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Overview

Power transactions and trends | Q2 2017

Market reform and new technology drive M&A activity

Power and utilities (P&U) transactions in Q2 involved a high number of low-value deals, many in renewables and new energy. Is this a new era of P&U investment?

EY - Infographic

Q2 recorded more deals than Q1, but value dropped in all regions except Europe (+12%). The Americas recorded the biggest decline (-72%). But this is not a sign of decreased activity in the sector, but instead highlights new trends emerging in P&U investment:

  • Renewables are playing a bigger role. Small value renewables deals accounted for 48% of total deal volume but just US$6.1b of deal value.
  • Asset privatizations are driving network asset sales as governments reap advantage of record multiples for these assets. Almost half (43% or US$13.3b) of Q2 deal value was driven by energy reform and privatizations.

Investors must note the changed conditions of this new era in P&U investment. Financial investors will need to understand that technologies designed to arbitrage technical shortfalls — for example, intermittent frequency and peaking demand issues — will impact the value of traditional market players unless they evolve.

This is particularly the case when competing to deploy capital into an oversupplied conventional market or where deal availability is dependent upon government decisions surrounding privatization and reform.

Global P&U deal value and volume by segment (Q2 2015–Q2 2017)

(asset and corporate-level deals)

EY - Global P&U deal value and volume by region (Q2 2015–Q2 2017)

Source: EY analysis based on Mergermarket data.

Global P&U deal value and volume by region (Q2 2015–Q2 2017)

(asset and corporate-level deals)

EY - Global investment flows inbound and outbound by country (Q2 2017)

Source: EY analysis based on Mergermarket data.

Global investment flows inbound and outbound by country (Q2 2017)

EY - Global investment flows inbound and outbound by country (Q2 2017)

*Note: Percentages may not add to 100% due to rounding.