5 minute read 19 Feb 2019
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How strong conditions in Europe are boosting utilities investment

5 minute read 19 Feb 2019
Related topics Power and utilities

As seen in EY's Power Transactions and Trends Q4 2018 report, clean energy deals are gaining momentum as renewables reach price parity with fossil fuels. 

The transition of the global energy market towards renewables is encresingly reflected in the power and utilities (P&U) M&A enviroment. While these deals remain of comparatively lower value, volume is increasing. Europe remains the only region with comprehensive policy support in place, and we expect this to boost P&U M&A here. But even in regions where policy support is uncertain or lacking, investment is expected to increase as economics improve, sustainability issues become more critical and consumers demand change. It’s these factors that are also driving the acceleration of electric vehicle (EV) adoption around the world, with utilities moving to invest in EV infrastructure and stake a claim in this growing market.

Changing conditions may challenge investors

While 2018 saw a record-high P&U deal value and volume, driven by overall economic growth, continued access to capital and low interest rates, it’s worth noting that more than 70% of value was contributed by Q1 and Q2. By Q4, conditions were deteriorating and, in 2019, we anticipate a more complex M&A environment as interest rates increase, macroeconomic conditions hang in the balance and political tensions weigh heavily on investors. The market may shift to favor lenders over borrowers, with an increasing level of sophistication required to identify and secure strategic investment opportunities.

Global deal value 2018


Global P&U deal value reached an all-time high of US$256.3b in 2018, a 22% increase from 2017.

Trends shaping dealmaking

Deals involving integrated assets, particularly in Europe, drove value in 2018, though a large number of smaller renewables transactions made up almost half of all deals globally. Key trends shaping dealmaking included:

Two European deals boost deal value: Europe was the region that contributed most to P&U deal value in 2018, with almost half (49%) of deals taking place here. Most of this investment was attributed to two large integrated deals in Q1 and Q2:

  • E.ON’s US$46.7b acquisition of Innogy from RWE was the largest deal of 2018 and a transformative transaction for Europe’s energy sector.
  • The second largest deal was China Three Gorges’ proposed takeover bid for Portugal’s EDP, which owns transmission and distribution across Europe.

Americas integrated deals contributed one-third of region’s value: Always attractive to investors, the Americas P&U sector hosted five multibillion-dollar integrated deals in 2018, which together contributed US$32b, or 32%, of the region’s total deal value. The largest integrated deal was announced in Q1: the all-stock merger of SCANA Corporation and Dominion Energy, which was approved and completed at the start of 2019.

Renewables make up almost half of deal volume: Globally, renewables made up 46% of total deal volume – 253 deals – but only 19% of total deal value (US$48.3b). Strong policy support saw Europe attract the largest share of renewables, with more than 40% of deal value and volume.

Largest Q4 deal demonstrates increasing sector convergence: In a landmark transaction that was the largest deal of the Q4, US water utility Aqua America announced plans to acquire Peoples Gas for US$4.3b. This deal, once complete, will create one of the largest publicly traded water utilities and natural gas local distribution companies in the US. Read more about the transaction rationale in our interview with Aqua’s CFO Dan Schuller.

Largest region


Deal value in Europe rebounds, growing more than 1.5 times from 2017.

Global capital flows in 2018

Our global capital flows tracks YTD M&A across the globe, highlighting the top countries globally. 

  • The US attracted the most capital in 2018, with total M&A totaling US$81.4b (a 7% decline from 2017). This included US$55.1 of domestic transactions and US$26.3 of inbound activity.  
  • Canada invested US$20.2b in the US (67.3%) of total investment activity.
  • China was the top outbound investor, investing US$34b in foreign countries with US$32.6b (96%) targeted at Europe.

Chinese investment targets Europe
Total investment activity globally by country — YTD (US$b)

Total shareholder return (TSR) and valuation analysis

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

Utilities outperform benchmark indices in every region
Total shareholder return — regional comparison (%)

Generation assets deliver above-market returns
TSR and valuations segment dashboard


  • The YTD return of the EY Americas Utilities Index was 2.7%, which is significantly higher than the regional market (as benchmarked by the S&P 500 index), which returned a full-year TSR of -5.2%.
  • The Americas utilities EV/FY2 EBITDA sector traded at 10.5x. Water and wastewater assets traded at the highest multiple at 13x for Q4, higher than any other region.


