Power transactions and trends

Global power and utilities mergers and acquisitions review, Q1 2013

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Robust outlook for 2013 deals

After a transformative 2012, the first quarter of 2013 points to a robust platform for mergers and acquisitions (M&A) activity in the global power and utilities (P&U) sector.

We are seeing encouraging signs, such as progress on large European privatizations and divestment initiatives, despite deal value decreasing US$2.3b (8%) from US$27.6b in Q4 2012 to US$25.3b in Q1 2013.

Global deal value and volume, Q1 2011-Q1 2013

EY - Global deal value and volume, Q1 2011-Q1 2013

Source: EY analysis based on mergermarket data

Q1 2013 registered seven billion-dollar-plus transactions. Europe remained the driver of global M&A, accounting for 51%, or US$13b, of deal value. This was underpinned by the Turkish privatization program, which included the sale of four power distribution grids for US$3.5b.

The biggest deal of the quarter emerged from the divestment efforts of E.ON SE and GDF Suez. The companies agreed to sell their combined 49% stake in Slovak gas group Slovensky Plynarensky Priemysel AS for US$3.5b to Czech investment fund Energeticky a Prumyslovy Holding. Both E.ON SE and GDF Suez have been selling assets to strengthen their financial positions and enable them to withstand difficult trading conditions in their home markets.

News that Chinese growth dipped slightly in the first quarter of 2013 disappointed those hoping for an increase in its recovery. However, despite market volatility and a global economic outlook that is far from certain, Chinese utilities continued to rise in prominence in the global M&A market. 2013 could be a record year for outbound P&U deals as thirst for investment diversification and growing policy support underpin P&U investment.

Capital is on the move, and portfolio management continues as the strongest theme in the global P&U market. As utilities continue to reshape their asset portfolios to deleverage from commodity volatility or increase their footprint in high-growth markets, we anticipate a robust M&A climate in 2013 that is likely to outpace last year.

EY - Joseph Fontana EY - Joseph Rodriquez
Joseph Fontana
Global Transactions Power & Utilities Leader
Joseph Rodriquez
Global Power & Utilities Sector Resident,
Transactions

Key findings, Q1 2013

  • Despite seven billion-dollar-plus transactions, Q1 2013 global P&U M&A registers US$25.3b, down US$2.3b (8%) from the prior quarter. Europe remains the center of activity, driven by large divestments.
  • Capital is on the move as European players divest transmission & distribution assets and reinvest in emerging markets. Cross-border M&A rises 49% (US$3.2b) from the prior quarter.
  • The US power generation market was once again active, headlined by a number of assets sales, including Dynegy’s purchase of Ameren’s competitive fleet. While power prices remained depressed, coal-fired generation retirements and tightening supply dynamics provide some optimism for generators.
  • Renewable M&A contributes 50% to global deal volume (23% to value); Asia-Pacific emerges as the new clean-energy hub, contributing 66% to the total renewables deal value.

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