International Finance

Economic slowdown pushes global power and utility M&A deals into steep dive

market value of Chinese goods, US power and utility deals
According EY, the M&A market is down 80% to $20.6 bn in Q1 from a record high of $97 bn in the same period last year

Merger and acquisition (M&A) deals of global power and utility companies recorded their lowest quarterly level since 2012 in the first quarter of 2019, an Ernst and Young (EY) report said. The economic slowdown is one of the factors largely responsible for the decline. According to the report,  the sector’s total value of global deals in the first quarter reached $20.6 billion, down almost 80 percent from a record high of $97 billion in the same period last year.

The report also said that most power and utility M&A deals were in renewable energy, with deals worth $12.7 billion accounting for 61 percent of the total.

Governments continue to focus on reducing investments in fossil fuels. Germany hopes to close 84 coal-fired power plants by 2038, while Norway has proposed to exclude investments in oil and gas exploration companies from its $1 trillion sovereign wealth fund.

In the first quarter 2019, the Chinese deals fell 45 percent to $4.1 billion and deals in Europe dropped 24 percent to $6.8 billion compared to the last three months of 2018. The US, being the largest region for power and utility deals accounting for $9.1 billion, also saw the market value drop 35 percent lower than the fourth quarter of 2018. 

EY Global Power & Utilities Transaction Advisory Services Leader Miles Huq, said, “The outlook for renewable energy transactions looks very positive because we expect the clean energy market to continue to expand and attract investment from a variety of stakeholders.”

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