The value of global power and utility merger and acquisitions reached an all-time high of $180bn in the first half of this year – and renewables accounted for almost half of all deals done in the second quarter.
Figures in a new report from global consultancy EY found that the 46 per cent of renewables deals comprised 63 contracts totaling $12.9bn. Most notable was the European Union’s landmark agreement to achieve 32 per cent renewable energy consumption by 2030, and three renewables deals in the US totaling $3.8bn.
EY also highlighted that utilities increasingly invested in new technologies during Q2. In Europe, $5.5bn was spent on energy services and new technology deals, while Japan’s Tokyo Electric Power Company (TEPCO) launched a subsidiary to form joint ventures around the development of disruptive technologies.
Miles Huq, EY Global Power & Utilities Transactions Leader, said: “The first half of 2018 reflects a complex deal environment characterized by a changing generation mix and a growing appetite for renewables investment, which will continue to drive the deal agenda into the second half of the year.
“Around the world, we are also seeing utilities companies increasingly exploring new technologies, including battery storage, electric vehicle infrastructure and digital grid technologies. With sector convergence on the rise, we are also seeing more non-conventional competitors emerge as the power and utilities landscape continues to undergo transformation.”
A further highlight in the second quarter according to EY was the emergence of developing markets as an investment destination for traditional M&A. Thailand and India accounted for $5.3bn and $3.2bn of deals respectively, while transactions by both domestic and foreign investors in Estonia totalled $600m.
China led global outbound investment in Q2 with $31.2bn of cross-border energy deals, in line with the country’s One Belt, One Road state initiative. Some $27.4bn was attributed to the announced takeover bid of Portugal’s EDP by China Three Gorges.
In Europe, EY said that business remained strong in Q2, reaching $45.7bn and representing 55 per cent of total power and utility global deal value.
Deal value in the Asia-Pacific region saw an increase of 78 per cent quarter-on-quarter during Q2 to $10.3bn – again with renewables driving much of the activity, with 25 clean energy deals worth a total of $3.8bn.
While deal value in the Americas declined by 8 per cent quarter-on-quarter to $26.9bn, EY noted that seven ‘megadeals’ totalling $21.8bn gave the region a boost. The US represented 75 per cent of Americas deal value at $20.2bn.
Huq explained: “US federal tax reforms are making an impact in the sector, with investor-owned gas and electric utilities preparing to return billions of dollars to ratepayers nationwide. Several utility holding companies and diversified utilities with competitive generation segments have announced plans to raise capital through equity and debt issuances or plans to reduce capital expenditures to maintain credit metrics. Further consolidation in the US is expected through 2018.”