Australia’s renewable energy transition is not without its challenges. The sector’s rapid expansion, against a background of evolving government policies and shifting market dynamics, is creating challenging conditions for projects. While the industry has seen substantial growth in wind, solar, and battery energy storage systems (BESS), an increasing number of projects are facing financial and operational difficulties, leading to distressed asset sales.
Sub-optimal infrastructure, approval delays, rising debt costs, and financial stress have all contributed to the growing pool of distressed renewable assets. As a result, mergers and acquisitions (M&A) in the renewables sector are increasingly focused on acquiring and restructuring troubled projects. For well-capitalised investors, acquiring distressed assets at a discount presents a unique opportunity if they can successfully navigate the legal and financial complexities involved. These deals also provide a viable exit strategy for sellers who can minimise further expected losses from their asset.
When is a renewable energy asset ‘distressed’?
A renewable energy project is considered “distressed” when it faces financial, operational, or physical challenges that threaten its viability. These challenges may include:
- Revenue pressures – Low or negative electricity prices reducing profitability.
- Debt burdens – High leverage making it difficult to service debt obligations.
- Curtailment issues – Limited grid capacity or economic factors forcing reduced generation.
- Regulatory hurdles – Permit or approval delays or compliance risks affecting project timelines.
- Market dynamics – Shifts in energy pricing, competition from newer technologies, or changing policy incentives.
What’s driving distress in the renewables market?
1. Economic and grid curtailment
Curtailment is one of the most pressing challenges facing renewable energy projects. The main types of curtailment affecting energy assets are:
- Economic curtailment: when market conditions make it unprofitable to generate electricity, such as when wholesale prices drop to negative levels during periods of oversupply.
- Grid curtailment: when transmission infrastructure is unable to handle the volume of energy produced, forcing renewable generators to scale back output.
Projects located in areas with weak grid infrastructure or that are exposed to volatile market pricing, will be affected more by curtailment pressures.1
2. Financial viability and debt pressures
The financial health of a renewable asset is closely tied to its Levelized Cost of Energy (LCOE) and debt structure. Projects with higher-than-market LCOE struggle to compete, especially when technological advancements drive down the cost of new developments.2
- Debt-heavy projects face refinancing risks, particularly in a rising interest rate environment. Increased debt servicing costs can strain cash flow and lead to lower profitability.
- Delayed projects often suffer from cost overruns and revenue shortfalls, further compounding financial stress.
3. Transmission and infrastructure bottlenecks
Grid congestion and high Marginal Loss Factors (MLF) are additional challenges for renewable projects. Assets located far from demand centres experience higher transmission losses, reducing the actual energy delivered to the grid. Transmission delays and lack of energy storage solutions exacerbate these issues, making it difficult for projects to generate consistent returns.
The market outlook
Australia’s renewable energy market is expected to continue its strong growth trajectory, with total capacity projected to reach 57.38 GW by the end of 2025, driven by solar, wind, and battery investments.3 M&A activity in renewables and energy infrastructure grew by 4% in 2024.4
The following factors will likely lead to an increase in distressed M&A:
- Interest rate decreases will allow for higher borrowing capacity for buyers. Similar increases in other markets have fuelled M&A activity.
- Withdrawal of government support provided during the COVID-19 pandemic has led to a growing number of businesses becoming insolvent.
- Government policies will continue to shape market dynamics, influencing investor appetite for struggling projects.
These conditions will likely see a surge of interested investors and allow owners of distressed assets to sell their assets, decreasing debt commitments and avoiding further costs. The ongoing global energy transition and heightened demand for renewable energy will mean higher deal value and minimal capital loss for sellers.
Turning distress into opportunity: Key strategies for M&A buyers
From a legal perspective, distressed assets often have encumbrances, unresolved contractual obligations, or regulatory compliance risks that can complicate transactions. Buyers must assess potential liabilities, unexpired power purchase agreements (PPAs), and pending litigation before pursuing a deal. For investors and energy companies looking to capitalise on distressed M&A opportunities, several key strategies can be employed:
1. Restructuring and financial optimisation
- Debt restructuring – Buyers with strong financial expertise can renegotiate debt terms or acquire distressed debt at a discount, converting it into equity.
- Cost optimisation – Implementing cost-saving measures, such as renegotiating supplier contracts or improving operational efficiencies, can enhance project viability.
- Refinancing under better terms – As interest rates shift, acquiring distressed assets and securing financing at lower costs can improve project economics.
2. Grid and transmission solutions
- Strategic site selection – Acquiring distressed assets in areas with lower grid congestion or planned infrastructure improvements can mitigate transmission risks.
- Storage integration – Investing in battery storage solutions to manage curtailment and capture value from peak pricing periods.
3. Repowering and technology upgrades
- Replacing outdated technology – Older wind and solar projects with higher LCOE can benefit from repowering initiatives, where newer, more efficient equipment is installed.
