Investment Funds Interest in Italy’s Energy Transition Is Growing

Investment funds are increasingly interested in the Energy & Natural Resources sector. That is revealed in the first Energy and Capital Observatory report by Bain & Company Italia, according to which this dynamism, driven by the challenges of the ecological transition and global decarbonization objectives , is accelerating the transformation of the energy landscape.

Investment funds are now a fundamental lever to drive change and acquire a central role in the sector

In Italy, there are currently 60 investment funds active, managing over 100 portfolio companies active in the Energy & Natural Resources sector, generating a total Ebitda of over 3.7 billion euros as of June 2024, equal to approximately 8% of the total Ebitda of the sector. Of these, 2 billion euros derive directly from the participations of investment funds.

The analysis shows that the portfolio diversification is significant: 55% of the investee companies operate in the renewable energy sector, contributing over 45% of the total EBITDA. The Waste and Services sectors each represent 10% of the investments, with a significant impact on EBITDA (11% and 3% respectively).

The Gas and Power networks, although representing only 5% of the investments, generate 17% of the EBITDA, demonstrating their strategic importance. The remaining 20% ​​of the investments are distributed among growing sectors such as water, public lighting, downstream and energy efficiency, with strong development potential.

30% of the investment funds analyzed boast a pro-quota Ebitda higher than 10 million euros, with an average tenure of the portfolio companies of 5 years. This scenario suggests potential exit operations in the next 18-24 months, in an increasingly dynamic market context.

The Bain & Company observatory highlights how the interest of investment funds in this sector is growing, representing a crucial source of capital to accelerate the energy and ecological transition, often in synergy with the skills of large industrial operators. In fact, 60% of portfolio companies see the presence of at least one other shareholder in the capital.

The current positioning of the investment funds and the market context require a rethinking of investment strategies along three main lines : designing a value creation plan as an accelerator of the transition, assigning financial investors a central role in supporting innovation in the Italian energy sector, identifying new investment opportunities in emerging sectors and optimizing the business models and performance of the assets currently in the portfolio.

Bain & Company places particular attention on three priority areas, taking into account the macroeconomic context, the specificities of the energy sector and growth prospects: the development and management of renewable generation assets, the future of networks, particularly gas, and emerging sectors such as Carbon Capture and Storage (CCS), electric mobility and biofuels.

“Optimizing performance is no longer enough,” explains Roberto Prioreschi , SEMEA Regional Managing Partner at Bain & Company. “We need to rethink our business model in light of recent transformations in the energy sector. Price volatility, supply chain challenges, and new regulations require an integrated approach and balanced management, through a value creation plan dedicated to renewable generation.”

The future of networks, especially gas, especially in relation to electrification and the development of hydrogen, is another strategic area. In the next 18-24 months, many assets will become attractive to new investors, making a clear strategic vision essential. Finally, emerging sectors such as Carbon Capture and Storage (CCS), electric mobility and bio-fuels offer significant investment opportunities, which are key to decarbonisation.

“These emerging businesses represent attractive opportunities for investors, but require careful evaluation of the critical elements” concluded Alessandro Cadei , Senior Partner and Head of Energy & Utilities EMEA at Bain & Company, “While most investments so far have been concentrated in the early stages, interest in these deals is growing and, for financial investors, they open up interesting opportunities to participate in new markets and new methods of intervention”.

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