Range of deals activity includes regulated utility, power generation, and retail deals
NEW YORK, May 6, 2014 ― Merger and acquisition (M&A) activity in the North American power and utilities industry decreased on a volume basis in the first quarter of 2014 as compared to the same period the prior year and prior quarter, as companies focused their efforts on deals that may drive growth and provide return potential, according to PwC’s US quarterly deals snapshot North American Power & Utilities Deals: Q1 2014. While smaller transactions drove deal volume in the first three months of the year, total deal value reached $4.4 billion in the quarter, up from $3.0 billion during the same period in 2013.
There were seven power and utilities transactions greater than $50 million in the first quarter of 2014, compared to nine during the first quarter of 2013 and 14 in the fourth quarter of 2013. Similar to the fourth quarter of 2013, when two large corporate deals drove the majority of total deal value, 66 percent of the first quarter’s deal value was driven by one large corporate deal, valued at $2.9 billion.
“During the first quarter we saw a range of deal activity spanning the industry landscape, including regulated utility, power generation, and retail deals. As we’ve previously highlighted, hybrid utilities have continued to evaluate their portfolios and the potential for bringing their merchant assets to market,” said Jeremy Fago, PwC’s U.S. power & utilities deals leader. “While we saw a decline in deal volume and value this quarter when compared to the previous quarter, we expect the deal environment to pick up through a combination of regulated and merchant transactions.”
Strategic investors accounted for 77 percent of deal value greater than $50 million announced during the first quarter, compared to 93 percent in the fourth quarter 2013; with financial investor activity carrying out the remaining 23 percent of deal value in the first quarter. “Private equity players have had continued interest in power and utility deal opportunities and have capitalized on deals that provide return potential,” added Rob McCeney, PwC’s U.S. energy & infrastructure deals partner.
Alternative power deals in the first quarter continued to comprise a small portion of total deal value, representing only four percent of deal value for deals greater than $50 million through one deal valued at $194 million. Despite low deal volume, interest in alternative deals remains high as benefits from the YieldCo model for renewable energy assets continues to gain attention across the industry.
PwC provides assurance, tax and advisory services to the power and utilities industry. Using deep industry experience, PwC helps top power and utilities companies gain operating efficiencies across the business value chain, from fiscal integrity and regulatory issues to increased customer service and talent management.
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