularly in wind. The buyout has enabled Edison to add 260MW to its own wind portfolio, taking it to 850MW of total capacity.

That makes Edison a significant player in Italy. The country’s total installed capacity was 8.9GW at the end of 2016, but the country’s largest wind owner by operational capacity is ERG Renew, with just over 1GW. It is a highly fragmented market, and Edison is looking to grow fast by taking advantage of that fragmentation.

Last week, chief executive Marc Benayoun said that, by March, Edison also plans to buy another wind company – a non-listed one – and he hopes to win tenders up to 100MW of new capacity by the end of 2017.

In doing this, he hopes to take Edison to over 1GW capacity in Italy in early 2017 and challenge ERG Renew for that top spot.

Edison also plans to invest around €665m into renewables by
2020, to increase the proportion of electricity it generates from renewables from 25% now to 40%.

The strategy looks like it makes sense. Only 295MW of wind farms were completed in Italy in 2015, which is making it difficult for Italy’s big energy players to grow their portfolios fast by developing projects. The alternative is to grow by acquisition – and it is not just Edison that is looking to grow in the country.

Last month, Italian oil giant Eni signed a deal with General Electric to develop large renewables projects in Italy, with onshore and offshore wind its preferences.

It hopes that supportive policies will help with this, including a wind auction where the results came out last month. The government has pledged to back 1GW of renewable projects, particularly onshore wind, and is looking to back another 1GW soon.

These tenders were the result of a ministerial decree that came into force this year. It aims to give incentives to electricity production from renewable energy sources other than photovoltaic, which amount to approximatively €9bn across the next 30 years. Almost 50% of those incentives are destined to go to the wind sector.

And that is how we get back to the referendum. While it is not an energy-focused referendum, the results of the vote on 4 December could affect the wind sector.

For example, if the political turmoil leads to a deepening economic crisis then that is likely to curtail demand for new electricity, which would hit development prospects in the wind sector. The Italian wind sector has waited for years for good incentives for investors, and now it has some that are sparking interest in the sector. If there is a change at the top of the Italian government then this support could be axed. It would not be the first time the wind sector has suffered a change of political leadership.

Next week we will know if Renzi has prevailed – or endured his own Brexit moment.