Energy reform drives global power and utilities M&A activity amid slow quarter
- Global power and utilities transactions hit six-year low in first half of 2015
- Asia-Pacific region records largest power and utilities Q2 deal value at US$9.3b
- Valuations remain strong, reflecting ongoing investor confidence
LONDON, Sept. 3, 2015 /PRNewswire/ -- Energy reform has shown that it is an increasingly influential driver of deals activity in the global power and utilities sector, even as M&A reached a six-year low of US$50.9b in the first half of 2015, according to EY's quarterly Power transactions and trends Q2 2015 report released today.
While 2015 started relatively strong, global power and utilities deal volume and value fell in the second quarter of the year to just 96 deals worth US$21.2b.
Matt Rennie, EY's Global Power & Utilities Transactions Leader, says:
"Much of the M&A fall off is due to an absence of megadeals in the US and a slowing of long-running divestment agendas for European utilities. Despite the deal slowdown, valuations remain strong for many assets, particularly in renewables, T&D and generation. During the second half of the year we expect to see M&A rebound as companies respond to the sector's ongoing transformation, particularly regulatory reforms and electrification in emerging markets."
Activity in Europe and the Americas mirrored the global decline with deal value falling 50% and 13% from US$11.4b and US$7.2b respectively quarter-over-quarter. The Americas renewables segment, however, showed strength in Q2, tripling the previous quarter's deal value, with 15 deals worth US$3.7b.
The Asia-Pacific region recorded 31 deals and the largest deal value in Q2 at US$9.3b while China saw the most deals with 86% of total regional deal value originating in the country. This region is particularly impacted by reform, with investors drawn by liberalization, electrification and privatization efforts in India, Indonesia, Pakistan, Japan and Australia. Similarly, reforms in Africa and the Middle East are attracting private sector investment in infrastructure for generation capacity expansion.
Rennie says: "Companies are adopting a more strategic approach when it comes to M&A. We've seen that reflected in innovative financing structures, investment in midstream infrastructure and renewables, the rise of Asia-Pacific and Africa as investment hubs and ongoing corporate restructuring in Europe. Throughout the second half of 2015 we expect to see notable deals to emerge as companies to respond to a changing industry."
To download the report, visit: www.ey.com/PTT.
Notes to Editors
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About the report
This edition of Power transactions and trends combines global transactions trends with current power and utilities' asset valuations and insight to help clients make informed, strategic decisions about capital investment in the sector. It explores the outlook for utilities, investors and sector participants.
The 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 2013 to 2015.
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 ey.com/powerandutilities.
Sarah Shields
EY Global Media Relations
Office: +33 (0)1 46 93 49 65
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sarah.shields@fr.ey.com
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