PwC: Power Sector Globalization, Acquisitions Moving Forward This Year

Lucas Gilmore, “Big 4″ observer
February 23, 2011 /

Although relatively lower than the values seen from 2005 to 2008, mergers and acquisitions in the power sector are ready to venture in 2011 onwards to “return at least to the foothills of these peaks.”

PricewaterhouseCoopers’s annual Power Deals review complements its initial report in December last year showing a stronger growth in the power sector propelled by the emergence of the capital market.

In three years starting 2007, PwC said shale trades have become the focus of companies looking for interesting mergers and acquisitions due to the past increases in their transactions.

According to PwC-acquired Thomson Reuters, the power sector has increased in valuations from $722 billion in 2009 to $786 billion in November 2010, significantly contributing to the growth of deal values which gained similar peaks in 2003 and 2004.

In 2009, however, global power deals have seen dramatic lows. But PwC’s review shows a 19 percent increase in valuations of the power sector deals, particularly the rise in gas utilities sectors from US$98 billion to US$116 billion last year, although it excluded the renewable energy sector.

PwC said 2010 “saw an end to the deal stalemate in the US with a renewed deal flow that looks set to continue this year.”

PwC noted that improvements in the power sector appear to lie in emerging markets, strong international interest in infrastructure assets, growing Chinese involvement, and independent power producers.

On the other hand, European companies remain upbeat on expansions as they are currently stepping up their international presence. PwC cited IP and GDF Suez as examples of firms that will see an initial period of rationalization in their combined portfolio followed by growth in emerging markets.

PwC said the clean energy policies of governments will likely shape the future of mergers and acquisitions in the power sector this year as new regulations in the industry determine deal values.

 

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