4 minute read 14 Aug 2019
Offshore wind farm Borselle windfield Netherlands

Why investors are targeting new energy technologies

4 minute read 14 Aug 2019

Technology is no longer on the fringe of the power and utilities investment agenda – it’s at its very heart.

As the sector reaches an inflection point in the energy world , a surge of venture capital funding is reshaping utilities M&A.

The traditional utilities industry is being disrupted by renewables and technologies that are triggering a fundamental shift in how electricity is produced, used, stored and traded.

This new, fast-paced energy world demands agile, bold investment decisions, but many utilities are struggling to adapt. Venture capital (VC) offers a way to challenge traditional investment models and fast-tracks the development of the technologies that will be critical to the energy transition. As reported in EY Power Transactions and Trends Q2 2019, early- to late-stage VC investment contributed US$2.1b in power and utilites (P&U) in Q2.

P&U investment on the fast track


Contributed by venture capital funds to early- to late-stage VC investment in Q2

Much of this investment targeted the electrification of transport. Electric vehicles are leading the charge to an increasingly electrified world, attracting venture capital investment in projects around developing electric vehicles technology, including batteries and charging infrastructure. Most of this investment in Q2 took place in the Asia-Pacific region, the vast majority (83%) in China.

But, attracting VC investors in a competitive market is no easy feat. Utilities will have to work hard at adapting to high-risk VC investing – the opposite of traditional regulated utility investment. But those that can make the shift will be better placed to focus on the emerging technologies set to disrupt the industry.  

Trends shaping dealmaking

Financial investors take the lead in all regions

Overall, financial buyers are still the sector’s dominant investors, responsible for the biggest deal in each region this quarter. As in previous quarters, regulated utilities are most attractive, with investors seeking to balance portfolios through buying assets that offer predictable earnings and a stable cash flow stream. Other key trends this quarter include the following:

  • Battery storage investment increases: The rise of renewables means that battery storage is an increasingly important tool to support the grid. Statkraft and Statera Energy announced plans to set up 1 GW of storage in the UK with a backup gas generator, to provide balancing services in the energy market. New York State Department of Public Service has identified 275 MW of peaking units as potential targets for replacement with six‐hour energy storage, in a bid to achieve the state’s clean energy targets and boost grid resiliency.
  • Utilities are continuing investment in new technologies: Dubai Electricity and Water Authority will partner with Canadian smart grid solutions company Enbala to build the first virtual power plant in the region to manage frequency regulation and create a smarter grid. In Japan, Toyota Motor Corporation will test peer-to-peer electricity trading using blockchain technology along with the University of Tokyo and renewable energy supplier TRENDE.
  • Regulatory uncertainty unsettles investors: The UK’s Labour Party has raised the possibility of renationalizing electricity and gas networks, which could force current operators to transfer assets at below-market prices. Meanwhile, Australia’s lack of energy coherence is limiting investment by financial investors. Lebanon’s plans to cut state electricity subsidies are being challenged in court, while South Africa’s reforms to Eskom are moving slowly. And, in India, the state of Andhra Pradesh’s decision to renegotiate renewable power purchase agreements (PPAs) has upset investors.

Global P&U deal value Q2 2019


An increase of 30% from Q1 2019.

Global capital flows in Q2 2019

The US attracted more than half of all investment in utilities in Q2:

  • The US was the globe’s top destination for utilities investment, led by the US$4.3b El Paso Electric transaction.
  • China is still Asia-Pacific’s top target, but investment in India increased this quarter.
  • European investment is spread across countries.
Investment activity globally by country, Q2 2019 (US$b)
Investment activity globally by country graph

Total shareholder return (TSR) and valuation analysis

We break down our view of TSR and enterprise value (EV)/FY2 EBITDA by regions and segments.

Utilities gain ground but underperform the market

Total shareholder return (TSR) and valuation analysis graph

TSR and valuations segment dashboard

TSR and valuations segment dashboard graph

Americas utilities performed better than their global peers

  • The quarter-to-date (QTD) return of the EY Americas Utilities Index was 7.8%. This is higher than the regional market (as benchmarked by the S&P 500 index), which returned a quarterly total shareholder return (TSR) of 3.7%. The EY Americas Utilities Index outperformed Europe and Asia-Pacific (QTD TSR of 5.8% and -3.7%, respectively).
  • The QTD TSR of the EY Europe Utilities Index was 5.8%. This is higher than the QTD TSR for the European benchmark index STOXX Europe 600, which returned 3.3% for the quarter.
  • The EY Asia-Pacific Utilities Index performed lower than the Nikkei 225, the Asia-Pacific regional benchmark index. Asia-Pacific utilities returned -3.7% QTD compared with the market at 0.8%. The QTD returns of the EY Asia-Pacific Utilities Index were the lowest of all regional EY utilities indices.

