Industry players still looking to grow in 2013
TORONTO, Feb. 6, 2013 /CNW/ - Canadian power and utilities companies are
showing an appetite to grow and diversify through acquisitions in 2013,
according to Ernst & Young. However, with changing regulatory
structures in different jurisdictions, companies are facing increased
uncertainty when it comes to pricing the deals.
"Regulatory models are changing in many power and utilities
jurisdictions," says Gerard McInnis, partner in Ernst & Young's Power &
Utilities practice. "And the peculiarities of the rate structures and
market characteristics within each of these jurisdictions — in Canada,
the US and internationally — are only exasperating the uncertainty that
goes along with those changes. In this environment, power and utilities
companies looking to acquire in 2013 need to factor in sufficient time
to carefully consider deal values and likely returns."
A recent Ernst & Young report, Power transactions and trends: global power and utilities mergers and
acquisitions 2012 review, 2013 outlook, predicts that competition in Canada will increase in 2013, providing
impetus for greenfield and brownfield development. However,
high-quality rate base or contracted assets will remain in demand, with
an emphasis on greater geographic diversification inside North America
"We're seeing Canadian power and utilities companies expand
geographically and build out their renewable assets through
acquisitions," adds McInnis. "As they expand their footprint beyond
familiar territory, they need to do due diligence to understand the
complexities of new regions and new markets."
Globally, M&A values within the power and utility sector during 2012
declined by 16.8% compared to 2011. The average deal value for 2012
remained in line with 2011 at US$552M, with eight transactions worth
over US$1B taking place in Q2 2012 alone. However, the second half of
2012 depressed the average 2012 deal value, with a higher concentration
of deals under US$100M reflecting the greater emphasis on smaller deals
and an increase in renewable transactions.
"Globally, the weak macro environment prompted buyers to focus on
lower-risk transactions and internal cost-reduction programs in 2012,"
says McInnis. "But with the right deal-making conditions in 2013, it's
an exciting time for Canadian power and utilities as they continue to
branch out and diversify."
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SOURCE: Ernst & Young