M&A Dealmaking: Second Quarter was Busy but Low-Key

The mergers & acquisition part of the utilities sector got a workout in the second quarter despite no real headline-grabbing megadeals.

Accounting and consulting firm PwC’s second quarter Deal Insights report on North American energy and utilities companies showed only one deal exceeding $1 billion in value—Eversource Energy’s $1.7 billion purchase of Aquarion Holdings LLC. The quarter also produced an accumulated value of only $6.5 billion in deals, the lowest total in several years.

Yet 18 mergers and/or acquisitions happened among North American firms, higher than the same period last year and the first quarter of 2017. Among those smaller deals, Fortis Inc. agreed to buy a majority stake in Canadian hydropower assets from Teck Resources (for $876 million in cash) while Pattern Energy also received nearly $800 million in new funding via its investors.

“Despite a decrease in total deal value, we saw a return in volume this (past) quarter driven to a significant degree by renewable deal activity as fundamental support for renewables continued to be strong,” Jeremy Fago, PwC’s power & utilities deals leader, said in a statement.

The second half of 2017 could see a major spike in megadeals, especially if Berkshire Hathaway Energy is successful in its offer of $9-plus billion in cash for Texas transmission firm Oncor Electric Delivery. Of course, Oncor is tangled up in parent Energy Future Holdings’ bankruptcy, so Berkshire has a potential rival in creditor Elliott Management if it makes a tangible, higher-valued move.

A third of second-quarter M&A deals were the $50 million to $100 million range, according to PwC’s quarterly report. Nearly half were in the $100 million to $500 million range.

Among those renewable energy deals included ORIX Corp. taking a 22 percent stake in Ormat Technologies for $626 million in May. In April, NextEra Energy Partners LP paid $422 million to related entity NextEra Energy Resources LLC for the Golden West Wind Energy Center in El Paso, Texas.

During the same month, Exelon Generation Co. also sold 49 percent of the membership interests in its ExGen Renewables Partners LLC to the John Hancock Life Insuranc e Co. for $400 million, according to PwC.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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