Power, utility transaction activity in AsiaPac jumped 43%

China dominated the region.

According to Ernst & Young, global power and utility (P&U) transaction activity shows signs of recovery with deal volumes reaching a three-year high of 398 total deals in 2013, with a value of US$125.4b, according to EY’s quarterly Power transactions and trends report. 

These numbers represent growth of 30.1% in deal volumes and 4.1% in deal value respectively, compared to 2012.

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Matthew Rennie, EY Global Transactions Power & Utilities Leader, says: “Overwhelmingly, rebalancing and consolidation drove transaction activity during 2013. Looking ahead to 2014, the C-suite is showing a renewed interest in upstream and downstream acquisitions and a focus on innovation.

“In an environment of wholesale price pressure in Europe and the United States, utilities are indicating they are keen to pursue cross-border transactions, where synergies can be exploited and returns can be increased through diversification.”

Three drivers emerged in Q3 and Q4, and these are expected to drive activity in 2014: industry consolidation, market reforms and continued opportunities in developing countries. Despite the impact of broad macro themes, today’s transaction drivers are localized, reflecting varying regulatory and business transformation within each region. 

Asia-Pacific saw significant activity with a 43% increase in deal activity and 15% increase in deal value. China dominated the transaction markets, leading both domestic and cross-border deals in the region.

Domestic consolidation, particularly in the gas T&D market, produced several megadeals in the region and domestic deals in the country accounted for over US$15b of deal value.

Regulatory and market reforms opens up transaction opportunities Uncertainty in relation to the generation mix in Japan incentivized Japanese investors to pursue outbound investment in 2013 and attractive valuations and distressed assets have encouraged investors in both China and Japan to explore growth opportunities in developed markets.

While China’s largest utility picked up stakes in electricity T&D assets in Australia, Japanese investors were active in Europe, acquiring key regulated assets in the region.