Q3 surge in power and utilities sector M&A activity expected to continue

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Spurred by a single deal valued at $4.2 billion, PwC reports that third quarter activity in the power and utilities sector increased in both value and volume over Q2 – and saw the highest level of deal activity of transactions worth over $50 million since the third quarter of 2011. PwC expects the trend to continue through year-end as power and utilities companies try to bolster their growth strategies by pursing assets.

 

According to Jeremy Fago, PwC’s U.S. power and utilities valuation services leader, companies want to scale operations to drive revenue. "Consistent with our earlier reports, we continue to see increased generation asset activity, both fossil and renewable," he added.

 

The $4.2 billion deal involved NRG Energy which, through its Plus Merger Corp wholly owned subsidiary,  agreed to merge with GenOn Energy, a Houston-based independent power producer.  Other deals included fossil, wind, solar and hydro generation, retail marketers and developers, PwC said.

 

"We’re seeing an uptick in renewable transactions as key incentives are nearing expiration and a few key players look for opportunities to acquire solar and wind assets that are near commercial operation," PwC's Rob McCeney noted.

North American Power and Utilities Deal Value Surges in

Third Quarter of 2012, According to PwC US

Rise in Generation Asset Activity

Strategic Buyers Account for Majority of Transactions

NEW YORK, November 12, 2012 ―North American power and utilities merger & acquisition (M&A) value increased in the third quarter of 2012, driven by one large deal worth $4.2 billion, according to PwC US. The uptick in activity seen in the third quarter is expected to continue through the end of the year as power and utilities companies look to bolster their growth strategies by pursing assets, according to the quarterly M&A snapshot – North American Power Deals: Q3 2012, released today by PwC.

In the third quarter of 2012, there were six announced transactions with values greater than $50 million totaling $4.9 billion, a notable increase in volume compared to the second quarter of 2012, which only saw two announced transactions totaling $668 million. The increase in deal value was driven by one large deal worth $4.2 billion, which pushed average deal value in the third quarter of 2012 to $826 million, compared to $334 million in the second quarter of 2012. On a year-over-year basis, while deal volume declined, total deal value increased 90 percent from $2.6 billion in the third quarter of 2011.

“This quarter we saw the highest level of deal activity of transactions worth over $50 million since the third quarter of 2011, as companies look to scale operations to drive revenues,” said Jeremy Fago, PwC’s U.S. power and utilities valuation services leader. “Consistent with our earlier reports, we continue to see increased generation asset activity, both fossil and renewable.”

Strategic investors dominated the investor group in the third quarter of 2012, accounting for $5 billion or 90 percent of all transactions greater than $50 million.

Among the six deals announced during the third quarter of 2012, the largest deal was in the merchant energy space, where PwC expects to see continuing activity for several reasons including environmental compliance pressures, load growth considerations and the current price of natural gas. Other deals in the third quarter included fossil, wind, solar and hydro generation, retail marketers and developers.

“We’re seeing an uptick in renewable transactions as key incentives are nearing expiration and a few key players look for opportunities to acquire solar and wind assets that are near commercial operation,” added Rob McCeney, U.S. power and utilities transaction services partner, PwC.

About the PwC Power and Utilities Practice

PwC provides assurance, tax and advisory services to the power and utilities industry. Using deep industry experience, PwC helps top power and utilities companies gain operating efficiencies across the business value chain, from fiscal integrity and regulatory issues to increased customer service and talent management.

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