PwC: Deal Value for Utility Sector Slows Down But Still Nearly $29 Billion in 2Q

The news that Great Plains Energy will acquire Westar Energy in a $12.2 billion combination dominated the merger sector of the electric utility industry in 2016’s second quarter, according to accounting and consulting firm PwC’s report on M&A activity for those three months.

All in all, deal value for power and utility companies totaled $28.3 billion, eight times higher than the same period in 2015 but 32 percent lower than the $41.4 billion in M&A activity in the first quarter, according to PwC (formerly PricewaterhouseCoopers).

“For deals over $50 million, Q2 2016, represented another robust quarter for deal activity in the power and utilities sector,” reads the introduction in “ËœPwC Deals: North American Power & Utilities Deal Insights.’ “Deal activity in the quarter was driven by large corporate deals for electric utility, renewable and independent power producers, among others. “

Only four mega deals—M&As worth more than $1 billion—were announced in 2016’s second quarter. After Great Plains-Westar, those included Tesla Motors’ nearly $6.6 billion unsolicited bid for PV panel producer SolarCity announced last month; equity fund Riverstone Holdings’ $5.09 billion offer for a 65-percent stake in Talen Energy Corp.; and Singapore-based GIC’s move to acquire a 19.9 percent piece of Michigan-based transmission firm ITC Holdings from Fortis for $1.23 billion.

Down the list was a series of sub-$1 billion deals involving Southern Co., Florida Power & Light and Dynegy, among other buyers. Completed mergers, such as Exelon’s $8 billion acquisition of eastern utility Pepco Holdings, were not included in the PwC report, nor was NextEra Energy’s recently announced $18.4 billion agreement to buy Oncor Electric Delivery from bankrupt parent Energy Future Holdings.

“A convergence of previously discussed themes was evidenced in Q2 with deal activity across the gamut of investment classes as electric and gas infrastructure and renewable and traditional generation were all active targets, ” Jeremy Fago, PwC US Power & Utilities Deals Leader, was quoted in the report. “The rapidly changing makeup of U.S. generation supply continues to create opportunity and drive activity broadly in the space.”

Strategic growth deals accounted for 71 percent of total volume in the three months, according to PwC. This majority of deal motivations, however, was a drop from the 77 percent in the first quarter and 90 percent during 2015’s second quarter.

A story last month in ELP.com showed data from consulting firm EY (formerly Ernst & Young) indicating that U.S. utility deals for the first half of 2016 skyrocketed 255 percent compared to the same period last year.

 

 

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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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