- Power and utilities deal value reached all-time high of US$180b during 1H18
- Surge in renewable deals continued in Q2, representing 46% of deal volume
- China lead Q2 global outbound investment with US$31.2b of announced deals
Global power and utilities deal value reached an all-time high of US$180b during 1H18, despite a 14% decline quarter-on-quarter to US$83b in Q2. That is according to EY Power transactions and trends: Q2 2018 (PTT), which also reveals that renewables accounted for almost half (46%) of Q2 deal volume.
The trend toward investment in clean energy continued to gain momentum during Q2, with 63 renewables deals totaling US$12.9b. Notably, the European Union’s landmark agreement to achieve 32% renewable energy consumption by 2030, and three renewables deals in the US totaling US$3.8b, set the agenda for growing investment in clean energy globally.
Utilities companies also increasingly invested in new technologies during Q2. In Europe, US$5.5b was attributed to energy services and new technology deals, while Japan’s Tokyo Electric Power Company (TEPCO) launched a subsidiary to form joint ventures around the development of disruptive technologies.
Miles Huq, EY Global Power & Utilities Transactions Leader, says:
“The first half of 2018 reflects a complex deal environment characterized by a changing generation mix and a growing appetite for renewables investment, which will continue to drive the deal agenda into the second half of the year. Around the world, we are also seeing utilities companies increasingly exploring new technologies, including battery storage, electric vehicle infrastructure and digital grid technologies. With sector convergence on the rise, we are also seeing more non-conventional competitors emerge as the power and utilities landscape continues to undergo transformation.”
Developing markets accelerate dealmaking
The second quarter saw the emergence of developing markets as an investment destination for traditional M&A. Thailand and India hosted US$5.3b and US$3.2b of deals respectively, while deals by both domestic and foreign investors in Estonia totaled US$600m.
China led global outbound investment in Q2 with US$31.2b of announced cross-border energy deals, in line with the country’s One Belt, One Road state initiative. Much of this value (US$27.4b) was attributable to the announced takeover bid of Portugal’s EDP by China Three Gorges.
After achieving record deal value in Q1 (US$63.1b), M&A in Europe remains strong, reaching US$45.7b in Q2 and representing 55% of total power and utilities global deal value during the same period. Europe was also the only region in which the current multiple traded at a premium (33%) to the average historic multiple for the quarter (6.6X).
Deal value in Asia-Pacific saw an increase of 78% quarter-on-quarter during Q2 to US$10.3b. Renewables continued to drive much of the activity in Asia-Pacific, with 25 clean energy deals totaling US$3.8b.
While deal value in the Americas declined by 8% quarter-on-quarter to US$26.9b, seven megadeals totaling US$21.8b gave the region a boost. The US represented 75% of Americas deal value (US$20.2b).
Huq says: “US federal tax reforms are making an impact in the sector, with investor-owned gas and electric utilities preparing to return billions of dollars to ratepayers nationwide. Several utility holding companies and diversified utilities with competitive generation segments have announced plans to raise capital through equity and debt issuances or plans to reduce capital expenditures to maintain credit metrics. Further consolidation in the US is expected through 2018.”
- Ends -
Notes to Editors
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.
About EY’s Global Power & Utilities Sector
In a world of uncertainty, changing regulatory frameworks and environmental challenges, utility companies need to maintain a secure and reliable supply, while anticipating change and reacting to it quickly. EY’s Global Power & Utilities Sector brings together a worldwide team of professionals to help you succeed — a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Sector team works to anticipate market trends, identify their implications and develop points of view on relevant sector issues. Ultimately, this team enables us to help you meet your goals and compete more effectively.
For more information, please visit Power & Utilities
About Power transactions and trends
The EY analysis and perspectives within Power transactions and trends are based on global financial releases and Mergermarket data, as well as global engagements conducted by EY member firms over the period 2012 to 2018. They provide an up-to-date assessment of outcomes and trends in the global utilities industry.