M&A and Investment Activity Increased in the Power Industry in Q2 2012

Friday 27 July 2012, Amsterdam

M&A and Investment Activity Increased in the Power Industry in Q2 2012

The new Power Quarterly Deals Analysis: M&A and Investment Trends - Q2 2012 report is an essential source of data on and trend analysis of the mergers and acquisitions (M&As) and financing in the power industry. The report provides detailed information on M&As, equity/debt offerings, private equity (PE), venture financing and partnership transactions recorded in the power industry in Q2 2012. The report portrays detailed comparative data on the number of deals and their value in the last five quarters, categorized into deal types, segments and geographies. The report also provides information on the top private equity (PE), venture capital (VC) and advisory firms in the power industry.

The data presented in this report comes from proprietary in-house Power eTrack deals database and primary and secondary research.

M&As Increased In The Power Industry In Q2 2012

M&As, which include change in ownership and control of companies (the report does not consider this value as a new investment in the market) in the power industry, recorded a marginal increase of 9% in deal value with $22.4 bn in Q2 2012, as compared to $20.5 billion in Q1 2012. Some of the high value deals in Q2 2012 such as GDF Suez’s agreement to acquire the remaining 30% stake in International Power for $10.9 bn, Cassa Depositi e Prestiti’s agreement to acquire around 30% interest in Snam Rete Gas from Eni for $4.4 bn, and Melrose’s agreement to acquire Elster Group for $2.3 bn, led to the increase. However, the number of M&A deals decreased from 91 in Q1 2012 to 76 in Q2 2012.

Substantial M&A activity was recorded in North America and Europe, each of which accounted for 37% of the total M&A deals in Q2 2012. In value, M&A activity in Europe increased substantially from $4.1 bn in Q1 2012 to $19.3 bn in Q2 2012. On the other hand, Asia-Pacific reported a decrease in the number of M&A deals from 18 in Q1 2012 to 14 in Q2 2012. Deal value also registered a substantial decrease from $5.7 bn in Q1 2012 to $1.1 bn in Q2 2012.

The number of M&A deals was the highest in the solar segment with 17 deals in Q2 2012, followed by biopower and energy efficiency segments with 15 and 10 deals respectively. In deal value, fossil fuels segment dominated the market with $11.4 bn in Q2 2012, followed by hydro energy segment with $11 bn.

According to Analyst Siddhartha Raina, “There was an increase in the M&A deal value due to some high value deals in Q2 2012 as compared to Q1 2012, nonetheless, the numbers decreased from 91 in Q1 2012 to 76 in Q2 2012. Although, over all deal numbers decreased in Q2 2012 but high M&A activity prevailed in the capital intensive solar energy markets with 17 deals followed by biopower and energy efficiency segments with 15 and 10 deals respectively. Fossil fuel segment gained maximum value in terms of revenues earned in Q2 2012. North America and Europe dominated the M&A activity globally by accounting for 37% each of the total M&A deals in Q2 2012.”

New Investments In Power Industry Increased In Q2 2012

Investments in power companies, including new investments through equity/debt offerings and financing by PE/VC firms, registered a 3% increase in deal value with $71.2 bn in Q2 2012, as compared to $69.2 bn in Q1 2012. However, the number of deals declined from 270 in Q1 2012 to 246 deals in Q2 2012.

The majority of investments came from the debt market and reached $61.7 bn in Q2 2012, which accounted for 87% of new investments in the power industry. Global debt offerings, including public and private debt placements, registered a marginal increase of 6% in the number of deals and 2% in deal value with 109 deals worth $61.7 bn in Q2 2012, as compared to 103 deals worth $60.4 bn in Q1 2012. Companies operating in the transmission and distribution business attracted majority of the new investments, which amounted to $41.7 bn in Q2 2012.

Global equity offerings, including initial public offerings (IPOs), secondary offerings, and private investment in public equities (PIPEs), registered a decrease of 9% in the number of deals and an increase of 8% deal value with 58 deals worth $6.8 bn in Q2 2012, as compared to 64 deals worth $6.3 bn in Q1 2012. Companies in North America recorded the majority of equity offering deals and deal value with 37 deals worth $3.9 bn in Q2 2012, followed by companies in Asia-Pacific with 15 deals worth $1.5 bn. Investments from PE/VC segment recorded an increase of 12% to reach $2.8 bn in Q2 2012, from $2.5 bn in Q1 2012.

According to Analyst Siddhartha Raina, “Investments in power sector increased by 3% in value terms during Q2 2012 as compared to Q1 2012, however, the deal numbers declined from 270 in Q1 2012 to 246 deals in Q2 2012. Low investment activity due to European debt crisis and the constrained supply of credit to businesses and consumers globally has led to the slow growth in new investment deals. The new investments in the power sector were predominately driven by the transmission and distribution sector. The Debt market contributed predominantly to the new investments, with 87% of the new investments in the power sector being driven by debt offerings.”

Asset Financing Decreased In Power Industry In Q2 2012

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 decrease of 36% in the number of deals and 33% in deal value with 184 deals worth $39.4 bn in Q2 2012, as compared to 287 deals worth $58.5 bn in Q1 2012. On a year-on-year basis, asset financing recorded a decrease of 70% in the number of deals and 73% in deal value from 609 deals worth $147.1 bn in Q2 2011 to 184 deals worth $39.4 bn in Q2 2012.

