Energy & Infrastructure M&A 2024 - Trends And Developments

Energy & Infrastructure M&A in Switzerland: An Introduction

Market activity

M&A activity in Switzerland saw an overall decrease in 2023 and the first half of 2024, compared to 2022. However, energy and infrastructure M&A in Switzerland has shown robust growth, with increased interest in renewable energy and digital infrastructure assets. Inbound deals have risen, with international investors attracted to Switzerland's stable environment and ambitious sustainability targets. Outbound deals have grown, driven by companies expanding renewable portfolios across Europe. Domestically, there has been an increase in deal activity, especially in the hydropower and digital infrastructure sectors.

Switzerland's ambitious carbon neutrality goals for 2050 are prompting a shift toward renewable energy, which has led to an increase in M&A deals focused on wind, solar and hydropower assets, as well as emerging energy technologies such as battery storage and hydrogen. Local and international market players are actively acquiring or partnering with Swiss firms to establish a foothold in the clean energy market. Noteworthy recent activities in the electric vehicle (EV) value chain in Switzerland include:

• ABB E-mobility's spin-off and pre-IPO financing;
• Shell's investment in EVPass (charging network); and
• Electra's Swiss market entry with EUR200 million financing from Energy Infrastructure Partners and plans to deploy over 600 public charging stations in Switzerland.

Utilities are investing in new technologies related to batteries and hydrogen to support the country's energy transition goals and improve grid reliability. Switzerland's hydropower industry continues to see investment and consolidation as companies look to optimise their portfolios. As renewable energy production increases, market players are also investing in energy storage solutions, particularly in pumped-storage hydroelectricity and battery storage, to manage intermittent supply from wind and solar energy. M&A in energy storage is expected to grow as companies seek to balance supply and demand and improve grid stability.

Switzerland's aging infrastructure requires upgrades in areas such as transport, utilities and digital connectivity. Recent M&A activity has included deals focusing on modernising transport and utility infrastructure, supported by private capital and government initiatives. While modernisation offers substantial investment opportunities, it also presents challenges in integrating new technologies and managing complex project logistics. Investors must assess the viability and costs of updating older assets with modern technologies such as smart grids, 5G and fibre-optic networks. In addition, these projects often require extensive collaboration with government entities, which can lead to bureaucratic hurdles and prolonged negotiation timelines. Looking ahead, more deals are anticipated, especially in areas related to digital infrastructure, such as data centres, fibre-optic networks and smart grid technologies.

Strategic partnerships and joint ventures between Swiss companies and foreign investors, particularly from neighbouring European countries, have become common, allowing different market players to pool resources and expertise. These collaborations are often centred around renewable energy projects and digital infrastructure, with an emphasis on expanding energy efficiency and connectivity within Switzerland and across Europe. Furthermore, with the anticipated gradual phase-out of nuclear energy, energy companies are increasingly looking for opportunities to diversify their power generation portfolios.

Private equity and institutional investors have increased their role in the energy and infrastructure sectors, attracted by the steady, predictable cash flows that energy and infrastructure assets provide. In recent years, several private equity firms have invested in both renewable energy assets and essential infrastructure in Switzerland. Their presence is expected to grow, with acquisitions aimed at capitalising on Switzerland's infrastructure transition and demand for sustainable energy solutions.

Key drivers in Swiss energy and infrastructure M&A

Energy transition

M&A activity in Switzerland's energy and infrastructure sectors is largely driven by the "4 Ds" of the energy transition: decarbonisation, digitalisation, decentralisation and deregulation.

• " Decarbonisation: the shift to a sustainable, low-carbon economy is a major driver. Switzerland aims for net-zero greenhouse gas emissions by 2050, moving away from fossil fuels to renewable energy sources like solar, wind, hydropower and biomass. The Swiss CO₂ Act includes carbon pricing and tax exemptions for emission reductions, and the Emissions Trading System (ETS) allows participation in the international carbon market.
• Digitalisation: new digital technologies, data analytics and smart systems are optimising energy production, distribution and consumption. Artificial intelligence (AI), big data and predictive analytics are used in energy forecasting, optimising renewable energy output and reducing grid inefficiencies. AI-driven algorithms help grid operators to manage fluctuating energy supplies by predicting weather patterns and solar or wind generation capacity.
• Decentralisation: Switzerland is moving away from large, centralised power plants to smaller, localised energy systems. Digital platforms enable consumers to produce and sell their own energy through small-scale renewable installations like solar panels on buildings. Local energy communities are forming, allowing co-operative energy production, storage and distribution.
• Deregulation promotes competition, increases efficiency and fosters innovation in Switzerland's energy markets. The Swiss Electricity Supply Act sets the framework for market liberalisation, allowing larger consumers to choose their electricity providers. The longterm goal is to extend this choice to all consumers, creating a more competitive energy market.

