TORONTO, Feb. 2 /CNW/ - While the number of deals soared, the value of
deals plummeted as companies faced the new reality of the financial crisis
and, in key markets, adopted a 'wait and see' approach to big acquisitions.
The latest edition of Power Deals, the annual review by PricewaterhouseCoopers
(PwC) of power sector M&A, shows a 24% increase year on year in worldwide 2008
power deal numbers, up to 954 from 768 in 2007, but a 41% plunge in total deal
value, down to US$205.6bn from its record level of US$372.5bn in 2007.
In each of the major markets - North America, Europe and Asia Pacific -
deal numbers were up. While European entities dominated deal value, the
incidence of deals was more evenly spread across the major regions worldwide -
35% in Europe; 29% in Asia Pacific and 24% in North America (by bidder). In
all these regions, the pattern was similar - with deal numbers up but values
"The billion dollar question on the outlook for deal-making is, of
course, how long we will have to wait for liquidity to return to the debt
markets," says John Williamson, PwC Partner and Leader of the Canadian Energy
and Utilities Practice. "Also of importance will be the speed at which climate
change policy is clarified in the first year of the Obama presidency and in
the run-up to the December 2009 UN Climate Summit in Copenhagen."
Key trends highlighted by the Power Deals 2008 report include:
Nuclear deals in the spotlight
The revival of nuclear power is being reflected in a race among the big
players to position themselves globally to capitalise on planned expansion.
France's EDF took the spotlight in 2008 as it went on the acquisition trail in
the UK and the US for nearly US$30bn of assets - in deals with British Energy
and for just under 50% of the nuclear generation portfolio of Constellation
Energy. The nuclear revival also spurred a number of non-M&A joint venture
deals between utility companies and nuclear technology and construction
Gas players sit tight
Gas deals were notably absent as holders of gas assets sat tight on
valuable reserves and comprised 11.6% of all power deals and just 7% of total
power deal value. The tight hold companies are exerting on gas was highlighted
by Origin Energy's successful resistance to BG Group's US$13.3bn takeover bid.
While bidder numbers rose by up to 58% in North America, total value fell
by 54% (from US$87.5bn in 2007 to US$40bn in 2008). This was mainly due to the
absence of mega-deals like the US$21.6bn Kinder Morgan and US$43.8bn TXU seen
in the previous year. Excluding these two mega-deals from previous year
totals, underlying bid activity by North American entities was comparable with
those in previous years - US$32.9bn in 2006, US$43.7bn in 2007 and US$40bn in
Europe loomed large in terms of the geographical distribution of deal
value, accounting for more than half of the worldwide value of all deals - 58%
by bidder and 53% by target. The impact of Europe on 2008 power deal totals
was driven by the number of large deals involving European companies. Six of
the ten biggest deals and 45% of all US$1bn plus deals were from European
Total 2008 target deal value fell to just US$25.9bn, a 49% fall from
US$50.4bn in 2007. Asia Pacific bidder activity was similarly down - by 42%,
from US$47.6bn in 2007 to US$27.4bn in 2008. All but 3% of target value was
for electricity assets. As in other regions, owners sat tight on valuable gas
assets. The value of deals for Australian targets plummeted from US$19bn
(37.7% of all Asian Pacific target value) in 2007 to just US$1.75bn (6.7% of
all Asia Pacific target value) in 2008. The majority of Asia Pacific bid
activity came from Chinese and Japanese entities. Together Chinese and Hong
Kong-based bidders accounted for US$9.8bn (35% of all Asia Pacific bidder
"The coming year will be one of obstacles and opportunities. The
constrained availability of finance will inhibit deal activity and, until that
situation is eased, there is unlikely to be a revival in deal values. But with
some businesses running short of cash for needed expansion or facing
refinancing challenges, businesses and assets may become available for
corporations with strong balance sheets and cash flows," says Williamson.
Power Deals includes analysis of all global cross-border and domestic
electrical and gas deal activity. We use the terms 'power utilities sector',
'power utilities' and 'power deals' to cover activity in both the gas
utilities and electricity utilities sectors. The analysis is based on
published transactions from the Dealogic 'M&A Global' database, December 2008.
Analysis encompasses announced deals, including those pending financial and
legal closure and those which are completed. Deal values are the consideration
announced or reported including any assumption of debt and liabilities.
Figures relate to actual stake purchased and are not multiplied up to 100%.
Throughout the report, both for 2008 and for 2007, we classify the Russian
Federation in a geographic category in its own right and define Asia Pacific
as excluding the Russian Federation.
The analyzed sectors referring to North American Industry Classification
System (NAICS) include: electric power generation; electric power
transmission, control and distribution; natural gas distribution; natural gas
transmission; gas transmission and distribution. The term 'power' used
throughout the report defines these categorized sectors. A full list of
transactions throughout 2008 is available by visiting the Power Deals website
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance,
tax and advisory services to build public trust and enhance value for its
clients and their stakeholders. More than 155,000 people in 153 countries
across our network share their thinking, experience and solutions to develop
fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP
(www.pwc.com/ca) and its related entities have more than 5,200 partners and
staff in offices across the country.
"PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, an Ontario
limited liability partnership, or, as the context requires, the
PricewaterhouseCoopers global network or other member firms of the network,
each of which is a separate and independent legal entity.
For further information:
For further information: Carolyn Forest, PricewaterhouseCoopers LLP,
(416) 814-5730, email@example.com; Nina Godard, PricewaterhouseCoopers
LLP, (416) 941-8383 x 13520, firstname.lastname@example.org