RWE, Germany's largest power producer, could become a takeover target as big industry players strive to expand their renewable portfolios around the world, Goldman Sachs said in a research note on Wednesday.
Following an asset swap with E.ON, RWE last year became Europe's third-largest renewables player after Spain's Iberdrola and Italy's Enel, and the world's No.2 offshore wind player after Denmark's Orsted.
However, its EV/EBITDA multiple - a valuation metric that measures the ratio between enterprise value and earnings - stands at 7, less than half of Orsted's 14.2. With a market value of less than 17 billion euros ($19 billion), RWE looks cheap when compared to its bigger rivals, Goldman Sachs said.
"Strong momentum to deliver energy transition, high industry fragmentation ... and the scale-advantage typical of such a capital-intensive business could drive a wave of consolidation," the investment bank said.
"This could lead to the emergence of a handful of 'Global Renewable Majors'."
RWE declined to comment.
Aside from RWE, Goldman Sachs also named Britain's SSE and Portugal's EDP as possible targets, pointing to their exposure to regulated infrastructure assets and relatively low market valuations.
At current share prices, EDP and SSE are worth about 14 and 15 billion euros, respectively.
The companies are free of significant family or government ownership, which has acted as a major impediment to deals in the past, Goldman Sachs said.
SSE and EDP declined to comment.
Goldman said the global renewables market was fragmented, and that consolidation to add scale was becoming increasingly important to deliver profitable growth.
The world's top ten renewables groups, which also include U.S.-based NextEra, capture only about 15% of the world's total portfolio, the brokerage said. With 9.5 gigawatts of capacity, RWE ranks fifth globally.
($1 = 0.8981 euros) (Reporting by Christoph Steitz; Additional reporting by Susanna Twidale and Sergio Goncalves; Editing by Pravin Char)