Cross-border M&A and integration

Switzerland's geographic location in the heart of Europe and its interconnectedness with the European Union (EU) energy market make crossborder M&A particularly important. Despite not being an EU member, Switzerland is part of the European electricity market, which enables the country to import and export energy through its integration with the European power grid.

Swiss energy companies are increasingly pursuing acquisitions and partnerships with European counterparts to access renewable energy assets and participate in cross-border energy trading. This trend is expected to continue as Switzerland further integrates into the European energy market, driven by the EU's decarbonisation goals and the growing importance of interconnected, renewable-based energy systems.

In addition to cross-border energy deals, Swiss infrastructure companies are active in expanding their footprint in neighbouring countries. Swiss-based utilities and infrastructure investors are targeting investments in energy networks, transport infrastructure and digital infrastructure across Europe and beyond, leveraging Switzerland's expertise in engineering and sustainable development.

Sustainability and ESG-driven investments

Environmental, social and governance (ESG) factors play a central role in shaping M&A activity in Switzerland, particularly in the energy and infrastructure sectors. Investors and companies are increasingly prioritising acquisitions that align with sustainability goals, focusing on green assets and technologies that contribute to the country's energy transition.

Switzerland's robust financial sector is also playing a critical role in ESG-driven M&A. Many financial institutions, asset managers and private equity firms are increasingly integrating ESG criteria into their investment decisions, driving demand for clean energy and sustainable infrastructure assets. Swiss institutional investors, including pension funds and insurance companies, are particularly active in acquiring infrastructure assets that provide long-term, stable returns while meeting ESG standards.

Sustainability-driven M&A is also visible in Switzerland's construction sector, where companies are investing in energy-efficient buildings, smart cities and sustainable transport infrastructure. The government's focus on achieving climate neutrality is encouraging private sector investment in green infrastructure, creating opportunities for M&A in energy-efficient technologies and smart building systems.

Digital infrastructure and smart grids

Switzerland is leading the way with the digital transformation of its energy and infrastructure sectors. The increasing use of digital technologies, such as smart grids, digital energy platforms and data centres, is transforming how energy is produced, distributed and consumed. These technologies enable better integration of renewable energy, improve energy efficiency and enhance the resilience of energy networks.

M&A activity in Switzerland's digital infrastructure sector has been growing, with companies investing in smart grid technologies, energy management systems and digital platforms that support the integration of decentralised renewable energy sources.

In addition, the demand for data centres and related digital infrastructure is increasing, driven by the growth of cloud computing, digital services and the need for secure data storage. Switzerland's political stability, advanced digital ecosystem and reputation for strong data privacy regulations make it an attractive location for data centre investments. M&A in this sector is expected to grow as companies seek to expand their digital capabilities and meet the rising demand for digital services.

Electric mobility and infrastructure investments

The electrification of transport is another key trend shaping Switzerland's infrastructure sector. As the country works towards reducing its carbon footprint, the demand for EVs is growing, spurring investments in EV charging infrastructure. Companies are engaging in M&A activity to acquire EV charging networks and related technologies, positioning themselves for the growing market for electric mobility.

The Swiss government is also supporting the development of EV infrastructure through policy incentives and public-private partnerships. This is leading to more investments in smart charging solutions, which allow for better integration with the electric grid and renewable energy sources. M&A in this space is likely to accelerate as both established energy companies and new entrants vie, for market share in the electric mobility sector.

Key challenges in Swiss energy and infrastructure M&A

Regulatory and policy uncertainty

While Switzerland's regulatory environment is generally favourable for business, uncertainties around energy policies and regulations can pose challenges for M&A in the energy and infrastructure sectors. For example, Switzerland's decision to phase out nuclear power creates longterm uncertainties regarding how the country will meet its energy needs, particularly during periods of low renewable generation.

Switzerland's relationship with the EU adds another layer of complexity. As Switzerland is not an EU member state, its energy policies must align with European standards to ensure continued access to the European energy market. Changes in EU energy regulations or Swiss–EU relations could affect cross-border M&A activity and investments in Switzerland's energy sector.

Supply chain and material costs

Global supply chain disruptions and rising material costs have affected infrastructure projects worldwide, including in Switzerland. The increased cost of raw materials such as steel, copper and aluminium, which are essential for renewable energy projects and infrastructure development, can increase the cost of acquisitions and reduce the profitability of projects.

The ongoing shortage of skilled labour in the construction and energy sectors is also creating challenges for companies looking to scale up their operations. This could slow down M&A activity as companies face difficulties in executing new projects and integrating acquired assets.

