Deal value declined in the third quarter of 2019 compared to Q2 2019 and the same quarter in the prior year primarily due to the continued absence of a mega-deal ($5+ billion) in the sector. This quarter had the lowest deal value since Q2 2017 and lowest deal volume since Q3 2017. However, Q3 2019 witnessed deals across the industry landscape, shedding a positive light in the diversity of opportunities within the sector. Q3 saw smaller deals spanning fossil generation, pipeline, renewable, district energy, retail, and storage. Renewables continue to remain a focus area for the sector, as renewable deals accounted for 50% of the quarterly deal volume and 19% of deal value. Going forward, we expect a continuation of themes including yield, access to infrastructure, rebalancing portfolios, and balance sheet rationalization being top of mind for deal makers.
“Total deal value continued to shrink in the third quarter as mega-deals proved hard to find. Asset deals, particularly on the renewables side, held volumes steady.”
We expect to see a continuation of themes in the Power & Utilities deals market in future quarters and the last quarter of 2019, with yield, access to infrastructure, rebalancing portfolios, and balance sheet rationalization expected to drive deal activity. Renewables will remain as one of the key area of interest for deal makers as federal incentives phase down/out. Additionally, with the recent decrease in interest rates, bid ask spreads and valuations may benefit, which could impact deal activity.
We define deal activity as mergers and acquisitions where targets are North American-based (US or Canada) companies or assets acquired by either US or foreign acquirers. Deal activity reflects unregulated power generation, electric and gas infrastructure, and regulated (electric, gas and water) transaction activity.
We have based our findings on data provided by industry-recognized sources. Specifically, values and volumes used throughout this report are based on announcement date data for transactions with a disclosed deal value greater than $50 million, as provided by Thomson Reuters and/or S&P Global Market Intelligence, and supplemented by additional independent research. Information related to previous periods is updated periodically based on new data collected by Thomson Reuters and/or S&P Global Market Intelligence for deals announced during previous periods, but not reflected in previous data sets. Unless otherwise noted, all data and charts included in this report are sourced from Thomson Reuters and/or S&P Global Market Intelligence.
Power and utility deals used in this report were developed using NAIC codes. In certain cases, we have reclassified deals regardless of their NAIC or SIC codes to better reflect the nature of the related transaction.
Jeremy R. Fago
Principal, Power & Utilities Deals Leader, PwC US
Power & Utilities Deals Principal, PwC US