Power transactions and trends
Global power and utilities transactions review
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
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.
Global P&U deal value and volume, Q3 2011-Q3 2013×
Source: EY analysis based on Mergermarket data