The 2014 Power & Renewables Deals outlook is the latest in our annual series in which we look at mergers and acquisitions activity in the power, utilities and renewables sector.
The power utilities sector is experiencing a period of huge transformation. Technology, finance and politics are all sources of disruptive change hitting the industry and this has been among the factors weighing on deals in 2013. Many uncertainties remain as we move into 2014 but we also see some encouraging trends that lead us, on balance, to anticipate upward deal momentum in the year ahead. In this section, we look at the influences on deals and specific expectations for power and renewables deal activity. In the later regional sections, we examine the deal outlook in each region.
2013 deal outlook: sector contrasts set the scene for deal revival
After a year in which M&A activity in the power sector moved down a gear, deal activity is set for a return to an upward trend during 2014.
Technology, finance and politics are all sources of disruptive change hitting the sector and this has been among the factors weighing on deals in 2013. Total worldwide power and renewables 2013 deal value was down 10% year on year. But the Asia Pacific region and the renewables sector bucked the trend. Renewables deal value rose 25% the value of Asia Pacific deals was up 6%.
The report expects a potential return of mega-mergers in the US power sector to be a key factor driving worldwide power and renewables M&A value upward.
After a year with very little merger and acquisition activity in the energy sector, the signs for 2014 are clearly at an international trend. Sub-Saharan Africa, Vietnam, Mongolia and Mexico will attract investors in 2014. The Swiss energy industry is uncertain, however, before a year in which many decisions are pending. The shows this year’s study, “Power & Renewables Deals 2014 outlook and 2013 review” of the accounting and consulting firm PwC.
After a year of great uncertainty in the energy sector for 2014 shows more confidence. The possible returns attract a wide range of buyers. The search of investors for returns is and will remain in this sector the main driver of financial statements. However, it is difficult to find plants with the right of return. So far, the focus was mainly on networks and renewable energy. New investors will again take bold and also thermal plants in the eye.
More investment in growth markets
The investment activities migrate away from the developed markets to go into the faster-growing emerging markets. Global Africa south of the Sahara, Vietnam, Mongolia and Mexico in 2014 to attract investors. “Western and Southern Europe are currently only less attractive for investors,” says Marc Schmidli, Partner and Head of Energy and Utilities industry at PwC Switzerland. “The new target markets are in Eastern Europe. Especially in wind and solar Eastern Europe offers a lot more potential.
Continuing upward trend in renewables deal
The growth potential of renewable energy is expected to continue in 2014. Many European governments clarify the regulatory uncertainty that had characterized the last few years. “In Switzerland, the design of the 2050 energy strategy is still largely open, the regulatory regime is still under development,” says Marc Schmidli. “For Swiss inverse gates which involves uncertainties.”
Open role of natural gas
The role of natural gas for electricity generation is uncertain, however, offers business opportunities. In Europe, more gas power plants were sent into retirement, there were only sporadic transactions. Most owners have behaved as quiet as possible about the hard times in recent years, some with the help of refinancing. “In the long run natural gas could once again become an attractive market segment,” says Marc Schmidli. “What is the role of natural gas is in Switzerland, is not yet open as part of the Energy Strategy 2050.”