High valuations and competition for sustainable assets

The global push for clean energy and sustainable infrastructure has led to increased competition for high-quality assets, particularly in the renewable energy space. Swiss companies are competing with international investors, including private equity firms and institutional investors, for access to prime renewable energy projects and infrastructure assets. This increased competition is driving up asset prices, making it more challenging for companies to find attractive acquisition opportunities at reasonable valuations.

Regulatory and other developments

2050 Energy Strategy

Following the 2011 Fukushima disaster, Switzerland decided to phase out nuclear energy. Coupled with global energy sector changes and Switzerland's 2015 Paris Agreement commitment to halve greenhouse gas emissions by 2030, this required an energy system overhaul. The Federal Council's 2050 Energy Strategy addresses these challenges with the following objectives:

• promote renewable energy in Switzerland;
• reduce dependency on fossil energy from abroad and ensure security of supply;
• reduce energy consumption and greenhouse gas emissions;
• increase energy efficiency;
• phase out nuclear energy; and
• achieve net-zero emissions by 2050.

One of the main focuses of the 2050 Energy Strategy is on expanding solar energy, wind energy, hydropower and biomass energy. Hydropower is the most important renewable energy source in Switzerland, accounting for nearly 60% of its total electricity production. Switzerland has a well-developed infrastructure of runof-the-river plants, reservoir plants and pumped storage systems, making it a leader in hydropower. Biomass energy (which includes energy from organic materials like wood, agricultural waste and biogas) plays a crucial role in reducing waste and decentralising electricity and heat production. It can be used for heat production and electricity generation, and even as a renewable fuel.

In light of the 2050 Energy Strategy, the following laws and regulations support Switzerland's goals of supply security, energy efficiency and climate change mitigation, while fostering technological and economic growth through innovation.

• The Swiss Energy Act promotes efficient energy use and renewable energy development to reduce reliance on non-renewable resources. Key aspects include:
  1. promoting solar, wind, hydropower and biomass energy;
  2. encouraging energy-saving measures for individuals and companies;
  3. introducing subsidies for energy-efficient renovations and renewable energy installations; and
  4. setting energy efficiency targets for buildings, industry and appliances.
• The Swiss Electricity Supply Act ensures a reliable, secure and environmentally friendly electricity supply. Essential elements include:
  1. market liberalisation, allowing larger consumers to choose their electricity providers;
  2. regulating grid access and ensuring nondiscriminatory access for all participants;
  3. mandating Swissgrid to ensure long-term grid reliability and security; and
  4. setting rules for fair competition and pricing to protect consumers.
• The Swiss CO₂ Act aims to reduce greenhouse gas emissions by 50% by 2030 compared to 1990 levels. Important features include:
  1. introducing a CO₂ tax on fossil fuels and other incentives to reduce fossil fuel consumption;
  2. participating in international emission trading schemes; and
  3. setting specific targets and measures for buildings, transport and industry to lower emissions.
• The Swiss Energy Research for the Energy Transition (SWEET) Funding Programme supports Switzerland's transition to a sustainable, low-carbon energy system by 2032. Managed by the Swiss Federal Office of Energy (SFOE), it funds interdisciplinary and collaborative research projects focused on energy efficiency, renewable energies, energy storage and grid security. In August 2024, the RECIPE (Resilient Infrastructure for the Swiss Energy Transition) consortium, led by ETH Zurich, received funding under the SWEET Funding Programme. The consortium will analyse hazards posed to Swiss energy infrastructure by the energy transition and climate change, proposing measures to increase resilience.

There are also several legislative processes that could affect energy and infrastructure M&A transactions in Switzerland. Some of these laws are already in effect, while others are still under discussion in the legislative process.

Swiss Climate and Innovation Act

This was approved by Swiss voters in June 2023 and aims for net-zero greenhouse gas emissions by 2050, with interim targets of a 75% reduction by 2040 and an 89% reduction for the period 2041–2050. To support this transition, the legislation provides financial incentives for individuals and businesses to adopt climate-friendly technologies, including replacing fossil fuel-based heating systems with renewable alternatives. It also allocates up to CHF200 million annually over ten years to support companies investing in innovative, climate-friendly technologies. The Swiss government is finalising the implementation framework to ensure a smooth roll-out of these measures, with the legislation expected to come into force on 1 January 2025.

EU Electricity Agreement

In March 2024, the Swiss Federal Council approved a definitive negotiating mandate to commence discussions with the EU on an electricity agreement. The aim is to integrate Switzerland into the EU's internal electricity market, enhancing grid security and legal certainty. Negotiations are ongoing, with both parties aiming to conclude them by the end of 2024.

