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Reflecting on 2021 – An Intense Year with Record Installations and Continued Market Evolvement

A few days into the new year, having had some rest over the holiday period, we have now had the chance to reflect on what was a very eventful 2021. We would like to share a few highlights and thoughts with you via this note.

During 2021, we advised on seven Nordic renewable energy deals including in total ca 1 GW of capacity requiring investments of ca EUR 1.3 bn. This brings us to a total of 63 closed Nordic renewable energy deals since 2007. We are thankful for the continued vote of confidence from our clients and getting the opportunity to contribute alongside them to the energy transition. Together, we enabled new renewable energy at a magnitude corresponding to the annual consumption of ca 300 000 households.

To us, the market still feels very young and dynamic. We learn new things every day together with our clients and partners. Thinking back about what we experienced and learned together, we would like to highlight a few observations:

  • A number of market entries and continued high interest from previously active investors

The flow of capital into the renewable energy space continues to be strong. A spectrum of investors, including direct institutionals, investment funds and an increasingly broad range of industrial / strategic investors are seeking large-scale investments on the Nordic market. While international investors continue to dominate, local investors have also stepped up their activities. Approximately half of our deals in 2021 were with market entrants either doing their first investment within the asset class or in the Nordics as a geography.

  • Improving corporate PPA opportunities via larger universe of offtakers but also increased merchant acceptance by equity and debt investors

During the past year, we noted an expanding offtaker universe including international energy majors and various types of large power consumers. While such PPAs in the past were seen as a must in order to attract investments, they are now increasingly pursued subject to improving the overall risk-return profile of the investment. Both equity and debt investors are adapting to the new market environment with increasingly innovative structures.

  • Electrification of society increasingly in focus

In taking a view regarding future Nordic power prices, we perceived an increased recognition of the expected significant increase in power consumption driven by electrification of transport and energy-intensive industries. In the past, most of our dialogues focused on the energy mix, somehow assuming static demand. The rapidly increasing electrification, intermittent production and volatile power prices and the market’s response to this will be very interesting to follow.

  • Wide range of deal sizes with focus on projects and portfolios in operational or ready-to-build stage, but with also increasing focus on growth platforms

2021 was record high commissioning year for Swedish and Finnish wind. In Sweden, ca 2.2 GW (608 WTGs) was added to the grid and in Finland 671 MW (141 WTGs). Build-out continues to be strong and also the larger installed capacity forms a base for a more active brownfield market.

During the past years, we have been able to develop large-scale onshore wind farms in the Nordics. During 2021, the average deal size remained north of 100 MW, but we worked on deals from 30 – 550 MW. While the supply of large-scale ready-to-build projects and portfolios has been quite strong in the past, the supply/demand balance has shifted due to many projects being stuck in environmental/municipal processes. Although we hope that this will be transitory, this could impact the supply of projects in the short term.

In addition, we also noted an increased appetite for growth platforms. Building renewable energy-focused independent power producers is once again a priority on the strategic agenda of many investors. Furthermore, we saw increasing activities for the development of solar assets in southern Sweden during 2021, backed by corporate offtakers. The activities in establishing positions for future build-out of offshore wind in the Baltic sea also increased. Is offshore wind the missing piece of the puzzle for Sweden, Norway and Finland?

  • COVID-19 and impact on deal making

The pandemic has unfortunately continued and we have had to adapt to it. In 2021, a great number of the deals we worked on were done without the parties ever meeting in person (!). This would have been unimaginable for us a few years ago. In many ways, we have learned to work via efficient digital platforms. We, however, miss the personal interactions and hope to be able to spend much more in-person time with our clients and partners during 2022.

We would like to thank our clients and partners for all the hard work and for our joint learnings during 2021. We are very much looking forward to an equally eventful 2022.

Wishing you all the best for 2022!

The Newsec Infra Team

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