May 8, 2019 / 11:19 PM / 4 months ago

Power and utility bosses positive on M&A despite deal slump: survey

LONDON (Reuters) - Global power and utility executives are positive about the prospects for mergers and acquisitions in the year ahead, despite deals falling to their lowest level since 2012 in the first quarter, Ernst & Young (EY) said on Thursday.

The value of global deals in the sector was $20.6 billion in the first quarter, down almost 80 percent from a record high of $97 billion in the same period of 2018, EY said in a report.

“At the end of 2018, global financial markets relapsed quite a bit which had an impact on M&A in power and utilities,” Miles Huq, EY’s leader for global transaction advisory services power and utilities, told Reuters.

Most transactions were in renewable energy, with deals worth $12.7 billion accounting for 61 percent of the quarter’s total.

EY published a separate survey of 2,900 senior executives about confidence in the economic outlook, including 101 respondents from the power and utility sector.

Most of those in power and utilities are confident of economic growth and 63 percent expect to pursue merger and acquisitions in the next 12 months.

EY said the outlook for renewable energy transactions this year looks positive because the clean energy market is expected to expand and attract more investment, while governments continue to put pressure on fossil fuels.

Germany aims to close its 84 coal-fired power plants by 2038, while Norway has proposed phasing out investments in oil and gas exploration by its $1 trillion sovereign wealth fund.

The EY report showed that the Americas accounted for deals valued at $9.1 billion, the largest single region, but this was 35 percent lower than the fourth quarter of 2018.

The value of Chinese deals fell 45 percent compared with the fourth quarter, to $4.1 billion, while the value of deals in Europe fell 27 percent to $6.8 billion compared to the last three months of 2018.

Reporting by Nina Chestney; Editing by Edmund Blair and Alexander Smith

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