Power transactions and trends
Global power and utilities mergers and acquisitions review, Q1 2014
Three–year high for Q1 deals
After a transformative 2013, when global utilities rebalanced asset portfolios and business models toward new growth areas, Q1 2014 kicked off on a promising note.
Deal value for Q1 was 11% higher than for Q1 2013 and 8% higher than for Q1 2012 — the highest quarterly result since Q1 2011.
Quarterly deal activity was driven by:
- Privatization and divestments in Europe
- Merchant asset sales in the US
- Renewable energy deals in Latin America
- Market reforms and infrastructure build-out in Africa and Asia Pacific
Portfolio optimization and geographic diversification drive global M&A
Emerging markets continue to receive significant capital inflows from Western Europe and other developed nations, where utilities continue to face slow growth or negative price trends. This movement is boosted by governments keen for capital. Countries such as India and Brazil are taking steps to introduce regulatory reforms to create an attractive environment for foreign and private investment.
The dual focus on growth and portfolio optimization will spur M&A activity across emerging markets. This is reflected in EY’s recent Capital Confidence Barometer survey report: 72% of acquisition capital will be deployed to emerging markets — both BRIC and non-BRIC — with China, the US, India, Brazil and Singapore the most likely investment targets.
Renewable energy assets registered a strong result for the quarter, showing the increasing importance of the segment in the global generation mix. While Europe remains the hot spot for M&A, emerging nations are likely to witness the next wave of clean energy transactions. We expect financial investors to be first in line for these prized assets.
Reforms to drive corporate strategies
Market reform and unbundling will form the basis of corporate strategies this year in countries such as India, Mexico, Japan and Greece as they gear up to liberalize their energy markets. This presents M&A opportunities across the value chain.
We anticipate an exciting year ahead, with deal activity registering new heights compared with 2013.
Global P&U deal value and volume, Q1 2012—Q1 2014
Source: EY analysis based on Mergermarket data