North American Power Deals: Mergers & acquisitions report

Quarterly report: Q3 2018

Evolving business models, portfolio rationalization and growth opportunities are driving competition in the North American power and utilities industry. Buyers are pursuing deals to bolt on growth opportunities and enhance their business models, while sellers are attracted to deals to shore up balance sheets, rationalize portfolios and monetize investments at attractive valuations.

Still, Q3 2018 was quieter compared to Q2 2018 from a deal value perspective, even with continued strong deal volume (albeit lower than Q2 2018). Deal value fell in the quarter, mostly due to the absence of any mega deals and a decline in the number of transactions worth more than US$1 billion. In the US, the three deals valued at more than US$1 billion in Q3 2018 were led by NextEra Energy Partners’ acquisition of a 1.4-gigawatt portfolio of wind and solar projects from NextEra Energy Resources for $2.2 billion. Canadian deals in the top 10 North American transactions included Innergex Renewable Energy Inc.’s move to acquire a 62% ownership interest in five Quebec wind farms from TransCanada Corp.

Strategic and asset deals drove both deal value and volume. Eight of 18 transactions involved renewables. The waning opportunity to take advantage of the US federal production tax credit and looming phase-out of the investment tax credit are a key driver of renewable deal activity, including mergers and acquisitions.

“In a relatively slow quarter of Power & Utilities deal making, two Canadian deals featured in this quarter's top 10. Innergex announced the acquisition of a 62% interest in a wind portfolio from TransCanada (CA$630 million), and Capital Power agreed to acquire a gas plant in Virginia (US$300 million). We have seen a slowing of mega deals in light of rising interest rates and limits on balance sheet capacity. The beginning of 2018 highlighted asset and portfolio deals driving activity, reflecting portfolio rationalization and capital availability.”

Ken Goodwin, National Deals Leader, Power & Utilities

Key trends this quarter

Key trend number 1

Overall deal value in Q3 2018 decreased compared to both the last quarter and Q3 2017 by 56 percent and 78 percent respectively. Though deal volume increased by 80 percent compared to Q3 2017, it decreased 10 percent comparing to last quarter.

The renewable sector accounted for 61 percent of deal value in Q3 2018 compared to 27 percent of deal value in Q2 2018.

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

Strategic and Asset deals drove both deal value and volume this quarter. Strategic deals contributed 70 percent and 67 percent and Asset deals 85 percent and 72 percent of the total deal value and volume respectively.

Key trends this quarter

Continuing with the same trend as the previous quarter, Inbound deals were limited in this quarter in terms of deal value, representing 19 percent of total deal value, but continued to represent a notable amount of deal volume at 28 percent.

View previous quarter reports

Contact us

Ken Goodwin

Partner, National Valuations Leader

Tel: +1 416 814 5760

John Matheson

Partner, Deals - Transaction Services

Tel: +1 416 687 8171

Jeffrey Stewart

Partner, Valuations, Forensics & Disputes

Tel: +1 416 941 8361

Brian Poth

National Energy, Utilities, Mining and Industrial Manufacturing & Automotive Consulting Leader

Tel: +1 416 687 8522

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