Wednesday 6 March 2013, Amsterdam
Power Quarterly Deals Analysis: M&A and Investment Trends – Q4 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 Q4 2012. The report presents 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.
M&As Decreased Marginally In Power Industry In Q4 2012
M&As, which include change in ownership and control of companies (we doe not consider this value as a new investment in the market) in the power industry, recorded a marginal decrease of 5% from $11.3 billion in Q3 2012 to $10.8 billion in Q4 2012. The approval of Cabinet Committee on Economic Affairs of India to sell 9.5% stake in NTPC, a power utility company, for approximately $2.4 billion; and Toshiba’s agreement to acquire 20% stake in Westinghouse Electric from Shaw Group for $1.6 billion were some of the high-value deals recorded in Q4 2012. The number of M&A deals also decreased 26% to 76 in Q4 2012 from 103 in Q3 2012.
Substantial M&A activity was recorded in North America and Europe, accounting for 45% and 29% of the total M&A deals respectively in Q4 2012. M&A value in Europe decreased substantially from $3 billion in Q3 2012 to $1.6 billion in Q4 2012. North America also demonstrated similar trend with M&A values decreasing from $5.7 billion in Q3 2012 to $4.5 billion in Q4 2012. Asia-Pacific reported a considerable increase in deal value from $1.8 billion in Q3 2012 to $4.3 billion in Q4 2012, while the number of M&A deals decreased from 20 in Q3 2012 to 15 in Q4 2012.
The number of M&A deals was the highest in the utilities networks segment with 25 deals in Q4 2012, followed by wind and solar segments with 15 and 13 deals respectively. In deal value, the fossil fuel segment recoded the highest value with $3.1 billion in Q4 2012, followed by hydro segment with $3.1 billion.
According to Siddhartha Raina, “There was a marginal decrease in the M&A deal value in Q4 2012 as compared to Q3 2012 due to lack of some high value deals in Europe and North America, consequently, the deal numbers also decreased from 103 in Q3 2012 to 76 in Q4 2012. Although, M&A activity witnessed a substantial decrease in the regions of Europe and North America but significant increase in the M&A deal values due to some high value deals in Asia-Pacific resulted in just a marginal decrease in the overall M&A activity globally during Q4 2012”.
New Investments In Power Industry Decelerated In Q4 2012
Investments in power companies, including new investments through equity/debt offerings and financing by PE/VC firms, registered a 26% decrease with $55.6 billion in Q4 2012, as compared to $75 billion in Q3 2012. The number of deals also declined 24% from 274 in Q3 2012 to 207 deals in Q4 2012.
The majority of investments came from the debt market and reached $48.8 billion in Q4 2012, which accounted for 88% of new investments in the power industry. Global debt offerings, including public and private debt placements, registered a significant decrease of 34% in the number of deals and 24% in deal value with 89 deals worth $48.8 billion in Q4 2012, as compared to 134 deals worth $64.6 billion in Q3 2012. Companies operating in the utilities networks segment raised the majority of capital in the form of debt instruments with 52 deals worth $30 billion in Q4 2012, showing a decrease of 42% in deals and 29% in value when compared to 90 deals worth $42.1 billion in Q3 2012.
Global equity offerings, including initial public offerings (IPOs), secondary offerings, and private investment in public equities (PIPEs) registered a marginal decrease of 5% in the number of deals and 16% in deal value with 60 deals worth $6.1 billion in Q4 2012, as compared to 63 deals worth $7.3 billion in Q3 2012. Companies in North America recorded the majority of equity offering deals and deal value with 35 deals worth $2.7 billion in Q4 2012, followed by companies in Asia-Pacific with 15 deals worth $2.4 billion. Investments from PE/VC firms recorded a decrease of 79% in deal value with $666.2m in Q4 2012, as compared to $3.1 billon in Q3 2012. The number of deals also registered a decrease from 94 in Q3 2012 to 67 in Q4 2012.
According to Siddhartha Raina, “New Investments in power sector decreased substantially by 26% in value terms during Q4 2012 as compared to Q3 2012, consequently, the deal numbers also declined from 274 in Q3 2012 to 207 deals in Q4 2012. Low investment activity due to European debt crisis and the constrained supply of credit to businesses and consumers globally has led to the decrease in new investment deals. The new investments in the power sector were predominately driven the utilities networks segment. The Debt market contributed predominantly to the new investments, with 88% of the new investments in the power sector being driven by debt offerings.”
Asset Financing Increased In Power Industry In Q4 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 substantial increase from $62.3 billion in Q3 2012 to $82.9 billion in Q4 2012, indicating an increase of 33%. The number of asset finance deals also increased substantially from 253 deals in Q3 2012 to 378 deals in Q4 2012, indicating an increase of 49%. On a year-on-year basis, asset finance recorded a considerable decrease of 21% in the number of deals and 23% in deal value from 476 deals worth $108.1 billion in Q4 2011 to 378 deals worth $82.9 billion in Q4 2012.
The fossil fuels market accounted for 34% of total asset financing value with $28.3 billion in Q4 2012, up 41% from $20.1 billion in Q3 2012. NTPC’s agreement to invest $2.3 billion in Darlipali power project in Orissa, India; the agreement of UP Rajya Vidyut Utpadan and Neyveli Lignite to invest $2.1 billion in a thermal power plant in Uttar Pradesh, India; and Lanco Infratech’s project financing of $2 billion for phase II of Anpara and Himawat power projects in India were some of the high-value deals registered in the fossil fuel market in Q4 2012.
