North American Power Deals: Mergers & acquisitions report

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Quarterly report: Q2 2018

Driven largely by renewable deals across North America, the second quarter saw brisk deal activity as several companies looked to acquire strategic solar and wind assets in order to balance their existing portfolio of non-renewable assets.

Canadian financial investors continued to show interest in the renewable sector, with four deals on the list of the top 10 North American power and utilities deals in Q2 2018. The Canada Pension Plan Investment Board led the way with two deals, one of which was to acquire a stake in solar and wind assets from Enbridge Inc. (US$1.4 billion) and the other of which was to buy a portfolio of projects from NextEra Energy (US$1.3 billion). Other Canadian buyers included Brookfield Asset Management Inc., as well as Manulife Financial Corp. and Axium Infrastructure Inc.

While deal volume increased in the second quarter compared to Q1 2018, deal value declined to US$23 billion from US$28.9 billion, largely due to a 38% drop in mega deal value. CenterPoint Energy agreed to acquire Vectren Corp. in a transaction valued at US$8.1 billion. NextEra Energy announced a definitive agreement with Southern Co. to acquire Gulf Power for an estimated deal value of US$5.7 billion.

None of the renewable deals were part of a mega deal in Q2 2018, compared to one renewable mega deal in Q1 2018. Renewable deals represented 27% of the total deal value, or $6.2 billion for the quarter. Investors took advantage of a window of opportunity in the segment as growing efficiency continues to reduce costs while the phased wind-down of various government incentives is encouraging companies to accelerate investments to take advantage of the programs now.

“Canadian financial investors featured prominently in the P&U sector this quarter. Across North America and in the US, as clarity around US tax reform impacts unfolded, we continue to expect a pickup in deal activity as compared to recent quarters. Dealmakers from prior years returned to capitalize on opportunities around changing generation supply dynamics, supporting infrastructure and evolving customer demand.”

Ken Goodwin, National Deals Leader, Power & Utilities

Key trends this quarter

Key trend number 1

Overall deal value decreased by 20 percent in Q2 2018 as compared to prior quarter, despite a 33 percent increase in deal volume.

The renewable sector accounted for 27 percent of deal value in Q2 2018 compared to 36 percent of deal value in Q1 2018, a decline of $4.1 billion.

Natural Gas Transmission and Distribution continues to trade at the high end of the range of multiples for subsectors within the industry.

Strategic and Corporate deals drove deal value this quarter. In Q2 2018, 75 percent of total deal value was from Strategic buyers and 75 percent of total deal value represented Corporate targets.

Key trends this quarter

Inbound deals were limited in the quarter in terms of deal value, representing 15 percent of total deal value; however, inbound deals accounted for 25 percent of the quarter’s deal volume.

View previous quarter reports

Contact us

Ken Goodwin
Partner, National Valuations Leader
Tel: +1 416 814 5760
Email

John Matheson
Partner, Deals - Transaction Services
Tel: +1 416 687 8171
Email

Jeffrey Stewart
Partner, Valuations, Forensics & Disputes
Tel: +1 416 941 8361
Email

Brian Poth
Partner, National Industry Leader, Power and Utilities
Tel: +1 416 687 8522
Email

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