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Merger and acquisition (M&A) activity in the North American power and utilities industry decreased on a volume basis in the first quarter of this year compared to the same period the prior year and prior quarter, according PwC US' quarterly deals snapshot "North American Power & Utilities Deals: Q1 2014."

Companies focused their efforts on deals that could drive growth and provide return potential, PwC notes. The firm says that while smaller transactions drove deal volume in the first three months of the year, total deal value reached $4.4 billion in the quarter, up from $3 billion during the same period in 2013.

PwC reports that there were seven power and utilities transactions greater than $50 million in the first quarter of this year, compared to nine during the first quarter of 2013 and 14 in the fourth quarter of 2013. Similar to the fourth quarter of 2013, when two large corporate deals drove the majority of total deal value, the company says that 66% of the first quarter's deal value was driven by one large corporate deal, valued at $2.9 billion.

Strategic investors, the firm adds, accounted for 77% of deal value greater than $50 million announced during the first quarter, compared to 93% in the fourth quarter of 2013. Financial investor activity carried out the remaining 23% of deal value to start the year.

"Private equity players have had continued interest in power and utility deal opportunities and have capitalized on deals that provide return potential," comments Rob McCeney, PwC's U.S. energy and infrastructure deals partner.

PwC says that alternative power deals in the first quarter continued to comprise a small portion of total deal value, representing only 4% of deal value for deals greater than $50 million through one deal valued at $194 million. Despite low deal volume, PwC notes that interest in alternative deals remains high, as benefits from the YieldCo model for renewable energy assets continues to gain attention across the industry.

"During the first quarter, we saw a range of deal activity spanning the industry landscape, including regulated utility, power generation and retail deals," remarks Jeremy Fago, PwC's U.S. power and utilities deals leader. “As we've previously highlighted, hybrid utilities have continued to evaluate their portfolios and the potential for bringing their merchant assets to market.

"While we saw a decline in deal volume and value this quarter when compared to the previous quarter, we expect the deal environment to pick up through a combination of regulated and merchant transactions," Fago continues.


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