Renewables M&A in the Nordics: Inside the evolving energy market with OX2

The Nordics are leaders in renewables, with ambitious targets for reaching carbon neutrality driving strong momentum in energy investments and M&A.

OX2 is among the companies standing at the forefront of renewable energy development in the region. Headquartered in Stockholm, this independent developer specializes in onshore wind, managing projects from initial stages to construction. 

In this interview, Johannes Brunila, Commercial Director at OX2, shares insights into the company’s operations, the trends driving renewables M&A in the Nordic region, and the unique challenges and opportunities in this rapidly evolving sector. 

Q. Please can you tell me about your company and your role?

OX2 started as a pure-play developer of renewable energy assets. We take a project from greenfield to when the assets are due to be constructed, at which point we sell them.

Our bread and butter has always been onshore wind power. We lease the land and spend the next 10 years getting all the permits, technical designs, procurement agreements, and wind turbine agreements in place. Then we provide construction services to the new owner, and that can take another two years. So it’s a bit like real estate development but for renewable assets.

What sets us apart from many other renewable asset developers is that we’ve been doing it for 20 years. We started in Sweden, then spread to Finland, across Europe, and into Australia. That experience of different regions and different types of projects means we can spot red flags at an early stage and know when it’s not worth our while to proceed.

Other developers start a lot of projects, only about 2% of which ever reach the ready-to-develop stage. For us, it’s closer to 80% because we don’t waste time on sites that won’t create value in the end. That’s why those 10 years are so important. 

It’s also why onshore wind has been so significant for Europe. In the Nordic region, we build huge machines that can produce massive amounts of energy compared to solar PV or wave energy. The development period is longer and much more challenging, but once finished, the assets are worth much more than, say, solar PV.

OX2 does do solar as well, but it’s more of an ancillary technology for us.

Q. How did you begin your career in renewables?

My background is in legal M&A. I used to be a lawyer doing mostly due diligence, so I was that guy whose name was on the list for access to Ideals data rooms.

That’s where I learned that it’s not the lawyers who run the processes; it’s the financial advisors. So I looked up which of the boutique firms in Helsinki had the highest deal flow and applied to all of them. I became a project manager and began looking for an in-house position for somebody with my background in law and finance. 

I soon realized that the big opportunities were in renewables, with a host of new players, and I wanted to understand what was behind that. In 2019, I started at OX2 as a Transaction Manager, and now I lead their Finnish investment operations.

Q. You mentioned that there are some interesting trends driving renewables M&A in the Nordics. Could you tell me more about them?

First of all, you need to look at what’s driving the investment decisions, and that’s interesting because it’s actually energy consumption.

All of the Nordics and Europe are more or less one area because of the interconnectors.

Historically, if electricity prices fell in a certain area, all the energy-hungry industries moved to that area. It used to be steel or other factories, but now it’s data centers for AI. Over the past 12 months, Finland has seen a lot of investment interest from AI developers, and we expect to see that demand grow significantly in the next two years.

The other key trend is also on the demand side. As well as the big US AI companies, we’re getting interest from companies making green steel or green methanol. A lot of these factories are being constructed in Europe at the moment, and Finland is an ideal location because of its low energy prices and exceptionally reliable grid. 

Assuming that electricity consumption in Finland will double or even triple, where will that electricity come from? By far the cheapest way to produce it is onshore wind.

Q. What is the cost differential of onshore versus out at sea?

It’s triple or even quadruple the cost to build offshore. But it does depend on the area. 

Finland is a large country with an excellent power grid and a small population. A country of similar size with 20 times the population and no empty areas or access to a reliable grid might be better off looking at offshore. 

Finland has a lot of open spaces with no trees, just bare land, but there will be a good connection point close by.

Also, the sea off Finland freezes during the winter, which makes it even more costly to build offshore. We probably will at some point, but for the moment, we have so much space onshore that it’s not worth it.

Q. How about batteries and storage? Is that an investment trend within Nordic countries as it is in, say, India?

It is, but for different reasons. In Finland, we have a national grid that’s always used to its full capacity, whereas the UK grid has curtailments. If you can only connect 60% of the energy your asset is producing, you need to store the excess somewhere. 

In Finland, battery storage is more to do with levelling out pricing differences during the day, or if you’re part of the national balancing market, when the grid is under pressure and needs feed-in at different points.

So we do see battery projects, but maybe not as many as in those markets where there are bottlenecks in the grid. Debt terms for batteries seem less favorable; it’s easier to get financing if you co-locate your battery, so it’s more like an ancillary component to a power-producing asset.

Q. Can you tell me more about how the Nordics energy market differs from the rest of Europe?

Firstly, no subsidies. The first Finnish onshore wind project to be built without subsidies was back in 2019.

Secondly, Finland and Sweden (though their permits take longer to come through) have the best permitting system in the world.

Thirdly, we build larger machines than they do in central Europe, taller and with longer blades.

So the Nordics became something of a laboratory for new developments, and there was a boom in market-based renewables that lasted several years. Investors had fixed price  PPAs with industrial companies to leverage financing for their projects.

Then, in 2022, Russia attacked Ukraine, which led to the interconnector between Finland and Russia being shut off. The price of electricity went up, and many of the market players thought it would stay high. It didn’t, and it has stabilized since, but what did peak was the supply chain costs. Everything associated with building the turbines now costs a fortune. Then, because of inflation, interest rates shot up.

What made things worse was that many investors had taken advantage of the price stability to fix a quota for what they sold. When the Russian grid was cut off, production became very volatile, and the guys who invested in 2019-2022 were really suffering because they had to sell a fixed amount of electricity at a fixed price. Our booming market was turned upside down.

Then, in 2024, interest rates came down, the price of CapEx dropped or stayed stable, and the price of electricity picked up. There will be another boom. But many of the investors that were active in the Finnish market won’t be coming back. They would see better returns than they did back then, but they don’t have the stomach for it anymore.

So, we’ve changed the way we operate at OX2. We used to sell all of our assets; now, we keep some, and we’ve become an independent power producer. We’re in an excellent position and, having learnt from those experiences, we can now make really wise investment decisions.

But it’s not good for the market in general that so many investors got their fingers burnt.

Q. Are you seeing signs that investors are returning to the market?

From where I sit, there is tremendous potential, and I would expect to see a lot of companies looking at significant investments. Obviously, not those that had the bad experience with their PPAs and left, they’re gone. 

But if you look at the facts and figures, it’s a brilliant time for good projects.