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M&A in the power and renewables sectors at a decade-highest level, according to PwC

According to a report from Big Four firm PwC, M&A in the power and renewables sector is at its highest level in a decade, with the total M&A deal value in this sector increasing by 47% to $293bn compared to $199bn in 2015.

Around $84bn of the rise came from North America, there were also increases in Australasia, Europe and Latin America.

Norbert Schwieters, global power and utilities leader at PwC, observed: “We believe the fundamentals of deal making in the sector will outweigh the political uncertainties. Investor appetite for the steady long-term yields that flow from regulated power and gas infrastructure assets will continue to attract strong investor interest with upward pressure on acquisition.”

There is a strong demand from institutional buyers and infrastructure funds as it increased fourfold from $7bn to $31bn. Renewables deal volume stayed level but renewables deal value fell from $55bn to $38bn due partly to a number of large hydropower deals in the previous year.

Andy Welsh, deals power and utilities leader at PwC Australia, observed: “In the Asia Pacific region, China and Australia has provided much of the momentum for deal activity. We expect them to continue to provide much of the power and renewables deal momentum in 2017.”

With the Trump presidency and key elections in Europe, 2016 has been a bumper year, with a “cloudy outlook” for 2017.

Rob McCeney, partner, power and utilities at PwC USA, added: “Looking ahead, expectations suggest the new presidency will focus on stronger growth, but with upward pressure on interest rates, this will likely put pressure on historically high valuations, causing some utilities to focus on balance sheet strengthening and others to look to build further scale through acquisition.”

The report (Power & Renewables Deals 2017 Outlook and 2016 Review) highlights eight themes that will characterise power and renewables deal activity in the year ahead.

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