Momentum strong after landmark year for power and renewables M&A
February 02, 2016
It’s been a landmark year for mergers & acquisitions (M&A) across the power and renewables sector, according to our latest annual Power and Renewables Deals report.
Following a strong performance in 2014, worldwide M&A activity in renewable energy has almost doubled, reaching a record high of US$55.3bn (2014: US$28.3bn).
Despite global economic headwinds, we expect power and renewables deal momentum to remain strong in 2016.
The record highs for Asia Pacific and the strength of renewables activity across other territories from Europe to Central and South America clearly demonstrate the global and technological shifts taking place across the sector.
We’re seeing a strong flow of power and renewable deals in countries like India, continuing major outbound moves by Chinese companies and a good flow of attractive grid assets coming to the deal table. If anything, wider economic uncertainty will heighten the attractiveness of such assets.
According to our report, a number of factors could help generate strong power and renewables deal flow during 2016. These include:
- ongoing corporate restructuring;
- a healthy list of expected sales in Europe;
- mid-cap consolidation in the US;
- continuing renewables deal momentum; and
- the attractiveness of steady returns from regulated assets in the sector to prospective buyers.
A bumper M&A year ahead
However, momentum is not confined to growth markets - it is also evident in more mature markets.
In Europe, of particular interest is National Grid examining options for the disposal of a majority stake in its UK gas distribution business, OMV’s planned sale of up to a 49% minority stake in Gas Connect Austria (GCA), the planned sale of German gas grid Thyssengas by Macquarie, and Belgian company Eandis selling a minority position in its networks. In addition, in Germany, the restructuring of power utility RWE is scheduled for 2016. And in France, EDF is considering a major disposal programme and negotiations continue around the future of Areva.
What will fuel upcoming power and renewables deal activity?
More widely, there are a number of other factors fuelling power and renewables deal activity for the year ahead. In particular:
- Strategic alliances between power companies and outside partners, including sovereign wealth funds and companies from other sectors, are becoming an important route to international growth and technological innovation.
- Strong US deal dynamics include mid-cap consolidation and the move away from coal to gas-fired and renewable generation as Section III(d) of the Clean Air Act impacts companies.
- Energy technology and energy storage advancements are spurring smaller deals and non-M&A partnerships as companies respond to energy transformation.
To read our latest annual Power and Renewables Deals report please click here.
Has the power and renewables deals market got off to a strong start for you this year? Share your thoughts below or schedule a meeting to discuss your situation in confidence.