Power transactions and trends: Q2 2019

Access more information, including regional analysis and a detailed list of companies, on SlideShare.

Read the report

Top five deals per region in Q2 2019


Announcement date Target

Target country/

bidder country

Bidder Deal value (US$b) Bidder rationale Segment
3 June
El Paso Electric Co.
J.P. Morgan Investment Management Inc.
4.3 Aligns with J.P. Morgan’s strategy to invest in utilities with high-growth potential to increase the value of their investor funds
24 June
Alberta PowerLine Limited
Greystone Managed Investments, Inc.; IST Investmentstiftung
1.3 Helps bidders secure long-term stable cash flows
24 April

Duke Energy Renewables, LLC

John Hancock Life Insurance Company, Inc.; John Hancock Infrastructure Fund, GP
1.3 Supports bidders’ strategy to invest in renewable energy assets
14 May
Mesquite Disposals Unlimited, LLC
US NGL Energy Partners LP
0.9 Makes NGL the largest water transportation and disposal company in the Delaware Basin
Water and wastewater
29 April
Goreway Power Station
Canada Capital Power Corporation
0.8 Furthers Capital Power’s growth strategy, Goreway’s location in the Greater Toronto Area load center also provides transportation flexibility

Note: All deals are announced deals, and the values indicated are disclosed enterprise values comprised of equity and debt components.


Announcement date Target

Target country/

bidder country

Bidder Deal value (US$b) Bidder rationale Segment
29 April
Innogy Grid Holding
(50.04% stake)
Czech Republic/Australia
Consortium led by Macquarie Infrastructure and Real Assets
2.1 Gives bidders 100% ownership of the asset

Gas distribution
5 April
Alpiq Holding Ltd. (37.12% stake)
Consortium led by CSA Energy Infrastructure Switzerland
1.6 Aligns with bidder’s strategy of growth while ensuring stable and diversified power supply to its customers
23 April

EDP Renovaveis, S.A. (23 onshore wind farms in France, Spain, Belgium and Portugal)
(51% stake)

J.P. Morgan Asset Management
0.9 Enables J.P. Morgan to deliver stable risk-adjusted returns to investors while continuing to grow its renewable energy portfolio
3 June
Group Limited
Algonquin Power & Utilities Corp.
0.5 Supports Algonquin’s international expansion strategy to grow via investing in regulated businesses
20 June
CEZ Bulgaria
Eurohold Bulgaria AD
0.4 Part of Eurohold’s long-term strategy to penetrate new regulated business segments that provide large opportunities for growth

Note: All deals are announced deals, and the values indicated are disclosed enterprise values comprised of equity and debt components.


Announcement date Target

Target country/

bidder country

Bidder Deal value (US$b) Bidder rationale Segment
28 March

China Power Clean Energy Development Co. Ltd. (73.58% stake)

Greater China/Greater China
China Power International Holding Limited
2.9 Aligns with bidder’s strategy to expand its renewables portfolio and delist the target company from the Hong Kong Stock Exchange
1 March Ayana Renewable Power Private Limited
India/UK CDC Group plc; National Investment and Infrastructure Fund (NIIF); EverSource Capital Group
0.3 Furthers bidders’ strategy to expand into India’s renewable energy market
22 February

Youngduk Wind Power Co., Ltd.; Yeong Yang Wind Power Corporation

South Korea/ South Korea SAMTAN Co., Ltd.; Shinhan Alternative Investment Management Inc.
0.2 Supports investors’ plans to expand into wind energy
7 March

Qinhuangdao Qinre Electric Power Co., Ltd. (40% stake); Hebei Zhanghewan Storage Power Generation Co., Ltd. (45% stake)

Greater China/ Greater China Jointo Energy Investment Co., Ltd. Hebei
0.2 Enables bidder to consolidate market share and enhance power generation capacity
20 March

TBEA Xinjiang New Energy Co., Ltd. (15.02% stake)

Greater China/ Greater China Bank of Communications Financial Asset Investment Co., Ltd.
0.1 Improves the financing capacities of Xinjiang and supports the development and operation of wind and solar projects

Note: All deals are announced deals, and the values indicated are disclosed enterprise values comprised of equity and debt components.


Utilities M&A increased in Q2, with deals driven by financial investors chasing integrated assets. But, as investment in emerging technologies becomes critical to the energy transition, an influx of venture capital funds is disrupting traditional investment models and reshaping utilities M&A.

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