Valuation of Solar PV / Heat pump installation business in the UK

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May 04, 2022

by a searcher from EDHEC Business School, Lille and Nice in London, UK

Hi there,

I am looking at a company installing solar PV, heat pump and other green energy technologies. It is a UK business.
I am wondering what kind of EBITDA / SDE multiple are those businesses going for?
I did go through the BVR page but unless I missed it, there is no clear multiples available.

Anyone has knowledge in this sector?

Thanks for your help.

Best,
Tom

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Reply by a searcher
from EDHEC Business School, Lille and Nice in London, UK
Thanks ^redacted‌ and ^redacted‌ for your input. My 2p on your comment Josh is that indeed demand is completely driven by government subsidies (which explained why solar uptake is very slow in the UK at the moment). On heat pump in the UK, there is no reason to go for this tech at the moment based on financial ground alone. But clearly huge demand still driven by environmental concerns. The key looking forward is (1) equipment is getting more and more efficient and utility bills rising, (2) the cost of the devices is dropping significantly YoY and (3) regulatory frameworks (imposing net carbon neutral quota) and (4) future subsidies.
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Reply by a searcher
from University of Colorado at Boulder in Boulder, CO, USA
Hey Thomas - The industry is experiencing high growth but solar is a highly cyclical business with relatively low net margins. I have seen ~3x SDE multiples on most of the businesses in the US. Heat pump installation may help smooth out some of that cyclicality and seasonality.
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