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EY
Fewer conventional generation investment opportunities leads to uptick in renewable energy deals in Q2 2017



Aug 24, 2017

Second-quarter deal value declined by 32% to US$30.8b in the global power and utilities sector in the wake of fewer high-value conventional generation investment opportunities, according to the EY report Power transactions and trends Q2 2017. Meanwhile, global deal volume grew from 115 in Q1 2017 to 134 in Q2 a 17% increase.

Renewable energy deals accounted for nearly half (48%) of total deal volume in the sector. This trend was echoed most noticeably in the Asia-Pacific region where renewables made up 51% of second quarter deal volume.

The report shows how renewable energy asset valuations are increasing with demand. Renewable assets traded at high forward premiums to long-term price-to-earnings multiples across regions, with the trend most acute in Europe where the premium reached 79% in Q2 2017.

Energy reform initiatives also continued to drive deal activity in the second quarter, with asset privatization generating US$13.3b in deal value, which was 43% of total global deal value.

Matt Rennie, EY Global Power & Utilities Transactions Leader, says:

"With fewer opportunities for conventional generation investment in developed markets, we are seeing a decline in large-scale deals in the global power and utilities sector. Instead, the transaction landscape is moving toward smaller deals, driven in large part by renewable energy opportunities and asset privatizations as a result of governments seeking to aid economic growth."

Europe was the only region to record an increase in power and utilities deal value quarter-on-quarter with US$10.6b 12% higher than Q1 2017 and a 31% increase over the same period in 2016.

Americas deal value the highest of all regions in Q1 2017 declined by 72% to a four-year low of US$5.9b in Q2. The US led this decline with quarterly deal value dropping 77% to US$4.4b. Sixty-percent of US deals were domestic as outbound investment slowed in the country.

Rennie says: "The decline in Americas deal value suggests that concerns over rising interest rates in the US and US federal policy changes may be taking their toll on investor confidence but time will tell. Regardless, we expect the relentless march of renewables and energy reform initiatives to continue to spur an increase in deal volume globally."

Background

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.

About EY's Global Power & Utilities Sector

In a world of uncertainty, changing regulatory frameworks and environmental challenges, utility companies need to maintain a secure and reliable supply, while anticipating change and reacting to it quickly. EY's Global Power & Utilities Sector brings together a worldwide team of professionals to help you succeed a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Sector team works to anticipate market trends, identify their implications and develop points of view on relevant sector issues. Ultimately, this team enables us to help you meet your goals and compete more effectively.

For more information, please visit ey.com/powerandutilities.

About the report

The EY analysis and perspectives within Power transactions and trends are based on global financial releases and Mergermarket data, as well as global engagements conducted by EY member firms between 2012 and 2017. They can provide an up-to-date assessment of outcomes and trends in the global utilities industry.


Contact
Sarah Shields
EY Global Media Relations
+1 604 891 8235
sarah.shields@ca.ey.com

For more information:

Organization:
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www.ey.com


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