North American power and utilities merger and acquisition (M&A) value increased in the third quarter of this year, driven by one large deal worth $4.2 billion, according to a new report from PwC US. The company expects the uptick in activity to continue through the end of the year as power and utilities companies look to bolster their growth strategies by pursing assets.
In the third quarter, there were six announced transactions with values greater than $50 million. These transactions totaled $4.9 billion - a notable increase in volume compared to the second quarter, which only saw two such transactions that totaled $668 million, the report notes.
The increase in deal value was driven by one large transaction by NRG Energy Inc. Through its Plus Merger Corp. wholly owned subsidiary, NRG definitively agreed to merge with GenOn Energy Inc., a Houston-based independent power producer, under a $4.2 billion deal. This pushed average deal value in the third quarter to $826 million, compared to $334 million in the second quarter of 2012. On a year-over-year basis, while deal volume declined, total deal value increased 90% from $2.6 billion in the third quarter of 2011.
“This quarter, we saw the highest level of deal activity of transactions worth over $50 million since the third quarter of 2011, as companies look to scale operations to drive revenues,” says Jeremy Fago, PwC’s U.S. power and utilities valuation services leader. “Consistent with our earlier reports, we continue to see increased generation asset activity, both fossil and renewable.”
Some of the top deals in the third quarter included wind, solar and hydro generation developers. For example, Innergex Renewable Energy Inc. agreed to acquire a 70% interest in the Magpie hydroelectric facility of Hydromega Services Inc., a Montreal-based provider of hydroelectric power services, for approximately $82 million. Also, Brookfield Renewable Energy Partners LP acquired a 16.2% stake in WesternWind Energy Corp., a Vancouver-based owner and operator of wind and solar energy farms, for $24.4 million.
“We’re seeing an uptick in renewable transactions as key incentives are nearing expiration and a few key players look for opportunities to acquire solar and wind assets that are near commercial operation,” notes Rob McCeney, U.S. power and utilities transaction services partner at PwC.
More information on the PwC report can be found here.
