Deals involving renewables, regulated assets hit USD 27bn in Q1
Global P&U deal value and volume (Q1 2014–Q1 2016). Source: Ernst & Young (http://www.ey.com).
At USD 26.9 billion (EUR 24bn), transactions involving renewable energy and regulated assets represented 67% of the global power and utilities deal value in the first quarter of 2016.
The worldwide total stood at USD 44.4 billion, rising by 50% year-on-year, according to Ernst & Young’s (EY) Power transactions and trends Q1 2016 report.
“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,” commented Matt Rennie, EY's Global Power & Utilities Transactions Leader.
EY mentioned the record low bid of USD 30/MWh in Dubai in May as proof that demand for greenfield, long-term power purchase agreements (PPAs) for renewables projects is driving competitively low bids. Also, as revenues from electricity sales decline, utilities are buying, partnering or taking stakes in energy services, battery storage and distributed energy ventures, driving increased M&A activity.
According to EY's Power & Utilities Capital Confidence Barometer, 53% of power and utilities executives around the globe plan “to actively pursue acquisitions” in the next 12 months. About 22% have more than five transactions in the pipeline.
EY expects robust M&A activity within the power and utilities sector through 2016.