The value of M&A in energy and utilities sector reached a record USD 180 billion in the first semester

Aurel Dragan 13/09/2018 | 11:33

The value of transactions in energy and utilities reached an absolute record of USD 180 billion in the first half of 2018, despite a 14 percent decline in the second quarter, compared to the same period last year, to USD 83 billion. According to the ‘EY Power transactions and trends: Q2 2018’, the renewable energy sector has accounted for nearly half (46 percent) of the volume of transactions in the second quarter of 2018.

The trend towards clean energy investment continued to boom in the second quarter, with 63 transactions totaling USD 12.9 billion. It is noteworthy that the European Union’s historic commitment to achieve a 32 percent share of renewable energy by 2030, as well as three renewable energy deals in the USA totaling USD 3.8 billion, have set the global investment agenda higher in clean energy.

And utilities have invested more and more in new technologies in the second quarter. In Europe, USD 5.5 billion have been invested in energy services and new technology transactions, while Japan’s Tokyo Electric Power Company (TEPCO) has set up a subsidiary to develop partnerships to develop innovative technologies.

“In Romania it is possible, given the continuous rise in prices on the futures markets, that renewable energy generators see a revival of the business, and soon due to the technological progress that leads to lowering the specific investment costs in such technologies and to increase performance, to see business plans that no longer matter on support schemes for electricity from renewable sources. Moreover, the price to pay for the electricity produced by photovoltaic panels installed on individual roofs may soon become attractive for private initiatives. Due to the delay in the evolution of strategic projects in new generating capacities, the necessary competitive pressure in the sector may originate from these new capacities that use renewable energies. We also look forward to possible vertical integration between suppliers and generators, but also horizontally between technology generators, given that market prices and carbon price perspectives on the European market bring an oxygen bubble to generators “Low-carbon”, with attractive prices for sellers,” says Valeriu Binig, partner EY Romania

Developing markets accelerate the pace of transactions

In the second quarter there was an increase in the popularity of emerging markets as investment destinations for traditional M&A transactions. Thailand and India recorded transactions totaling USD 5.3 billion and USD 3.2 billion respectively, while in Estonia transactions by domestic and foreign investors totaled USD 600 million.

China ranks first in foreign investment in the second quarter, with announced USD 31.2 billion cross-border transactions, in line with the Chinese government’s One Belt, One Road initiative. Much of this amount (USD 27.4 billion) is the offer to take over the Portuguese company EDP by China Three Gorges.

After reaching a record high in the first quarter (USD 63.1 billion), the European M&A market remained strong, reaching USD 45.7 billion in the second quarter, accounting for 55 percent of the value total transactions in the energy and utilities sector globally.

Europe was the only region where transactions in the field took place with a premium of about 33 percent compared to the average multiplier historically recorded about 6.6 times.

The value of transactions in the Asia-Pacific region grew by 78 percent in the second quarter of 2018 compared to the same period last year to USD 10.3 billion. Renewable energy has fueled most of the region’s work, with 25 clean energy transactions totaling USD 3.8 billion.

Although the value of transactions dropped 8 percent in the Americas as compared to the second quarter of last year to USD 26.9 billion, the seven megatranzactions recorded (totaling USD 21.8 billion) increased activity in the region. USA recorded 75 percent of the value of transactions in the both American continents (USD 20.2 billion).

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