By - Jim Vess

Utility M&A deals rebound in the second quarter of 2019, reaching $12.3 billion, PwC says

Energize Weekly, August 7, 2019

North American utility mergers and acquisitions rebounded in the second quarter of 2019, hitting $12.3 billion, a 55 percent increase over the year’s first quarter, according to the accounting and consulting firm PricewaterhouseCoopers (PwC).

Still, the second quarter of 2019 was 47 percent lower than the same quarter in 2018, and there were no “mega-deals,” which PwC defines as a transaction of more than $5 billion. It was the fourth consecutive quarter without a mega-deal.

The PwC analysis includes mergers and acquisitions of American and Canadian companies by either U.S. or foreign acquirers.

Domestic deals made up 77 percent of deal volume for the quarter. The 10 domestic deals contributed $10.2 billion to total deal value for the quarter. There were a total of 13 transaction in the quarter.

The largest deal was J.P. Morgan’s purchase of the El Paso Electric Co. for $4.3 billion. J.P. Morgan agreed to pay $68.25 in cash per share.

The next biggest deal was the $1.3 billion acquisition of Alberta PowerLine Limited by IST3 Infrastruktur Global Fund and Greystone Infrastructure Fund.

PwC said these types of investor deals drove the market in the second quarter. These financial deals made up 61 percent of deal value for the quarter.

“It highlights investments made by financial investors in the sector, as they see potential for attractive returns,” PwC said.

What will continue to drive M&A in 2019 is the goal of acquiring infrastructure, rebalancing portfolios and balance sheet rationalization, PwC said.

“Renewables will remain as one of the key areas of interest for deal makers as certain states across the U.S. continue to boost their renewable targets and as federal incentives phase down/out,” the consultant said.

“Additionally, valuation and regulatory pressures could impact the number of mega deals and evolving utility models and emerging technologies will drive additional deal activity,” PwC said.

There were two other $1 billion-plus deals in the quarter. John Hancock Funds announced its minority share acquisition of a commercial renewable energy portfolio from Duke Energy Renewables LLC, the competitive renewables arm of Duke Energy, for $1.3 billion. In a $1.1 billion purchase, Ontario Power Generation Inc. will acquire Cube Hydro Partners LLC and Helix Partners, an owner-operator of hydropower plants.

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