The number of power and utilities deals in 2016 are outpacing the previous three full years, according to an analysis performed by consulting firm, PWC.
An earlier report released by the firm, PwC Deals: North American Power & Utilities Deal Insights, notes that deals which took place in the second quarter of the year, were “driven by large corporate deals for electric utility, renewable and independent power producers, among others.”
Reports suggest that a four ‘mega deals’ fetched more than $1 billion each in 2016’s second quarter.
Apart from the news that Great Plains Energy will acquire Westar Energy in a $12.2 billion and Tesla’s $6.6 billion bid for SolarCity, other billion dollar deals include Riverstone Holdings’ $5.09 billion offer for a 65% stake in Talen Energy Corporation, and GIC’s pursuit to gain a 19.9% share in ITC Holdings from Fortis for $1.23 billion.
Bloomberg has rightly deduced that “it's merger time in utility-land,” and attributes the rise in M&A activity to a stagnant electricity market and increase in distributed energy which has “given big US utilities a tremendous appetite for M&A.”
Just this week, Metering.com reported on several acquisitions including Aclara’s acquisition of Tollgrade’s smart grid business. US water technology provider Xylem is also reportedly nearing a deal to purchase Sensus for $1.7 billion and the State Grid of China is looking to acquire Brazilian electric company CPFL Energia SA, a deal which could be China’s largest investment in the country.
Commenting on the high occurrence of acquisitions in the market, Joseph Fontana, EY Global Utilities Leader, Transaction Advisory Services, said: “Lower margins and lower demand for electricity, partly due to advancements in energy efficiency, have been driving consolidations.
"Since these dynamics are not changing, the M&A boom will continue into the second half of 2016, but likely not at the same pace as we’ve seen. We are running at four to five megadeals every six months, which is historically very high.”
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