Global M&A activity hit a new high for the decade
PwC: Power and renewables deals rise 70% y-o-y to $243mn in 2014.
Global M&A value in the power and renewables sector has reached the highest level seen in the current decade and any further upward movement would begin to move sector deal value back towards the heady levels last seen before the credit crunch, according to PwC and Strategy&’s latest annual Power and Renewables Deals report.
The report states there is plenty of potential in the global power and renewables M&A pipeline but the latest surge may not be indicative of the long-term trend.
A more globally-balanced spread of deals is expected in 2015 with fewer of the US mega-deals that buoyed 2014 totals.
But the flow of divestment- and privatisation-driven deals looks strong and so there are plenty of reasons to think any dip in US deal value will be taken up, in part at least, by activity elsewhere.
The report finds that total worldwide power and renewables deal value rose from $143.3bn in 2013 to $243.1bn in 2014, a 70% increase year-on-year. It’s the first time the total has broken out of the $100-200bn range established since the pre-credit crisis year of 2007.
A series of big but one-off restructuring deals in the US gas sector, involving Kinder Morgan and Williams, contributed a massive $92.2bn to the worldwide M&A total.
Andrew McCrosson, partner, PwC power and utilities said: “We see plenty of potential deal flow in the pipeline but there’s likely to be an element of ‘wait and see’ as dealmakers take stock of a changed energy pricing environment.
“There are also a number of wider economic uncertainties to give investors some pause for thought, not least the risk of deflation. But this is also likely to heighten interest in the stable contracted or regulated returns available in the sector.”
The report maps a number of deal hot spots and investment opportunities around the world in the power and renewables sector for the year ahead. In particular, it notes that energy transformation and consequent business model change, arising from technological shifts and policy moves to encourage clean energy, are set to become increasingly reflected in power sector M&A activity. E.ON’s decision to split into two entities may not be the only such move.
Click here to access the report