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Global power mergers market: $10.8 billion deal value in Q4 2012

Press Release   •   Feb 22, 2013 14:27 GMT

The global power mergers market saw a marginal decline, with the value falling from $11.3 billion in Q3 2012 to $10.8 billion Q4 2012. The number of deals in the global power mergers market also declined, from 103 in Q3 2012 to 76 in Q4 2012. This suggests a 26% fall in deal numbers. The approval of Cabinet Committee on Economic Affairs of India to sell 9.5% stake in NTPC, a power utility company, for approximately $2.4 billion; and Toshiba's agreement to acquire 20% stake in Westinghouse Electric from Shaw Group for $1.6 billion were some of the high-value deals recorded in Q4 2012.

Substantial M&A activity was recorded in North America and Europe, accounting for 45% and 29% of the total M&A deals respectively in Q4 2012. M&A value in Europe decreased substantially from $3 billion in Q3 2012 to $1.6 billion in Q4 2012. North America also demonstrated similar trend with M&A values decreasing from $5.7 billion in Q3 2012 to $4.5 billion in Q4 2012. Asia-Pacific reported a considerable increase in deal value from $1.8 billion in Q3 2012 to $4.3 billion in Q4 2012, while the number of M&A deals decreased from 20 in Q3 2012 to 15 in Q4 2012.

The number of M&A deals was the highest in the utilities networks segment with 25 deals in Q4 2012, followed by wind and solar segments with 15 and 13 deals respectively. In deal value, the fossil fuel segment recoded the highest value with $3.1 billion in Q4 2012, followed by hydro segment with $3.1 billion.

There was a marginal decrease in the M&A deal value in Q4 2012 as compared to Q3 2012 due to lack of some high value deals in Europe and North America, consequently, the deal numbers also decreased from 103 in Q3 2012 to 76 in Q4 2012. Although, M&A activity witnessed a substantial decrease in the regions of Europe and North America but significant increase in the M&A deal values due to some high value deals in Asia-Pacific resulted in just a marginal decrease in the overall M&A activity globally during Q4 2012.

Investments in power companies, including new investments through equity/debt offerings and financing by PE/VC firms, registered a 26% decrease with $55.6 billion in Q4 2012, as compared to $75 billion in Q3 2012. The number of deals also declined 24% from 274 in Q3 2012 to 207 deals in Q4 2012.

The majority of investments came from the debt market and reached $48.8 billion in Q4 2012, which accounted for 88% of new investments in the power industry. Global debt offerings, including public and private debt placements, registered a significant decrease of 34% in the number of deals and 24% in deal value with 89 deals worth $48.8 billion in Q4 2012, as compared to 134 deals worth $64.6 billion in Q3 2012. Companies operating in the utilities networks segment raised the majority of capital in the form of debt instruments with 52 deals worth $30 billion in Q4 2012, showing a decrease of 42% in deals and 29% in value when compared to 90 deals worth $42.1 billion in Q3 2012.

Global equity offerings, including initial public offerings (IPOs), secondary offerings, and private investment in public equities (PIPEs) registered a marginal decrease of 5% in the number of deals and 16% in deal value with 60 deals worth $6.1 billion in Q4 2012, as compared to 63 deals worth $7.3 billion in Q3 2012. Companies in North America recorded the majority of equity offering deals and deal value with 35 deals worth $2.7 billion in Q4 2012, followed by companies in Asia-Pacific with 15 deals worth $2.4 billion. Investments from PE/VC firms recorded a decrease of 79% in deal value with $666.2m in Q4 2012, as compared to $3.1 billon in Q3 2012. The number of deals also registered a decrease from 94 in Q3 2012 to 67 in Q4 2012.

New Investments in power sector decreased substantially by 26% in value terms during Q4 2012 as compared to Q3 2012, consequently, the deal numbers also declined from 274 in Q3 2012 to 207 deals in Q4 2012. Low investment activity due to European debt crisis and the constrained supply of credit to businesses and consumers globally has led to the decrease in new investment deals. The new investments in the power sector were predominately driven the utilities networks segment. The Debt market contributed predominantly to the new investments, with 88% of the new investments in the power sector being driven by debt offerings.

Asset financing, including project financing, self-funded, tax equity, lease and bond financing, and bridge loans for new builds, acquisitions and refinancing of assets registered a substantial increase from $62.3 billion in Q3 2012 to $82.9 billion in Q4 2012, indicating an increase of 33%. The number of asset finance deals also increased substantially from 253 deals in Q3 2012 to 378 deals in Q4 2012, indicating an increase of 49%. On a year-on-year basis, asset finance recorded a considerable decrease of 21% in the number of deals and 23% in deal value from 476 deals worth $108.1 billion in Q4 2011 to 378 deals worth $82.9 billion in Q4 2012.

The fossil fuels market accounted for 34% of total asset financing value with $28.3 billion in Q4 2012, up 41% from $20.1 billion in Q3 2012. NTPC's agreement to invest $2.3 billion in Darlipali power project in Orissa, India; the agreement of UP Rajya Vidyut Utpadan and Neyveli Lignite to invest $2.1 billion in a thermal power plant in Uttar Pradesh, India; and Lanco Infratech's project financing of $2 billion for phase II of Anpara and Himawat power projects in India were some of the high-value deals registered in the fossil fuel market in Q4 2012.

Hydro, solar and wind energy markets also recorded substantial investments with $25.3 billion, $15.6 billion, and $9.4 billion respectively in Q4 2012. Some of the high-value deals in Q4 2012 include Norte Energia's project financing of $9 billion for Belo Monte hydroelectric plant in Brazil; Securum Equity Partners and Amicorp Fund's agreement to invest $2.3 billion in Neper Solar PV Power Project in Serbia; and Mitsui and Fiera Axium's project financing of $1.1 billion for the acquisition of 60% stake in a portfolio of renewable energy projects from GDF SUEZ in Canada.

For more information on the Global power mergers market, please click here: Global Power Mergers Market
For more information on the Energy and Utilities market, please click here: Energy and Utilities Market

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