Power transactions and trends

Global power and utilities transactions review
Q3 2013

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Transactions rebound as utilities rebalance portfolios

The global power and utilities (P&U) transactions market rebounded slightly over Q3 2013, with deal volume reaching a two-year high, up 25% from Q2. Value dropped slightly from US$33b to US$31.7b over the quarter, with results dominated by nine transactions that each exceeded US$1b.

Global P&U deal value and volume, Q3 2011-Q3 2013

EY - Global P&U deal value and volume, Q3 2011-Q3 2013

Our P&U partners at EY member firms globally are reporting three trends behind these results:

  • Utilities are actively rebalancing their portfolios in response to continued market uncertainty. We see a growing trend to explore opportunities upstream and downstream in the supply chain to gain competitive advantage, revenue security and yields which are incremental to, and leverage off, core business.

    This has been highlighted by the US$4.6b acquisition of the UK’s Invensys Plc. by French-based Schneider Electric, and the US$2b acquisition of Midland Cogeneration venture by GSIA, a consortium of pension funds in Japan and Canada.

    Changing political, regulatory and commodity fundamentals will see utilities continue to re-evaluate traditional models, narrow their focus on core operations, and optimize asset portfolios through non-core divestments and acquisitions of supporting vertical and horizontal services. 

  • Market reforms continue to drive transactional activity. Gazprom Energoholding’s US$3.8b purchase of 89% of the Moscow Integrated Power Company OJSC, as part of the Moscow City Government’s privatization program, was notable. 

    In Japan, proposed deregulation and unbundling of the country’s 10 vertically-integrated utility companies will remain a focus for the next two to three years. In Australia, sales of publicly-owned generation, as well as increased private sector involvement in networks, are expected over a similar timeframe. 

  • Emerging markets remain a focus. In July, President Obama’s announcement to commit US$7b to sub-Saharan Africa’s electricity network sparked strong interest from foreign investors — although a reported US$300b is needed for the region to achieve universal access to electricity by 2030.

Key findings, Q3 2013

  • Momentum building amid global rebalancing: M&A reaches US$31.7b, in line with US$33b of Q2 and up 67% compared to Q3 2012; deal volume hits two-year high
  • European divestments, privatization programs continue to drive global M&A: the region hosted five billion-dollar-plus transactions and contributed more than 50% to the total deal value
  • Opportunistic power generation deals in the US on the back of a buy-versus-build value spread
  • Privatization programs in Oceania and Eastern Europe gather pace
  • Financial investor M&A quadruples to reach US$6.5b compared to previous quarter, led by Australian and Japanese outbound billion-dollar-plus transactions
  • Energy services deals increase, as utilities look for new avenues for growth

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Global P&U deal value and volume, Q3 2011-Q3 2013

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Source: EY analysis based on Mergermarket data