5 minute read 30 May 2021
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How confidence pushed P&U dealmaking in Q3 18

5 minute read 30 May 2021

The optimism of power and utility executives helped push Q3 18 deal making to a yearly high.

Despite ongoing regulatory uncertainty and geopolitical tension, confident global power and utilities (P&U) executives are ready to make deals, according to the latest P&U EY Capital confidence barometer (CCB) which revealed that 57% of those surveyed said they expect to pursue a transaction in the next year.

After a record-breaking start to 2018 for mergers and acquisitions (M&A) in the energy sector, deal activity has remained buoyant despite a 25% quarter-on-quarter decline in Q3. A surge in gas and renewables deals in the third quarter of 2018 saw global P&U year-to-date (YTD) deal value rise to a record US$241.8b.

Global deal value


Global deal value was US$61.9b in Q3 18. Taking a year-to-date perspective, global deal value was US$241.8b.

Trends that shaped dealmaking in Q3 18

Gas utilities transactions dominated. These deals reached an all-time quarter high, representing 59% of global deal value (US$36.5b). More than half of Q3’s gas transactions were conducted in the Americas (US$18.3b).

Renewables remained an investment priority. This was true in all regions, with 58 deals accounting for 41% of global deal volume. In Europe, renewables represented 78% of deal value (US$8.1b) and underpinned a weaker-than-expected quarter in that region.

Globally, corporate power purchase agreements (PPAs) are an increasing driver of renewables investment, with growing interest in Latin America, Asia-Pacific and the Middle East. In part, the rising use of PPAs is due to demand for cheaper, sustainable sources of energy as energy-intensive businesses seek electricity at below-market prices.

Offshore wind is attracting institutional investment, particularly in Europe. This quarter saw more than 1.9 GW of greenfield projects in offshore wind announced across Europe and the Americas, with more investment from financial investors.

Sustained regulatory uncertainty threatens M&A. All regions are experiencing regulatory uncertainty that, if sustained, could impact the strong M&A environment.

Largest segment


Gas was the largest deal segment in Q3 18 with a value of US$36.5b. Taking a year to date view, integrated was the largest segment with a value of US$114.9b

Power transactions and trends: Q3 2018

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Global capital flows in Q3 18

Global capital flows in Q3 18

Total shareholder return (TSR)

We break down our view of TSR by regions and segments.

Total shareholder return regional comparison

Americas: The YTD return of the EY Americas Utilities Index was 3.4%, which is significantly lower than the regional market (as benchmarked by the S&P 500 index), which has been steadily increasing since mid-March, returning a YTD TSR value of 11.3%. The QTD returns for utilities in the Americas were also significantly lower than the overall market.

Europe: The YTD TSR of the EY European Utilities Index was 8.9%, which is significantly higher than the YTD TSR for the European benchmark index STOXX Europe 600, which performed poorly, returning a mere -1.8% for the year. The utilities index followed the market until the end of April, when the STOXX Europe 600 began to decline and the utilities index started to steadily rise. Utilities also outperformed the index for the quarter, returning 3.1%, compared with the benchmark value of 1%.

Asia-Pacific: The EY Asia-Pacific Utilities Index performed significantly worse than the Nikkei 225, the Asia-Pacific regional benchmark index. Asia-Pacific utilities returned -1.8% YTD compared with the market at 4.2%. The QTD and YTD returns of the EY Asia-Pacific Utilities Index were also significantly lower than the returns from other regional EY utilities indices.


For each regional segment, we examined the TSR and the EV/FY2 EBITDA values.

Americas: Generation achieved the highest TSR of the region, and was the only segment to outperform the market. Medium and small market capitalization integrated assets TSR performed the worst. The TSR of the water and wastewater segment performed better than in other regions.

The Americas utilities EV/FY2 EBITDA (enterprise value by next 12 months’ earnings before interest, tax, depreciation and amortization) multiple traded at a discount when compared with the Q2 average of 9.7x. Water and wastewater assets traded higher than the forward multiple of this asset across other geographies.

Europe: Generation achieved the highest QTD TSR in the region, while the water and wastewater segment TSR performed the worst. The TSR of the large market capitalization integrated segment performed better than in other regions.

The European utilities sector traded at the lowest EV/FY2 EBITDA multiple during Q3, and renewables traded the highest of all asset classes in Europe and recorded the highest performance for renewables across all regions.

Asia-Pacific: Gas utilities achieved the best YTD TSR in the region, and was the only segment to outperform the market. The renewables segment TSR was the worst result of the region, and also represented the poorest performance for this segment across all regions. The TSR of the medium and small market capitalization integrated segment outperformed other regions.

