PwC’s survey on global power and renewables (P&R) M&A trends for 2017 predicts an investment thrust for the progressive sector.

In 2016, the P&R sector’s total global deal value was the highest that it had been in the current decade, fueled, in particular, by mega deals for North American network infrastructure targets. Both corporate and institutional buyers are vying for the market’s international offerings.

Regionally, the acquisition of regulated assets defines US market growth, with deal momentum slowing and interest rates climbing. Across the water, economic growth in Europe plays out alongside waning acquisitions. However, post-Brexit, restructuring and transformation efforts may see the implementation of new market strategies. Finally, the Asia-Pacific (APAC) region’s buyers have been, and will continue to be, active and influential players, with Australian network deals at their market’s forefront. Overall, global investors are seeking stable and long-term profits stemming from regulated power and gas infrastructure assets.

Progress trumps politics

Despite uncertainty stemming from the volatility of the American political climate, PwC does not expect to see a significant impact on the sector’s M&A activity. Renewable energy movements, bolstered by technological developments, are producing change that transcends political divides.

APAC partnering

The APAC region continues to pursue international power sector investments into 2017. To combat risk, and in the face of widespread interest, joint and consortium arrangements are on the rise.

Energy transforming transactions

Also expected by PwC are more deals involving power companies and extra-sectorial but energy-minded businesses. New entrants and veteran companies alike are seeking a social and technological edge in an energy- and self-aware market.

Value vs volume

The total deal value of renewables in the different global sectors has either remained level or dropped. By contrast, 2017 will likely see renewables cornering a significant share of the sector’s deal activity. Deals for renewable targets now make up the majority of the worldwide sector deal volume, despite being small in nature. Larger deals continue to revolve around hydropower assets. 

Thermal assets not a hot commodity

Thermal generation assets, particularly coal-fired power stations, are not presenting as attractive sales targets. 2017 energy requirements and innovations are prompting the conspicuous closures of coal power stations, with only some niche buyers seeking such assets.

North American power and utilities deals: Q2 2017

With the passing of two quarters, PwC’s market projections are reaching maturity. Renewable activity remains strong and will see mounting interest moving forward, principally from Canadian investors. In fact, the majority of inbound deals were driven by Canadian buyers.

Overall, although the quarter has seen a 77% decline in total deal value as compared to Q2 2016, there has been a 6% uptick in deal volume driven by renewable deal activity. Overall, P&R acquisitions and investments are attractive options in a sector that is facing continued rapid growth and development.

The author would like to thank Sarah Pennington, Summer Student, for her assistance in preparing this legal update.

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