PwC: North American power and utility deal value fell 77% in Q2
The value of energy deals fell 77% in the second quarter, compared with second quarter 2016, even though deal volume was up quarter-over-quarter, according to a new report from PwC.
There was only one deal greater than $1 billion in value in the second quarter and a total deal volume of $6.5 billion, which was far below the $28.3 billion recorded in second quarter 2016.
- The report found that deal activity continued to be driven by strategic deals, which accounted for 68% of deal value, but was weaker than in second quarter 2016 when strategic deals accounted for 76% of deal value.
A recent report found that power and utility executives’ appetite for M&A deals is at a seven year high. But so far this year, the sector has gotten off to a slow start, according to PwC’s most recent M&A report.
Much of the slowdown can be attributed to a lack of large deals. There was only one large deal in the second quarter. Eversource agreed to acquire Aquarion from Macquarie Utilities for $1.7 billion.
The report says that deal demonstrates that utilities are seeking growth opportunities to offset factors such as weak demand for electric power.
Another trend highlighted in the report was deal makers’ continuing interest in regulated yields, as seen in the three regulated deals announced in the quarter.
PwC expects small- and mid-cap utilities will continue to be potential acquisition targets, as the industry continues to consolidate. And, with the continuing change in the nation’s generation supply, deal makers will continue to seek exposure to infrastructure assets, such as gas pipelines and transmission assets.
Renewable energy deals, which often involved contracted assets with steady returns, could also be a deal driver going forward. “Despite a decrease in total deal value, we saw a return in volume this quarter driven to a significant degree by renewable deal activity, as fundamental support for renewables continued to be strong,” Jeremy Fago, PwC US power and utilities deals leader, said in a statement.
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