First quarter global power and utilities transaction activity up 50% compared to Q1 2015

- Investors target regulated and renewable energy assets for returns

- Americas sector contributes 77% of global power and utilities M&A

- Asia-Pacific deals hit new low but reforms set to lift activity

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May 19, 2016, 08:02 ET

LONDON, May 19, 2016 /PRNewswire/ -- After hitting historic records in 2015, global power and utilities total deal value continued to climb, reaching a five-year high of US$44.4b in Q1 of 2016 — a 50% increase over the same period last year, according to EY's Power transactions and trends Q1 2016.

A growing deal imbalance across the sector drove investors to renewable and regulated assets, with the potential to accelerate growth and generate stable earnings. Transactions involving these assets accounted for 67% total global deal value at US$26.9b.

Matt Rennie, EY's Global Power & Utilities Transactions Leader, says:

"Low interest rates and wholesale energy prices combined with an oversupply of conventional generation in most developed markets continued to put pressure on traditional utilities to diversify. We saw this play out in the form of regulated asset and disruptive technology investments throughout the first quarter. In the Americas alone, deals involving regulated electric and gas transmission and distribution assets totalled US$17.5b."

Americas deal value reached US$34b in the first quarter and accounted for 77% of the global total. US megadeals dominated activity with the country hosting five of the region's eight US$1b-plus transactions and contributing US$26b to the total regional deal value. Canadian investors buying assets in the US accounted for three of the five US megadeals.

At the opposite end of the spectrum, the first quarter Asia-Pacific deal activity significantly slowed down, with value totalling just US$2.8b compared to US$42.1b in the previous quarter (Q4 2015) and US$10.9b in Q1 2015. Deal volume saw a similar decline quarter-over-quarter, with 35 deals in Q1 2016 compared to 64 in Q4 2015.

Rennie says: "Despite a quiet quarter, we expect increased activity in Asia-Pacific as utilities trade at discounted values in the coming months. Buyers in the region are taking time to digest transactions and integrate acquisitions made in the previous year, and a huge opportunity for long-term investors to acquire distressed assets at attractive prices remains. This, coupled with reforms in India and Australia, should generate more deals throughout the year."

Looking ahead, EY's Power & Utilities Capital Confidence Barometer reveals that, globally, 53% of power and utilities executives plan to actively pursue acquisitions in the next 12 months. And 22% have more than five deals in the pipeline.

Rennie says: "Power and utilities companies are preparing for a new energy world. The consumer market is turning towards off-the-grid and self-sustainable energy solutions that require the delivery of new capabilities and technology. Transactions will play an important, strategic role in the industry as the search for new avenues to top-line growth intensifies."

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.

Sarah Shields
EY Global Media Relations
+44 (0) 20 7951 6563
[email protected]

SOURCE EY