Federal Act on a Secure Electricity Supply from Renewable Energy Sources

On 9 June 2024, Swiss voters approved the Federal Act on a Secure Electricity Supply from Renewable Energy Sources. The legislation aims to ensure the long-term stability, reliability and sustainability of electricity supply through enhanced infrastructure, renewable energy integration and grid resilience. By promoting investment in modern energy technologies and strengthening grid security measures, the statute seeks to protect consumers from disruptions and support the transition to a more resilient, low-carbon energy system. The legislation aligns with broader energy security and climate objectives, balancing economic growth with environmental responsibility. It is expected to come into force on 1 January 2025.

Lifting ban on new nuclear power plants

In August 2024, the Swiss Federal Council announced plans to lift the ban on constructing new nuclear power plants, which has been in place since 2017. This decision aims to enhance energy security and meet climate objectives amid rising electricity demand and geopolitical uncertainties. The government intends to submit legislative amendments by the end of 2024, with parliamentary discussions expected in 2025.

Foreign direct investment (FDI) screening

Switzerland does not currently have any general FDI screening mechanisms in place. However, certain regulatory requirements apply to certain industries and sectors – eg, banking and real estate. Several additional business activities require a governmental licence, and the licensing conditions include specific requirements regarding foreign investors. Examples of such business activities are aviation, telecom, radio and television, and nuclear energy.

On 15 December 2023, the Federal Council adopted the dispatch on new legislation regarding investment screening. Under the new draft legislation, investment screening is intended to apply only when a foreign state-controlled investor takes over a domestic company that operates in a particularly critical area, such as electricity grids and production, water supply and transport infrastructure. This means that the takeover of Swiss companies active in such critical areas by a foreign state-controlled investor would need an approval, subject to reaching certain turnover thresholds.

Interestingly, the Federal Council has so far been opposed to introducing new FDI control regulations, so that the scope of the draft is narrower compared to similar legislation in other jurisdictions. It will be interesting to follow further discussions on the topic as the legislative process advances in Switzerland against the backdrop of increasingly protectionist tendencies abroad. For now, the regulatory environment regarding investment screening in Switzerland remains favourable for investors.

EU Artificial Intelligence Act

AI is increasingly influencing the energy and infrastructure sectors, particularly in optimising energy production, enhancing storage systems and managing smart grids. AI plays a growing role in developing smart cities by managing traffic, urban planning and the efficient use of energy and waste. It also assesses infrastructure health and improves the energy efficiency of buildings, contributing to more sustainable and resilient urban environments.

On 1 August 2024, the AI Act came into force in the EU. It is the first-ever legal framework on AI that aims to provide AI developers, deployers and users with clear requirements and obligations regarding specific uses of AI systems by adopting a risk-based approach (eg, the higher the risk of an AI system, the stricter the rules that apply to its development and deployment) and by introducing rules for so-called general purpose AI models. The AI Act will have an extraterritorial reach and will not only be applicable to a Swiss company that makes an AI system available in the EU market but will also apply if the output generated by the AI system of a Swiss company is used in the EU.

At the end of 2023, the Federal Council instructed the relevant federal department to prepare a report on the possible regulatory approaches to AI systems for Switzerland that are particularly compatible with the AI Act and the Council of Europe's AI Convention, which should create the basis to issue a concrete mandate for a Swiss AI regulatory proposal in 2025.

See also 1.1 Energy & Infrastructure M&A Market and 8.1 Significant Court Decisions or Legal Developments in the Switzerland Law and Practice chapter in this guide.

Outlook

Looking ahead to 2025, several factors are expected to shape M&A activity in Switzerland's energy and infrastructure sectors.

• The energy transition will remain a key driver of M&A activity as Swiss companies continue to invest in renewable energy projects and divest from fossil fuels. More acquisitions of wind, solar and hydroelectric assets are expected, both domestically and across Europe, as companies align with Switzerland's climate goals.
• M&A in digital infrastructure, including data centres, smart grids and energy management platforms, is expected to grow as Switzerland enhances its digital capabilities. Companies will continue to invest in technologies that improve energy efficiency, optimise grid performance and enable the integration of distributed energy resources.
• The rise of EVs and the need for charging infrastructure will create new opportunities for M&A in the transport and energy sectors. Swiss companies are likely to invest in EV charging networks and smart charging solutions, positioning themselves for the future of electric mobility.
• Private equity firms will continue to play a major role in Swiss infrastructure M&A, particularly in the renewable energy, digital infrastructure and transport sectors. These investments will be driven by the long-term, stable returns that infrastructure assets provide, as well as increasing demand for sustainable investments.

Switzerland's energy and infrastructure sectors are poised for significant growth in M&A activity as the country continues its transition to a lowcarbon, digitalised economy. While challenges such as regulatory uncertainty and competition for assets persist, the outlook for 2025 remains positive, as continued investments in renewable energy, digital infrastructure and electric mobility are expected.

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