Renewables driving investor interest in power, utility industry
August 13, 2015 | By
Barbara Vergetis Lundin
Renewable transactions hit a significant milestone, and drove merger and acquisition (M&A) activity in the North American power and utilities industry in the second quarter of 2015, according to PwC US.
Specifically, nine of the 10 power and utilities' transactions with deal values greater than $50 million were renewable power deals totaling $2.7 billion, PwC reported. The remaining one transaction greater than $50 million outside of the renewable space was a transmission deal worth $281 million. The 10 deals represented a decrease compared to 13 deals in the same period last year. Deal value of $3 billion was down significantly from the $34.9 billion in the same period last year, which included six megadeals (deals greater than $1 billion) and was the highest level of megadeals since the second quarter of 2006. "This is a significant milestone for renewable transactions, driven by a number of investors competing in the space," said Jeremy Fago, PwC's U.S. power & utilities deals leader. "Wind and solar assets are continuing to generate interest from buyers with the continued low interest rate environment and the attractive contracted nature of these types of assets." YieldCos accounted for 85 percent of deal activity as they looked to the renewable space to drive growth and returns. While no deals consummated this quarter, PwC continues to see strong interest in regulated returns, and the potential for utility transactions in the coming year. "Much like what we have historically seen with master limited partnerships, dropdown activity has also continued to gain pace with the increasing focus on growth at existing YieldCos," said Kenyon Willhoit, PwC power & utility deals director. Strategic investors accounted for 91 percent of total deal value and 90 percent of total deal volume during the second quarter of 2015, compared to 93 percent and 77 percent, respectively, during the same time period in 2014, PwC notes. "While renewable transactions drove deal activity this quarter, and continues to drive investor interest in the space, we see broader interest in deals across the industry landscape," said Fago. "With the attractive profile of regulated utilities, we see broader interest in power and utilities deals from both strategic and financial investors, and see investor interest in regulated transactions from both domestic and foreign investors." For more: © 2015 FierceMarkets, a division of Questex, LLC. All rights reserved. |