North American Power & Utilities M&A Activity Jumps 116% in the Fourth Quarter of 2012, According to PwC US

Alternative Energy Deals Increase, Led by Wind Activity

Continued Low Natural Gas Prices, Tax Credit Expirations, and Environmental Regulations Among the Factors that Accelerated Deals in the Final Months of 2012

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PwC

Jan 31, 2013, 08:00 ET

NEW YORK, Jan. 31, 2013 /PRNewswire/ -- North American power and utilities merger & acquisition (M&A) activity continued on a steady growth path, with deal volume more than doubling in the fourth quarter of 2012 compared to the same timeframe in 2011. This activity was largely driven by an increase in generation asset and renewable transactions, according to PwC US' quarterly M&A snapshot – North American Power Deals: Q4 2012.

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The number of announced power and utilities transactions greater than $50 million has consistently risen since the second quarter of 2012. There were 13 deals totaling $4.9 billion in the final quarter of 2012, an increase in both sequential and year over year activity compared to eight deals in the third quarter of 2012 and six in the fourth quarter of 2011. Smaller asset deals dominated M&A activity through the end of 2012 with fewer large transformative transactions over $1 billion.

"With continued low natural gas prices and lingering uncertainty around load recovery, environmental regulations and tax policies and incentives, we saw an uptick in generation asset and renewable transactions through the end of 2012," said Jeremy Fago, PwC's U.S. power and utilities transaction services leader. "Additionally, we saw an increase in wind deal activity as expiration of the Production Tax Credit approached at the end of December. Looking at the deal landscape throughout the year, we anticipate more merchant divestiture activity as companies look to rebalance around core regulated businesses."

Alternative energy sources accounted for 40 percent of the transactions in the fourth quarter of 2012, a significant increase compared to seven percent in the third quarter of 2012 and two percent in the fourth quarter of 2011. Wind transactions accounted for nearly 60 percent of alternative deals in the fourth quarter of 2012.

While strategic investors continued to lead the investor group in the fourth quarter of 2012, representing 57 percent of acquisitions greater than $50 million in the fourth quarter of 2012, the sector saw the most activity from financial investors in almost two years as they look for distressed and attractively priced assets.

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