Global utilities, power deals hit six-year low in 2015

Global transactions in the power and utilities sector hit a six-year low in the first half of 2015. That’s according to a new report which states energy reform is an […]

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By Priyanka Shrestha

Global transactions in the power and utilities sector hit a six-year low in the first half of 2015.

That’s according to a new report which states energy reform is an “increasingly influential” driver.

EY revealed markets and acquisitions (M&A) totalled $50.9 billion (£33.3bn) in the first six months of this year.

It added although 2015 started “relatively strong”, the amount fell in the second quarter to just 96 deals worth $21.2 billion (£13.9bn).

Europe and the US saw the value of deals fall 50% and 20% from $11.4 billion (£7.5bn) and $7.2 billion (£4.7bn) respectively.

However, Europe “remains attractive” to financial investors, particularly in renewables and transmission and distribution (T&D) and general asset valuations are still high, according to the report.

The renewables sector in the US also saw deals value triple, with 15 deals worth $3.7 billion (£2.4bn).

The green industry is driving “significant” deal activity globally, the report adds, with $18.8 billion (£12.3bn) recorded in the first half of 2015 – a four-year high.

“Renewables are driving significant deal activity globally. Investors seem willing to pay premiums for assets that can generate long-term stable returns, particularly contracted solar and wind energy assets. This trend is most visible in the Americas where renewables dominated transactions”, it states.

The Asia-Pacific region recorded 31 deals in total, with the largest value in the second quarter at $9.3 billion (£6bn).

China saw the most deals with 86% of the total regional deal value. India, Indonesia, Pakistan and Japan are also “sparking interest”, much of it driven by energy reform, according to the report.

Africa and the Middle East are also attracting private sector investment, it added.

Matt Rennie, EY’s Global Power & Utilities Transactions Leader said: “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.”