The number and value of deals announced in the power and utilities (P&U) sector in the second quarter (Q2) of the year were both up when compared with Q2 2015. Deal value was up 835%, while deal volume was up 70%. Though the numbers for Q2 were lower than for Q1, overall, 2016 is proving to be a hot year.

Q2 deal activity was “across the gamut of investment classes as electric and gas infrastructure and renewable and traditional generation were all active targets. The rapidly changing makeup of US generation supply continues to create opportunity and drive activity broadly in the space,” according to Jeremy Fago, PwC U.S. P&U deals leader.

Fago’s comment was part of the July 28 report “North American Power & Utilities Deals Insights Q2 2016.” The report, based on PwC analysis of data provided by Thomson Reuters and S&P Capital IQ, finds that, “On a value basis, combined deal value for the first two quarters of 2016 is already greater than the annual figures for each of 2013, 2014, and 2015 respectively[,] signifying a strong current deal environment in the P&U sector.” The total value of corporate and asset deals over $50 million in Q1 and Q2 was $69 billion (see figure).

Announced deals in the power and utilities sector. Courtesy: PwC
Announced deals in the power and utilities sector. Courtesy: PwC

Biggest Deals

Deal activity in Q2 was driven by “large Corporate deals for electric utility, renewable, and independent power producer companies, among others.”

The two largest deals were the Great Plains Energy Inc. acquisition of Westar Energy Inc. for $12.2 billion and the Tesla Motors Inc. acquisition of SolarCity Corp. for $6.6 billion.

The third “mega deal” in the power generation sector was Riverstone Holdings LLC’s $5.1 billion acquisition of the remaining 65% interest in independent power producer Talen Energy Corp. The private-equity firm, which focuses on energy and power investments, will buy all remaining shares of Talen that it doesn’t already own.

The largest asset deal announced in Q2, with a value of $469 million, was Southern Company subsidiary Southern Power Co.’s acquisition of a 90.1% stake in Invenergy Wake Wind Holdings LLC (a wind power generation deal). That transaction is expected to be completed in late 2016, according to the report.

Renewables Take Larger Share of Total Deals

Although overall deal volume and number of mega deals dropped compared to the previous quarter, renewable deals were up in Q2 to 28% of total deal value, as compared to 3% in the prior quarter.

Gail Reitenbach, PhD, editor (@GailReit, @POWERmagazine)