First Quarter 2011 North American Utilities & Power Generation Deal Value Triples Over 2010, According to PwC US

Increase in Deal Value Driven by Second Largest Power Transaction in Three Years

Deal Volume Doubles, Led by Corporate Transactions

Asset Transactions and Renewables Continue Upward Momentum

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May 04, 2011, 09:00 ET

NEW YORK, May 4, 2011 /PRNewswire/ -- The number and value of mergers and acquisitions (M&A) in North America continue to rise in the heavily fragmented utilities and power generation sector as companies look to gain greater scale and efficiency in their operations. During the first quarter of 2011, North American utilities and power generation M&A deal value jumped almost 200 percent, driven by one 'mega' power deal, according to the quarterly M&A industry snapshot – North American Power Deals: Q1 2011, released today by PwC US.

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For the three month period ending March 31, 2011, deals with value greater than $50 million increased by 191 percent with $31.7 billion in total deal value compared to $10.9 billion in the same period of 2010. The increase in deal value was largely driven by the announcement of a $26 billion merger – the second largest power deal since the first quarter of 2007 – which alone accounted for 82 percent of total deal value. The deal helped boost average deal size by 46 percent to $2.2 billion compared with $1.5 billion in the first quarter of 2010 – however, in spite of this mega deal, the total number of transactions jumped 50 percent to 14 compared with seven from the same period in 2010.

"We continue to see a number of corporate power and utilities companies take advantage of depressed prices for assets to add additional generation capacity to existing operations," said John McConomy, U.S. utilities & power transactions leader, PwC. "During the quarter, strategic buyers dominated larger value deal activity, and we have noted a modest trend of municipal utilities buying power plants and moving them into rate base. We expect corporates to stay focused on 'buy versus build' transactions, and both strategic and financial sponsors to show an increased appetite for renewables deals."

Corporate transactions contributed the majority of deal value during the first quarter of 2011 with $29.4 billion, or 93 percent – while asset transactions led volume with eight deals making up 57 percent of total deals. Despite leading deal activity, asset deals contributed only 7 percent of total deal value with $2.3 billion. Corporate deals also led the top 10 deals by value, making up 60 percent with $29.4 billion, while asset sales represented 40 percent with $1.6 billion.

During the first quarter of 2011, utilities & power companies generated 11 deals totaling $31.3 billion, or 99 percent of deal value, while three financial sponsor-backed deals contributed just $420 million. "Despite the slight decrease in the number of financial sponsored deals from 2010, investors are continuing to circle the water but are facing a very competitive bidding landscape where strategic buyers are winning and snapping up very attractive assets to add to their existing portfolios," continued PwC's McConomy. "Nevertheless, we expect to see financial buyers continue to compete with the strategics in pursuing asset acquisitions in select markets."

According to PwC, the uptick in deal activity in the renewables space reflects an increasing appetite for clean energy as more utilities & power companies look to diversify their generation activity and navigate potential legislative and regulatory uncertainties. The number of renewable deals increased to five versus two during the first quarter 2010, representing 33 percent of total deal value with $1.8 billion. There were three renewable deals in the top 10 transactions in the quarter, which were all corporate deals.

"The power and utility industry continues to evolve rapidly to meet a growing demand for power resources – and with continued market and commodity price volatility, deal makers need to be very thorough in their diligence and have an air-tight strategic rationale to maximize the return on any power and utility transaction. At the same time, the rationale behind any transaction can quickly unravel unless a comprehensive integration plan is in place to reach the full potential of the deal," added McConomy.

According to PwC, foreign interest remains low in North American utilities and power generation, with only one of these deals in Q1 2011, compared to 13 domestic deals.

For a copy of the North American Power Deals: Q1 2011 please visit: http://www.pwc.com/us/en/industry/utilities/publications/us-power-deals.jhtml

About the PwC Utilities and Power

PwC provides assurance, tax and advisory services to the utilities and power generation industry. Using deep industry experience, PwC helps top utilities and power companies gain operating efficiencies across the business value chain, from fiscal integrity and regulatory issues to increased customer service and talent management.

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© 2011 PwC. All rights reserved. "PwC" and "PwC US" refer to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

SOURCE PwC