Dealmakers are already getting excited by the UK government’s plans to turbo-charge investment in green energy.

The UK energy sector has already seen 12 deals since Keir Starmer’s Labour Party won the 4 July general election with a platform that emphasised infrastructure investment, according to Mergermarket data.

The largest deal so far involves Macquarie Asset Management, which exercised its option to acquire the remaining 20% in National Gas previously held by National Grid [LON: NG]. The target owns and operates the UK’s 7,660-kilometre national gas transmission system.

Another recent transaction saw CDPQ announcing an agreement with Brookfield Asset Management [NYSE: BAM; TSX: BAM] and Brookfield Renewable [NYSE: BEP; NYSE: BEPC; TSX: BEP.UN; TSX: BEPC] to buy its 25% stake in First Hydro Company, an electricity generation and storage facility in the United Kingdom. Engie is the majority shareholder, with 75%.

Starmer, the UK’s new Prime Minister, last week told Labour’s conference that GB Energy, a new Aberdeen-headquartered publicly owned but operationally independent company, will “drive forward our mission on clean energy.”

The bill to create the new company is working its way through parliament. Although the mood in the market is one of excitement, there are still question marks over some of the details, as flagged by Dealspeak EMEA in June.

We now know that GB Energy will have GBP 8.3bn (EUR 9.9bn) to spend over this parliament, which could run until 2029. The extent of its impact on M&A will depend on how it decides to invest this money, said Lewis McDonald, global co-head of energy at Herbert Smith Freehills.

“If used to de-risk more nascent technologies such as floating offshore wind and tidal stream, it could accelerate the opening up of investment to a much wider investor base and therefore facilitate M&A opportunities,” McDonald said.

Accelerate decarbonisation

In its founding statement, GB Energy has promised to work with the public and private sectors to accelerate decarbonisation in the run-up to 2030 Net Zero.

Private investors will play a key role in helping GB Energy with its mission. Its chair, Juergen Maier, told Labour’s conference that the company will engage with investors as well as communities to build supply chains across the UK.

Despite the generally bullish mood, the government still needs to clear up some concerns of investors in early-stage green tech.

“It’s important to make sure GB Energy doesn’t start competing with private investment, diluting the interest in a sector that currently lacks guaranteed returns,” according to Andrew Inglis, Director at Energy and Chemicals advisory firm etasca.

There are also potential risks around first-of-a-kind (FOAK) green-tech investments, Inglis said. “Who is going to pay for the higher price of these energy transition molecules?

Despite these concerns, the UK’s energy sector is sprouting green shoots, with year-to-date (YTD) deal volumes almost doubling to GBP 10.5bn in 2024 across 77 transactions, from GBP 5.5bn over 53 deals in 2023. This is the highest volume since 2021.

Green skies ahead?

The UK energy pipeline is brimming with sale candidates, signalling chunky transactions and increased investment ahead.

Cubico Sustainable Investments‘ owners Public Sector Pension (PSP) Investment Board and the Ontario Teachers’ Pension Plan (OTPP) are preparing to sell the UK-based renewable energy company for an expected EUR 7bn, as reported in January. Cubico has a Likely to Exit (LTE)* score of 59 out of 100, according to Mergermarket’s predictive algorithm.

Meanwhile, on the buyside, infrastructure funds are poised to invest billions in the energy transition. At the same time, Shell’s [LON:SHEL] balance sheet is bursting with surplus capital. The company has renewable energy on its mind.

Expect the boom to continue fi the new government continues to make the right noises about partnering with the private sector in the months and years ahead.