Matt Rennie, EY Global Power & Utilities Transactions Leader, says:
"Ongoing sector and global volatility continues to be at the forefront of investors' minds. In the second quarter we saw this play out in the form of buyers seeking safe bets in renewables, where demand continues to rise in developed and emerging markets, and regulated transmission and distribution assets that offer stable, long-term returns."
Deals involving renewables and regulated assets accounted for 52.3% (67 deals) of total deal volume, with a cumulative worth of US$13b.
Rennie says: "The trend toward investment in disruptive technologies is also gathering pace. Both utilities and non-traditional investors are shifting their focus to areas like distributed energy and battery storage. And, as consumer demand increases, more M&A will follow."
The Americas contributed the largest share of deal value in the quarter with a total of US$24.7b. Mirroring the global trend, energy technology and rising adoption of renewables continued to drive sector convergence and M&A in the region. Consolidation in the US also persisted under the pressure of environmental regulations and depressed energy prices.
Europe experienced a strong quarter with a 44% increase in deal value (US$8.2b) over Q2 2015 and a 10% increase over Q1 2016. Additionally, while utilities traditionally favor small- to mid-size bolt-on deals, two billion-dollar acquisitions from Chinese and Russian investors contributed 35% to the region's deal value in the second quarter.
Rennie says: "The UK's decision to leave the EU may impact M&A in the country and, potentially, across Europe. The full effect of the referendum won't be clear, however, until the UK's energy policy and position in the EU energy market unfolds. This is just one of many unknowns in today's power and utilities sector. Transaction activity in the coming months will tell whether utilities are ready to take a chance on new avenues of growth or whether caution will prevail."
Notes to Editors
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About EY's Global Power & Utilities Sector
In a world of uncertainty, changing regulatory frameworks and environmental challenges, utility companies need to maintain a secure and reliable supply, while anticipating change and reacting to it quickly. EY's Global Power & Utilities Sector brings together a worldwide team of professionals to help you succeed — a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Sector team works to anticipate market trends, identify their implications and develop points of view on relevant sector issues. Ultimately, this team enables us to help you meet your goals and compete more effectively.
For more information, please visit ey.com/powerandutilities.
About the report
Power transactions and trends combines global transactions trends with current power and utilities' asset valuations and insight to help clients make informed, strategic decisions about capital investment in the sector. It explores the outlook for utilities, investors and sector participants.
The analysis and perspectives within Power transactions and trends are based on global financial releases, and Mergermarket data, as well as global engagements conducted by EY member firms.
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