Shift from projects to platforms as mergers and acquisitions reshape the grid

The renewable energy sector in Africa is currently undergoing a significant transformation, shifting from a landscape dominated by promises to one focused on tangible results. What was once a sector primarily driven by donors and startups is now experiencing a shift towards commercial maturity, as evidenced by the increasing number of mergers and acquisitions taking place. These transactions are not only indicative of growth but also highlight how the market is evolving to prioritize resilience, efficiency, and long-term value.

In 2024, Africa’s energy sector witnessed a substantial 140% increase in the value of M&A deals. However, it’s not just the size of these deals that is noteworthy; it’s their quality. Investors are moving away from purely optimistic greenfield projects towards established platforms with operational stability and growth potential. This shift in mindset is already shaping the activities in 2025, where a sense of measured confidence prevails.

Infrastructure funds and private equity firms are at the forefront of this transformative period, as they are increasingly drawn to portfolios that offer predictable returns. Independent power producers that are vertically integrated are strategically expanding through acquisitions that align with their regional growth strategies. Many developers are strategically choosing to sell their assets as a means to recycle capital and refocus on early-stage development. Smaller companies are also exploring refinancing and partial exits to remain competitive.

As the renewable energy sector evolves, so too does the methodology of asset valuation. Investors are no longer solely focused on megawatt comparisons but are considering factors such as technology mix and commercial advantages of individual projects. Projects that incorporate elements like wind with battery storage or hybrid architecture are gaining attention for their consistent generation capabilities and market resilience. Solar projects, although still dominant in installed capacity, are facing margin pressures. Battery storage has become a viable investment opportunity, while hydro continues to play a stabilizing role in markets with favorable geographic conditions.

Revenue models are evolving rapidly, with long-term fixed-price power purchase agreements giving way to more dynamic strategies that involve merchant exposure and shorter contract terms. Aggregators and energy traders are introducing complexity and new opportunities, offering bespoke solutions for power offtake while also altering the risk landscape. Financing structures need to adapt accordingly, balancing creativity with creditworthiness to meet these shifting demands.

Geographical focus within the sector is broadening beyond South Africa, with countries such as Namibia, Zambia, Botswana, and Mozambique emerging as high-potential markets. New wheeling arrangements and participation in the Southern African Power Pool are facilitating expansion into these markets, but each country presents unique challenges in terms of regulations, currencies, and approval processes. Local knowledge and adaptability are becoming critical factors in navigating these diverse landscapes.