The Asia-Pacific utilities sector EV/FY2 EBITDA traded highest across all geographies and slightly higher than in Q2.

Renewables in the Americas and Europe: TSR and valuations segment dashboard

Top five deals per region in Q3 18


Announcement date Target

Target country/

bidder country

Bidder Deal value (US$) Bidder rationale Segment
August/September Enbridge Energy Partners LP (66.06% stake), Enbridge Energy Management, L.L.C. (88.33% stake), Spectra Energy Partners, LP (16.89% stake) US/Canada Enbridge Inc. 18.3b Helps streamline bidder’s corporate and capital structures, improve its credit rating and mitigate impacts associated with regulatory changes that will impact the cash flows of master limited partnerships (MLPs) Gas utility
5 September Sempra Energy (non-utility operating solar assets, solar and battery storage development projects, and one wind facility) US/US Consolidated Edison Inc. 2.1b Strengthens Consolidated Edison’s position in the renewable energy market and will generate synergies due to proximity of plant locations Renewables: solar, battery and wind
5 September

NextEra Energy, LLC (11 wind farms with a cumulative capacity of 1.4 GW)

US/US NextEra Energy Partners, LP 1.3b Gives bidder access to high-quality, contracted renewable energy assets and is in line with its strategy to expand its geographical footprint Renewables: wind
24 September Dominion Energy (two combined-cycle plants) US/US Starwood Energy Group Global, LLC 1.2b Supports bidder’s strategy of buying or building core infrastructure assets in attractive locations close to customer demand Generation
29 July  Bayonne Energy Center, LLC US/US NHIP II Bayonne Holdings LLC 0.9b Supports bidder’s strategy to invest across the energy sector in developed markets Generation

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$) Bidder rationale Segment
26 July Hornsea 1 (50% stake) UK/US Global Infrastructure Partners (GIP) 5.9b Aligns with GIP’s strategy of acquiring stakes in under-construction renewable assets with a focus on long-term returns Renewables: wind
19 July RTR Rete Rinnovabile S.r.l. Italy/Italy F2i SGR SpA 1.5b Fits with investor’s strategy to acquire renewable assets for long-term stable returns Renewables: solar
27 September

DESFA SA (66% stake)

Greece/Italy Snam SpA; Fluxys SA; Enagas S.A. 0.6b Takes the company private; with the consortium planning to transfer technical and operations capabilities to drive synergies, as well as exploring expansion opportunities Gas utility
31 July Encevo S.A. (25.48% stake) Luxembourg/China China Southern Power Grid International (HK) Co., Ltd. 0.5b Supports investor’s strategy to expand geographical footprint Generation
11 September Valdesolar Hive SL Spain/Spain Repsol S.A. 0.2b Supports investor’s strategy of diversifying into renewable energy Renewables: solar

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
Bidder Deal value (US$) Bidder rationale Segment
13 August APA Group Ltd*. Australia/Hong Kong (Greater China) CK Infrastructure (CKI), CK Asset (CKA) and Power Assets Holdings 16.3b Establishes CKI as a major player in Australia’s east coast gas pipeline network, where it already owns stakes in gas infrastructure and energy assets Gas utility
20 September Energy Development Corporation (EDC) (10.89% stake) Philippines/
EDC 1.3b In line with EDC’s plan to delist, giving the organization greater corporate flexibility and allowing it to offer shareholders a premium to the current share price Renewables: geothermal 
 6 July

X-ELIO Energy, S.L. (187 MW Japanese solar assets portfolio)

Japan/Japan Consortium formed by Japanese institutional investors  0.6b Aligns with investor’s goal of investing in growth assets with long-term returns Renewables: solar 
12 August Ramky Enviro Engineers Limited (60% stake) India/US Kohlberg Kravis Roberts & Co. L.P. 0.5b Brings operational advantages by leveraging the bidder’s engineering innovation, through attracting managerial talent and boosting efficiencies Water and wastewater: treatment
26 July Monnet Ispat & Energy Ltd. (74.29% stake) India/India JSW Steel Ltd.; AION Capital Partners Limited 0.4b Aligns with JSW’s focus on acquiring smaller steel plants with captive generation in the domestic market Generation

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

*Note: The completion of this deal remains in balance as the Federal Government issued a preliminary view that the bid should be rejected.


For the world’s power and utilities companies, investment and mergers and acquisitions are important strategic tools to help navigate the radical transformation of their sector. But global dealmaking conditions are becoming more complex and finding the right opportunities is increasingly difficult.

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