Hydro, solar and wind energy markets also recorded substantial investments with $25.3 billion, $15.6 billion, and $9.4 billion respectively in Q4 2012. Some of the high-value deals in Q4 2012 include Norte Energia’s project financing of $9 billion for Belo Monte hydroelectric plant in Brazil; Securum Equity Partners and Amicorp Fund’s agreement to invest $2.3 billion in Neper Solar PV Power Project in Serbia; and Mitsui and Fiera Axium’s project financing of $1.1 billion for the acquisition of 60% stake in a portfolio of renewable energy projects from GDF SUEZ in Canada.
Region wise, Asia-Pacific received the majority of investments with $28 billion, which accounted for 34% of the total asset financing in Q4 2012. Deals wise, North America recorded 101 asset financing deals, accounting for 27% of the total deals in Q4 2012.
According to Siddhartha Raina, Analyst at GlobalData, “The asset financing increased globally by 33% in value terms during Q4 2012 as compared to Q3 2012, consequently, the deal numbers also increased significantly from 253 deals in Q3 2012 to 378 deals in Q4 2012. The fossil fuel sector dominated the asset financing and accounted for 34% of the total deal value in Q4 2012. Geographically, Asia Pacific noted the largest project financing activity in value terms and accounted for 34% of the total asset financing deals while North America witnessed the maximum asset financing activity in terms of deal numbers in Q4 2012.”
Venture Capital Investments Decelerated In Q4 2012
The power industry recorded a decrease of 21% in the number of deals and 46% in deal value with 49 deals worth $479.9m in Q4 2012, as compared to 62 deals worth $881.6m in Q3 2012. Companies in growth capital and expansion stage obtained the majority of funds with $370.4m in Q4 2012, followed by companies in start-up stage with $70.3m financing. The majority of the financing deals were in the growth capital and expansion stage with 38 deals in Q4 2012, followed by start-up stage with eight deals.
Technology wise, the energy infrastructure segment raised much of the venture capital financing with $101m from eight deals in Q4 2012. Kleiner Perkins Caufield & Byers topped the VC ranking table between Q1 2012 and Q4 2012, through participation in six financing deals worth $303m.
The private equity market registered a substantial decrease in the number of deals from 15 in Q3 2012 to nine in Q4 2012. Deal value also registered a substantial decrease of 92% from $2.3 billion in Q3 2012 to $186.3m in Q4 2012. Blackstone’s agreement to acquire home automation & technology services provider, Vivint, for $2 billion, in the energy infrastructure segment was a major deal that contributed much to the deal value in Q3 2012. The solar industry received majority of the PE funding, which amounted to $150m in Q4 2012. North American companies recorded six PE deals, accounting for 67% of the total PE deals in Q4 2012.
According to Siddhartha Raina, “Investments by VC companies registered a substantial decrease in Q4 2012 as compared to Q3 2012 with majority of funds directed towards growth capital due to increased competition to fund start-up businesses. This represents a decrease of 21% in the number of deals and 46% in deal value of VC investments. Investments by PE companies also witnessed a significant decrease in both value as well as deal numbers in Q4 2012 as compared to Q3 2012. Overall, reduced investment activity and lack of funds impacted the global capital raising.”
Decreased Deals In North America And Europe In Q4 2012
North America registered a marginal decrease in the number of deals and a marginal increase in deal value with 273 deals worth $48.4 billion in Q4 2012, as compared to 278 deals worth $43.2 billion in Q3 2012. On a year-on-year basis, the number of deals registered a decrease of 31% from 396 in Q4 2011 to 273 deals in Q4 2012.
Europe registered a decrease of 40% in deal value from $50.3 billion in Q3 2012 to $30.2 billion in Q4 2012. As government subsidies have been either eliminated or reduced, and economic turmoil in the Euro zone led to drastic decrease in investments in the quarter due to debt crisis, utility companies are finding it increasingly difficult to borrow money from banks to finance their projects in Q4 2012, and many investors have pared financial support for green energy investments in the region. The number of deals also registered a marginal decrease of 9% to 155 in Q4 2012 from 170 in Q3 2012.
Asia-Pacific registered a decrease of 8% in the number of deals and an increase of 17% in deal value with 149 deals worth $40.9 billion in Q4 2012, as compared to 162 deals worth $34.9 billion in Q3 2012. The Rest of the World (ROW), including South and Central America and the Middle East and Africa, registered a substantial increase of 48% in deal value with $29.9 billion in Q4 2012, as compared to $20.2 billion in Q3 2012. Norte Energia’s announcement of project financing of $9 billion for Belo Monte Hydroelectric plant in Brazil and Instituto Costarricense’s announcement of project financing of $944m for Reventazon Hydro power plant in Costa Rica were some of the high-value deals recorded in Q4 2012. The number of deals also registered an increase of 52% from 71 in Q3 2012 to 108 Q4 2012.
According to Siddhartha Raina, “Regions of North America and Europe registered decrease in investments in terms of deal numbers in Q4 2012 as compared to Q3 2012.Although, North America witnessed a marginal increase in deal values in Q4 2012 as compared to Q3 2012, Europe continued to witness a decrease in deal values in Q4 2012. Utility companies in Europe are finding it more difficult to borrow money from banks to finance their projects as debt crisis continue to bite the companies in Q4 2012, as well as many investors have pared back financial support for green energy investments in the region. The Asia-Pacific region witnessed increased investments in value terms but the deal numbers declined marginally over the quarter. Increasing confidence in the growth prospects and improving business outlook of power companies led to the growth in this region”.
