London, 1 March 2010 -- The power deal spotlight in 2009 continued to shift away from the very large deals of earlier years as companies focused their attention on smaller acquisitions. The overall market for power deal activity remained relatively buoyant, with the number of electricity and gas deals only 10% down in the main non-renewables power deal sector despite the more constrained financial and uncertain economic climate. These are among the key findings of PricewaterhouseCoopers annual Power Deals review.
Only those companies with balance sheet strength were active players for bigger deals as small deals became the order of the day. Deal numbers dipped 10% but remained at relatively high levels. However, average power deal value (excluding renewables) plummeted from US$428 million in 2008 to US$262 million in 2009. Total deal value across the whole of the sector (including renewables) was barely half (56%) of its 2008 level.
For the second year running, Europe dominated the top 10 deal list. Seven out of the largest 10 transactions had European companies on both sides of the deal. European companies dominated power deal making in 2009 for the second year running, accounting for three fifths (60%) of the value of all deals both by bidder and by target. European bidders featured in three out of every 10 non-renewable electricity and gas deals.
Mark Hughes, European energy leader, PricewaterhouseCoopers, said:
“Consolidation in Western Europe has reached a more advanced stage but this could prove a platform for a reawakening of wider international ambition. The speculation surrounding Suez and International Power shows the potential for major international M&A moves. Within Europe, network divestment will continue to be a deal driver.
“The sharp fall in deal value was felt right across the different segments of the industry but was mildest in renewables where total deal value was down 14% on 2008 levels. However, renewables accounted for the largest drop in deal numbers – 36%. Deal flow for non-renewable and other electricity assets proved the most resilient with an 8% year-on-year fall in numbers as buyers remained active, albeit for smaller acquisitions.”
In contrast, Asia Pacific and South America’s share of worldwide non-renewables power deal value advanced significantly in 2009. Together these two regions accounted for 25% of target value and 27% of bidder value, a big increase on the 13% bidder and target share they enjoyed in 2008. Following a rally in the two preceding years, North American deal numbers went the same way as deal values in 2009 with a sharp fall downward. The only North American deal in the top 10 came in Canada with the US$3bn debt induced sale of hydro and nuclear generation assets by Canadian New Brunswick Power to Hydro-Québec.
In the UK, Centrica paid US$3.5bn for a 20% stake in nuclear power company British Energy. As part of the 2008 EDF purchase of British Energy, the two companies had announced a non-binding agreement for Centrica to purchase a stake of up to 25% at the same price as that paid by EDF.
Almost a fifth of worldwide power deal target value (including renewables) came from the Asia Pacific region in 2009, second only to Europe and eclipsing North America for the first time ever. Total Asia Pacific power deals value was US$22.7bn – nearly US$2.6bn higher than that of North America.
Manfred Wiegand, global utilities leader, PricewaterhouseCoopers commented:
“Our quarterly analysis of power deal activity during 2009 is indicative of how deal numbers remain relatively buoyant but deal value has dipped to a much lower level. After a first quarter that saw a total deal value of US$38.5bn, quarterly deal values dipped and followed a trend around the US$20bn volume mark for the remainder of 2009.”
“The coming year will be one of obstacles and opportunities. The constrained availability of finance will inhibit deal activity and, until that situation is eased, there is unlikely to be a revival in deal
values. But with some businesses running short of cash for needed expansion or facing refinancing challenges, businesses and assets may become available for corporates with strong balance sheets and cash flows.”
Note to Editor:
Power Deals includes analysis of all global cross-border and domestic electrical and gas deal activity. We use the terms ‘power utilities sector’, ‘power utilities’ and ‘power deals’ to cover activity in both the gas utilities and electricity utilities sectors (see detailed coverage below). The analysis is based on published transactions from the Dealogic ‘M&A Global’ database, December 2009. Analysis encompasses announced deals, including those pending financial and legal closure and those which are completed. Deal values are the consideration value announced or reported including any assumption of debt and liabilities. Figures relate to actual stake purchased and are not multiplied up to 100%. Throughout the report, both for 2009 and previous years, we classify the Russian Federation in a geographic category in its own right and define Asia Pacific as excluding the Russian Federation. The analysed sectors referring to North American Industry Classification System (NAICS) include: electric power generation; electric power transmission, control and distribution; natural gas distribution; natural gas transmission; gas transmission and distribution. The term ‘power’ used throughout the report defines these categorised sectors. All presented numbers of deals are inclusive of those deals with no reported value. A full list of transactions throughout 2009 is available by visiting the Power Deals website at www.pwc.com/powerdeals .
Elaine Bailey, media relations, PricewaterhouseCoopers
Tel: +44 (0)20 7212 5133, Email: email@example.com
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