  • The YTD TSR of the EY European Utilities Index was 7.8%, which is significantly higher than the YTD TSR for the European benchmark index STOXX Europe 600, which performed poorly, returning -14.5% for the year.
  • The European utilities sector traded at the lowest EV/FY2 EBITDA multiple during Q4, and renewables and gas utility assets traded the highest of all asset classes in Europe.


  • The EY Asia-Pacific Utilities Index performed better than the Nikkei 225, the Asia-Pacific regional benchmark index. Asia-Pacific utilities returned -2.5% YTD compared with the market at -14.9%.
  • The Asia-Pacific utilities sector EV/FY2 EBITDA traded highest across all geographies and slightly higher than in Q3.

Power transactions and trends: Q4 2018

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

Find out more

Top five deals per region in 2018


Announcement date Target Target country/bidder country Bidder Deal value (US$b) 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. 18.3 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
3 January SCANA Corporation US/US Dominion Energy Inc. 14.3 Expands Dominion’s presence in the Southeast; increases its compounded annual earnings-per-share target growth rate to 8% through 2020 and reduces customer bills through refunds of US$1.3b Integrated
23 April Vectren Corporation US/US CenterPoint Energy Inc. 8.1 Leverages growing financial resources to expand competitive energy services across a larger US footprint with a view to also improve customer service levels Integrated
21 May Gulf Power Company US/US NextEra Energy Inc. 5.8 Improves NextEra’s financial position and expands its customer base by 450,000 customers  Integrated
16 February Enel Generación Chile (40.02% stake) Chile/Chile Enel Chile S.A. 3.3 Aligns with Enel Chile’s strategy to consolidate the Chilean energy companies of majority shareholder Enel S.p.A and strengthen its leadership of Chile’s energy market Generation:
hydro, wind,

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
12 March Innogy SE Germany/Germany E.ON SE 46.6 Supports E.ON’s strategy to rationalize its portfolio and focus on energy networks and retail customer solutions Integrated
11 May  Energias de Portugal S.A. (76.73% stake) Portugal/China China Three Gorges Corporation 27.4 Aligns with CTG’s plan to make strategic investments in the European energy market Integrated
26 July Hornsea 1 (50% stake) UK/US Global Infrastructure Partners (GIP) 5.9 Aligns with GIP’s strategy of acquiring stakes in under-construction renewable assets with a focus on long-term returns Renewables: wind
25 May Techem GmbH Germany/Switzerland Caisse de Depot et Placement du Quebec; Ontario Teachers' Pension Plan; Partners Group Holding AG 5.4 Consortium plans to assist Techem to introduce new technologies and geographically expand its energy invoicing and energy management offerings  Others: energy
22 February Gas Natural Fenosa
(20.07% stake)
Spain/UK CVC Capital Partners Limited; Corporacion Financiera Alba SA 4.7 Aligns with the investors’ strategy of investing in assets with long-term stable returns Integrated

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
20 June Glow Energy Public Co. Ltd. Thailand/Thailand Global Power Synergy Public Company Limited 5.2 Allows Global Power Synergy to benefit from Glow’s high-quality generation assets, leverage potential business opportunities and increase market presence in Thailand Generation
1 March GD Power Development Co., Ltd. (22 subsidiaries); China Shenhua Energy Company Limited (18 subsidiaries) China/China GD Power Development Co. Ltd./China Shenhua Energy Company Limited Joint Venture 4.4 Joint venture is in line with the strategies of GD Power Development and China Shenhua Energy to reduce competition and improve core competitiveness Generation:
2 April Ostro Energy Pvt. Ltd. India/India ReNew Power Ventures 1.7 Enables ReNew Power to increase its installed capacity and consolidate its position in India’s renewable energy market Renewables: wind
20 September Energy Development Corporation (EDC) (10.89% stake) Philippines/Philippines EDC 1.3 Delists EDC, giving the organization greater corporate flexibility and allowing it to offer shareholders a premium to the current share price Renewables:
4 June Orange Renewable Power Pvt. Ltd.; Chengdu Jinqiang Water Co., Ltd. (60% stake); Jiangyin Tianli Gas Co., Ltd. (37.23% stake) Chengdu Jinqiang Water Co., Ltd. (60% stake); Jiangyin Tianli Gas Co., Ltd. (37.23% stake) Jiangyin Tianli Gas Co., Ltd. (37.23% stake) India/India Greenko Energy 0.9 Helps Greenko increase its installed capacity with 907 MW of solar and wind projects and 500 MW of assets under development Renewables:
solar and wind

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



Power & utilities M&A hit a record high of US$256.3b in 2018, driven largely by a European rebound. But deteriorating conditions may create a more complex investment environment in 2019.    

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