North American Power and Utilities Deal Value Soars 94% in the First Half 2011, According to PwC US

Regulated Deal Activity Remains Strong;

Second Quarter Value Increases 26 Percent over Q2 2010;

Strategic Buyers Account for Overwhelming Majority of Q2 2011 Deal Value

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Aug 08, 2011, 07:00 ET

NEW YORK, Aug. 8, 2011 /PRNewswire/ -- Continued strength in merger and acquisition (M&A) activity in the North American power and utilities sector helped drive a 94 percent increase in deal value for the first six months of the year, compared to the first half of 2010. Sustained activity for regulated deals, available financing to fund larger cash transactions, attractive valuations, and competition among strategic buyers were all key contributing factors to the increase, according to the quarterly M&A industry snapshot – North American Power Deals: Q2 2011, released today by PwC US.

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In the first half of 2011, there were a total of 27 transactions (value greater than $50 million) worth $52 billion, compared to the first half of 2010, which saw six fewer deals totaling nearly $27 billion. In the second quarter of 2011 alone, there were 13 deals totaling $20 billion – a 26 percent increase over the same period of 2010, which saw 14 deals worth $16 billion. Average deal value rose to $1.5 billion in the second quarter of 2011 from $1.1 billion in the same period last year, representing a 36 percent increase. The increase in average deal value was driven in part by the three mega deals – transactions valued at $1 billion or more – which had a combined value of approximately $17.2 billion and were announced during the second quarter of 2011, according to PwC.

"We're continuing to see a very competitive landscape from strategic buyers for regulated assets, which has helped propel deal activity in the first half of this year," said John McConomy, US power and utilities transaction services leader, PwC. "Corporates are finding value in distressed opportunities, acquiring capacity, and buying growth versus building new capabilities from within. The various stakeholders involved in these deals are also working together to reach timely regulatory approvals, helping to minimize risk and support the rationale behind transactions in the space. We expect that ongoing pursuit for additional and diverse generation capacity will sustain a continued interest for deal activity in the sector for the remainder of 2011."

Strategic buyers continued to lead in deal value in the second quarter of 2011, accounting for $19 billion, or 96 percent, while financial investors represented $906 million, or 4 percent, of total value.

There were three renewable transaction deals worth $810 million in the second quarter of 2011, compared to three deals worth $816 million in Q2 2010.

"There is ongoing attractiveness of adding renewable energy capacity to North American power and utilities companies' portfolios," said Rob McCeney, U.S. power and utilities transaction services partner, PwC. "We expect renewable energy deals to remain on the radar for both corporate and financial dealmakers as a result of a general uncertainty around ongoing legislative and regulatory changes from region to region."

Transactions with domestic buyers increased to 10 deals worth $18 billion in the second quarter of 2011 from nine deals valued at $12 billion during the same period in 2010 – a 92 percent increase – as foreign inbound interest in North American power and utilities assets remained slow in the second quarter, according to PwC.

"The fragmented, regulated utilities industry is ripe for ongoing consolidation, but deals in the space have their challenges," added PwC's McConomy. "Rising commodity costs, regulatory and compliance concerns, and growing investment requirements are just a fraction of the factors that can derail a power and utilities transaction. While deals in the space provide tremendous opportunities for growth and cost savings, these transactions are under heightened scrutiny, and dealmakers should tread carefully to ensure they have uncovered every significant potential risk."

For a copy of North American Power Deals: Q2 2011, please visit: http://www.pwc.com/us/en/industry/utilities/publications/us-power-deals.jhtml

About the PwC Utilities Practice

PwC provides assurance, tax and advisory services to the utilities and power generation industry. Using deep industry experience, PwC helps top power and utilities 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