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First Reserve in solar energy merger

The global private equity energy specialist has combined two solar energy companies from Spain and Italy.

First Reserve, the global private equity energy specialist, has bought Gamesa Solar, a Spanish solar energy company, for €261 million ($409.1 million). It has also acquired Ener3, an Italian solar power plant construction company, according to a statement. First Reserve will combine the two companies.

a First Reserve

Under First Reserve’s business plan, the new group will build up a solar capacity of up to 400MW in Southern Europe within four years. First Reserve will invest €600 million during the period.

Gamesa Solar has created 40MW of solar projects and is set to develop a further 50MW of projects in 2008.

Paolo Pietrogrande will become chief executive of the combined group. Pietrogrande was previously chief executive of Enel GreenPower and chairman of Atmos Holding, an Italian renewable energy groups, as well as a director of Trinergy, a renewable energy asset manager. 

Francesco Giuliani, a director at First Reserve, said: “We’ve been scoping the renewable space for a while and we decided to invest more in the construction, development part of the business.” The cost to profit ratio available in construction and development was favourable, he said. Although solar energy is currently associated with high costs, he said capital expenditure would come down over the next five years.

He said solar sites have not been exploited to their full potential. For example, Spain provides approximately 500MW from solar energy, while in Italy only around 60MW is generated, despite the countries being broadly similar in terms of potential solar energy capacity.

First Reserve’s $7.8 billion fund has the capacity to invest around 10 percent in renewables, and the firm is considering increasing its allocation either in the present fund or in later efforts, he said.

First Reserve has been one of the most active private equity firms so far this year. In the first quarter it bought four companies including the largest deal during the period, the $3.48 billion (€2.22 billion) acquisition of CHC Helicopter, the Canadian oil and gas-focussed transportation company, according to Dealogic.

A high proportion of the private equity dealflow so far this year has been in the energy sector, spurred on by the high oil price. While much of this activity has been oil and gas related, renewable deals in 2008 include a $1 billion joint venture in solar power between Riverstone, the Carlyle affiliate specialsing in energy, and AES, the US power company.