Corporate deals from strategic investors drive deal value
Deals related to YieldCos and resource constrained markets drive asset activity
NEW YORK, January 28, 2014 ― Merger and acquisition (M&A) activity in the North American power and utilities industry increased in the fourth quarter of 2013 on both a year-over-year and sequential quarter basis as companies continued reshuffling portfolios with a focus on their core businesses and strategic opportunities. PwC’s US quarterly deals snapshot North American Power & Utilities Deals: Q4 2013 shows an increase in deal activity driving overall deal volume and value in the fourth quarter and full year 2013.
There were 14 power and utilities transactions greater than $50 million in the fourth quarter of 2013, compared to 12 deals in the previous quarter and 13 during the fourth quarter of 2012. Bolstered by two large corporate deals worth nearly $7.4 billion, fourth quarter deal value reached $10.3 billion, more than doubling the deal values of third quarter 2013 and fourth quarter 2012.
“Closing out the year with such a high level of activity is a positive sign for 2014 deal activity. Investors continue to be attracted to assets that generate strong yields, and combined with cash on the sidelines, sellers are seeing this as a good time to bring assets to market,” said Jeremy Fago, PwC’s U.S. power & utilities deals leader. “We’re also seeing increased activity around assets in regions of tightening supply and demand dynamics, as well as those fitting the YieldCo investment profile.”
Strategic investors accounted for 93 percent of deals greater than $50 million announced during the fourth quarter, compared to 72 percent in the third quarter, with financial investor activity carrying out the remaining seven percent of deals. “Private equity players have been focusing on regions with tightening supply, specifically Texas, for opportunities in the generation side of the business and to expand their power and utilities portfolio,” added Rob McCeney, PwC US energy & infrastructure deals partner. “The markets also remain interested in the outcome of hybrid merchant generation businesses, where there remains the potential for additional assets to come to market.”
Six alternative power deals in the fourth quarter marked a high for the year. While these transactions had smaller deal values, they showed there is an interest in alternative deals, especially wind related transactions.
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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