The wind energy market accounted for 47% of total asset financing value with $18.6 bn in Q2 2012, up 9% from $17 bn in Q1 2012. City Electric’s agreement to invest $2.5 bn in offshore wind farm in Limnos Island, Greece; Iberdrola’s proposed investment of $2 bn in Wikinger offshore wind farm in Germany; and the agreement of Welspun Energy to invest $1 bn in two wind power projects in Karnataka, India were some of the high value deals registered in the wind energy market in Q2 2012.

Fossil fuels, solar and hydro energy markets also recorded substantial investments with $9.7 bn, $6.2 bn, and $2.2 bn respectively in Q2 2012. Some of the high value deals in Q2 2012 include NLC’s agreement to invest $1.9 bn in a coal fired power plant in Uttar Pradesh, India; Shanghai Alex Solar’s proposed investment of $1.74 bn in a solar PV project in the city of Jinchang, China; and Elektroprivreda’s agreement to invest $1.6 bn in two coal-fired power plants in Bosnia.

Region wise, Asia-Pacific received the majority of investments with $12.9 bn, accounting for 33% of the total asset financing in Q2 2012. Deals wise, Europe recorded 55 asset financing deals, accounting for 30% of the total deals in Q2 2012.

According to Analyst Siddhartha Raina, “The asset financing decreased globally by 33% in value terms during Q2 2012 as compared to Q1 2012, due to this the deal numbers also went down by 36% as compared to Q1 2012. The wind energy sector dominated the asset financing and accounted for 47% of the deals in Q2 2012. Geographically Europe noted the largest project financing activity with some high value investments made in the offshore wind sector.”

Private Equity Investments Increased In Q2 2012

The power industry recorded a substantial increase in investments by private equity firms, with $2 bn in Q2 2012, as compared to $1.3 bn in Q1 2012. Bain Capital’s agreement to acquire Bravida from Triton for $1.3 bn and the agreement of AXA Private Equity to acquire 23.48% interest in Enovos International from ArcelorMittal for $428m were the high value deals that led to an increase in deal value in Q2 2012. The energy efficiency sector received majority of the PE funding, which amounted to $1.3 bn in Q2 2012. European companies recorded investments worth $1.8 bn, accounting for 90% of the total PE investment in Q2 2012.

Venture capital segment registered a decrease of 20% in the number of VC deals from 82 in Q1 2012 to 66 deals in Q2 2012. VC investments also decreased 34% from $1.1 bn in Q1 2012 to $752.4m in Q2 2012. Companies in growth capital and expansion stage obtained the majority of funds with $547.9m financing in Q2 2012, followed by companies in start-up stage with $132.3m financing. The majority of the financing deals were in the growth capital and expansion stage with 39 deals in Q2 2012, followed by deals in start-up stage with 18 deals.

Technology wise, solar energy segment remained prospective, attracting the majority of VC investments with $249.4m in Q2 2012. Kleiner Perkins Caufield & Byers topped the VC ranking table between Q3 2011 and Q2 2012, through participation in six financing deals worth $449m.

According to Analyst Siddhartha Raina, “Investments by PE companies registered a substantial increase in Q2 2012 as compared to Q1 2012 with majority of funds directed towards energy efficiency sector due to the growing demand of power globally. Majority of the PE investments were directed towards European companies and accounted for 90% of the totalPE invetements in Q2 2012. However, VC market registered a decrease of 20% in the number of VC deals in Q2 2012 as compared to Q1 2012. This also translated to the decrease in value terms of VC investments by 34% in Q1 2012. Reduced investment activity and lack of funds impacted the global capital raising.”

Increased Investments In Europe In Q2 2012

Investments in Europe increased from $47.7 bn in Q1 2012 to $64.2 bn in Q2 2012, indicating an increase of 35%. However, the number of deals in the region decreased 25% from 184 deals in Q1 2012 to 138 deals in Q2 2012. North America registered a decrease of 22% in the number of deals and 11% in deal value with 245 deals worth $38.9 bn in Q2 2012, as compared to 313 deals worth $43.8 bn in Q1 2012, while Asia-Pacific registered a decrease of 17% in the number of deals and 40% in deal value with 114 deals worth $20.9 bn in Q2 2012, as compared 138 deals worth $34.7 bn in Q1 2012.

The Rest of the World (ROW), including South and Central America and the Middle East and Africa, registered a significant decrease of 59% in deal value with $9.1 bn in Q2 2012, as compared to $22.1 bn in Q1 2012. The large difference in deal value was due to some of the high value deals in Q1 2012 such as DSCE’s proposed investment of $3.27 bn in Mohammed Bin Rashid Al Maktoum solar power project in UAE; Global Biofuels’s $2.5 bn project financing for a biofuel power project portfolio in Nigeria; CEC and AFC’s proposed investment of $1 bn in Luapula Hydropower project in Zambia; and Cameroon Republic and Joule Africa’s proposed $1 bn investment in Kpep Hydroelectric project in Cameroon. However, the number of deals registered a marginal increase from 52 in Q1 2012 to 53 Q2 2012.

According to Analyst Siddhartha Raina, “Investments in Europe increased by 35% in Q2 2012 as compared to Q1 2012 in terms of deal value. However, the region registered a decrease of 25% in Q2 2012 as compared to Q1 2012 in terms of the number of deals due to some high value deals reported for the quarter Q2 2012. On the other hand North America and Asia-Pacific region witnessed reduced investments in value as well as deal numbers over the quarter. Overall, global investments have been affected due to reduced credit availability and slower recovery from financial crisis in the European and North American regions in 2011.”

Power Quarterly Deals Analysis: M&A and Investment Trends - Q2 2012

Power Quarterly Deals Analysis: M&A and Investment Trends - Q2 2012

Publish date : August 2012
Report code : ASDR-30703
Pages : 66

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