The first quarter of the global power industry M & A transactions reached 44.5 billion US dollars
According to a new report released by Ernst & Young, one of the world's top four accounting firms, utilities and utility executives are eager for M & A to reach a seven-year high.
The report also draws on the company's semi-annual "power and utility capital confidence barometer", showing that 59% of respondents in the survey of electricity and utilities executives said they are expected to actively engage in a merger in the next 12 months, This percentage increased 12% from the previous survey. 89% of respondents said that the next 12 months of trading volume will grow or remain stable.
Matt Rennie, head of global electricity and utility transactions at Ernst & Young, said the merger in the first quarter of this year showed that the trend in 2016 is continuing.
Ernst & Young reported a $ 44.5 billion M & A transaction in the first quarter, the highest level in seven years. In the first quarter, the power transmission and distribution and renewable energy assets supported by the purchase agreement accounted for US $ 35.6 billion, or 78% of the total acquisition.
The report notes that compared with the fourth quarter of 2016, the value of renewable energy M & A transactions in the first quarter of 2017 was higher than that of other sectors, while the total transactions in all other sectors declined.
The competition for these assets also led to price increases. The report notes that the average market share and the enterprise multiple of the transmission and distribution and renewable assets are traded at a strong premium.
The report pointed out that in developed countries, overcapacity and low interest rates continue to encourage investors to seek a stable and safe return; and for developed countries, investors, the main driving factor is the electrification of the growth and more infrastructure needs.
In the Americas, renewable energy transactions are particularly strong. The report shows that 18 renewable energy assets mergers and acquisitions accounted for 41% of the amount of transactions in the first quarter, or 8.6 billion US dollars. Similar to the conclusion of PricewaterhouseCoopers' acquisition earlier this year, entry investment dominated.
Ernst & Young found that the first five major US deals in the first quarter included investment in Canada in the United States, and three of them were in the renewable energy sector. The largest trading in the Americas this quarter was Canada's utility company AltaGas, which acquired the US-based WGL holding company for $ 6.3 billion.
Ernst & Young said investors are increasingly interested in disruptive technology. For example, Omar Technologies acquired $ 35 million acquisition of battery storage company Viridity Energy, Edison United Electric Corporation acquired Ross Solar, Japan's acquisition of Edison's commercial and industrial branch of solar energy, and the National Grid's $ 100 million investment in Sunrun.
As the developed countries continue to increase renewable energy, Ernst & Young is looking forward to increasing investment concerns to increase the reliability of the system, which will make flexible assets such as fast gas power plants more important.
Overall, Americas accounted for the largest share of global M & A transactions in the first quarter. Ernst & Young reported that $ 21 billion was valued at the Americas and $ 15.1 billion came from the Asia-Pacific region. These two regions contributed 80% of the total M & A value for the quarter. The report said that because the United States, Brazil and Canada are designated as one of the five goals for the next 12 months, the Americas will likely maintain the first place in mergers and acquisitions.
In addition to renewable energy development, Ernst & Young said its survey showed that 53% of electricity and utility executives noted that market share growth and entry into new markets were the main drivers of M & A.
The report warns that some factors may affect the overall outlook for M & A deals, that is, rising interest rates, the recovery of the European electricity and utility markets, and a significant shift in the potential economy of the battery technology.