- Leveraging AI and predictive maintenance – Optimising asset performance using data analytics can improve long-term profitability.
4. Acquiring assets below replacement cost
- Many distressed renewable assets are being sold below their original development cost, providing investors with an opportunity to acquire projects at attractive valuations. With careful due diligence, investors can unlock value by stabilising operations and securing long-term revenue streams.
Who stands to benefit?
The growing pool of distressed renewable assets presents opportunities for various market participants:
- Owners of distressed projects – While financial distress can be a challenge, owners have several potential avenues to extract value from their assets. Selling to a well-capitalised buyer can provide an exit strategy, allowing them to recover capital and avoid prolonged financial strain. Alternatively, restructuring through debt refinancing, joint ventures, or securing new PPAs can help stabilise the project and extend its operational viability. Owners who proactively engage with investors or restructuring specialists can ensure they retain some upside while alleviating financial pressure.
- Private equity and infrastructure funds – Can acquire distressed assets, restructure them, and exit profitably.
- Renewable Energy Developers/Asset Owners – Can deploy capital to the asset, optimise and renovate the equipment before operating efficiently.
- Utilities and independent power producers (IPPs) – Can expand their portfolios, optimise operations, and achieve economies of scale.
- Debt investors and special situation funds – Can take advantage of loan-to-own strategies, converting distressed debt into asset ownership.
For distressed asset owners, the key is early intervention and strategic decision-making: whether that means a structured exit, financial restructuring, or operational turnaround. By taking proactive steps, project owners can mitigate losses, preserve stakeholder confidence, and potentially reposition their projects for long-term success.
Navigating distressed M&A: legal and strategic considerations
While distressed asset acquisitions present significant opportunities, they also come with unique legal and financial risks that require careful navigation. Unlike traditional M&A deals, distressed transactions often occur on accelerated timelines with limited access to seller-provided information. This can create challenges in conducting due diligence and assessing potential liabilities.
Sellers in financial distress may not be able to provide extensive contractual protections, such as warranties and indemnities, leaving buyers exposed to greater risks. To mitigate this, investors should:
- Ensure comprehensive due diligence to uncover hidden liabilities, regulatory risks, or operational deficiencies before finalising the acquisition.
- Negotiate warranty and indemnity (W&I) insurance to protect against unforeseen risks, particularly in cases where sellers cannot offer traditional legal protections.
- Structure deals strategically, including considering deed of company arrangement (DOCA) mechanisms in insolvency situations to negotiate better terms with creditors.
- Address regulatory and compliance challenges early, ensuring that the acquisition meets all legal requirements and avoids post-transaction disputes.
With the right legal and financial strategy, buyers can successfully acquire and restructure distressed renewable energy assets, maximising value while minimising risk. Given the complex nature of these transactions, engaging experienced legal advisors is critical to navigating the process efficiently and ensuring a successful outcome.
The future of distressed M&A in renewables
With economic and market conditions creating an environment where distressed asset sales will likely increase, strategic investors have a unique opportunity to acquire and revitalise struggling renewable projects. By leveraging financial restructuring, operational efficiencies, and technological advancements, buyers can turn distressed assets into high-performing investments that contribute to Australia’s clean energy transition.
As M&A activity in the renewable sector intensifies, those with the capital and expertise to navigate the distressed asset sector will be well-positioned to create long-term value while supporting the industry’s growth.
Navigating distressed M&A requires more than just financial resources – it demands a deep understanding of regulatory risks, contract restructuring, and creditor negotiations. Our team has advised on complex energy transactions, from distressed debt restructures to insolvency-linked acquisitions, ensuring buyers mitigate risk while maximising value.
If you are looking to capitalise on distressed opportunities in renewables, we can guide you through every stage of your transaction.
The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects.
For more information, please contact Matt Baumgurtel, Jo Ruitenberg and Nicholas Edwards.
1Australian Energy Regulator, State of the Energy Market 2024 (Performance Report, 7 November 2024) 14-15.
2‘Global competitiveness of renewable LCOE continues to accelerate’, Wood Mackenzie (News Release, 21 October 2024) <https://www.woodmac.com/press-releases/2024-press-releases/global-competitiveness-of-renewable-lcoe-continues-to-accelerate/#:~:text=By%202060%2C%20utility%2Dscale%20solar,for%20key%20components%20like%20polysilicon> (‘Global Competitiveness of Renewable LCOE’).
3‘Australia Renewable Energy Market Analysis – Industry Growth, Size & Forecast Report (2025 – 2030)’, Mordor Intelligence (Report) <https://www.mordorintelligence.com/industry-reports/australia-renewable-energy-market>.
4Whit Keuer, Arnaud Leroi and Margaret Persons, ‘M&A in Energy and Natural Resources: Making Deal Economics Work in a Record Year’, Bain & Company (Web Page, 4 February 2025).
