Deal value in power, utilities sector

The global power deal market is finally seeing an upward trend in momentum from the lows reached in 2009.Total deal value in the power and gas utilities sectors (excluding renewables) is up 19% year on year from US$98bn to US$116bn in 2010 – a year which also saw an end to the deal stalemate in the US with a renewed deal flow that looks set to continue this year. Compared to the heady mountain of power deals transacted between 2005-2008, deal values remain low but conditions are in place for a return at least to the foothills of these peaks, according to PwC’s annual Power Deals review.

Globalisation of the power sector is moving forward on a number of fronts with, for example, companies looking at gaining a larger presence in growth markets, strong international interest in infrastructure assets and signs of greater Chinese involvement, not just from grid companies but also independent power producers.

Expansion remains high on the agenda for a number of European companies as they weigh up moves to step up their international presence. For example, IP and GDF Suez have signalled that their merger will result in an initial period of rationalisation across their combined portfolio, followed by expansion in key growth markets. Additionally, E.ON could make the first moves in its growth market strategy.

Kameswara Rao, Leader- Energy and Utilities, PwC India said:

“India companies’ interest in global power deals remains lukewarm, as they have preferred to invest in resources instead, especially thermal coal to meet their growing domestic requirements. However, with divestments expected in various parts of the world as Governments seek to free up capital, we could see a selective Indian interest in regulated utility deals.”
 
“Within the country, the deal activity will gain further momentum as international investors and funds buy into portfolio of lower-risk developed projects, as Indian promoters divest partial stake to fund new plans. In fact, 2010 has set a trend for this and we have seen major international investors return to invest in conventional power plants.”

In renewable energy a quiet but vibrant resource consolidation and reallocation is taking place with deals involving wind areas, hydro sites, and biomass. We are at a critical point now and the course of renewable regulations, especially with regard to mandatory procurement obligations and activation of the REC market will significantly determine market activity.”

ENDS

Note to Editors

Methodology
Power Deals includes analysis of all global cross-border and domestic power and gas utility deal activity. It is the latest in our Power Deals annual series. We include deals involving power generation, transmission and distribution; natural gas transmission, distribution and storage; and energy retail. Deals involving upstream operations upstream of these activities, including upstream gas exploration and production are excluded. Renewable deals are covered in our sister publication, Renewable Deals and therefore excluded. The analysis is based on published transactions from the Dealogic ‘M&A; Global database’ for all power, gas and utility deals. It 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. Throughout the report, the Russian Federation is treated as a geographic entity in its own right. We have considered Asia Pacific as a region including Australasia, except where otherwise explicitly stated. All presented numbers of deals are inclusive of those deals with no reported value, unless specified.

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