For deals over US$50 million, Q4 was the lowest quarter in 2016 on a deal volume and deal value basis.
The year 2016 was a big one for Canadian power and utilities players. But in a year that featured blockbuster acquisitions by TransCanada, Enbridge and Emera, there were only two deals with a Canadian angle in Q4 2016. Both of these deals saw TransCanada as the seller of generation assets, largely to help fund the purchase of Columbia Pipelines.
Across North America, Q4 2016 deal activity decreased in the power and utilities sector as compared to the prior quarter and the same period in the prior year. Ten deals worth US$8.8 billion were announced this quarter. With the changing makeup of America's generation supply, deal makers remain interested in exposure to both gas and transmission infrastructure, which was again highlighted in Q4 2016 deal activity.
Looking forward to 2017, we expect infrastructure and generation asset deals to continue to be a theme, with deal makers keeping a close eye on rising interest rates, potential tax reform and environmental policies.
Key trends this quarter
- Overall deal activity–both in deal volume and deal value, decreased significantly in Q4 2016 by 55 percent and 89 percent, respectively from the prior quarter. Average deal size decreased sizably from $3.6 billion in the last quarter to US$0.9 billion this quarter, or 75 percent. However, 2016 was a robust year for deals in the P&U sector, with 71 total deals worth US$156.6 billion.
- Four mega deals occurred in Q4 2016, as compared to six mega deals in the previous quarter, driving 76 percent of total deal value for the quarter. In 2016, there were 21 total mega deals driving 30 percent of deal volume and 92 percent of deal value.
- Seven of the 10 deals for the quarter were generation asset deals, spanning fossil, nuclear, and renewable. These deals contributed 59 percent to total deal value.
- While there were no inbound deals this quarter, there were 11 total inbound deals in 2016, an increase from eight in 2015.