M&A deals show transatlantic divide

According Power Deals 2006, the annual analysis by PricewaterhouseCoopers of M&A activity in the gas and electricity sector, this rise is all the more remarkable as it comes in a year when deal activity from corporate US utility players plummeted. In the last 12 months a $136.1 billion chasm has opened up as European players moved for $190.6 billion worth of targets, with the total value of European power targets increased by a massive 56%. This compared to just $54.5 billion by their North American counterparts.

The sharp downturn in North America came as companies addressed aggressive regulatory approaches from some state regulators during a US midterm election year that coincided with the ending of rate freezes and reaction to the repeal of the Public Utilities Holding Company Act. North American electricity deal values fell 64% to $20.7 billion, not far above the $16.7 billion level of 2003.

However, while US deal activity tumbled, European and Asia Pacific deals soared. In Asia Pacific, the number of deals in the electricity sector rose by 26% while total target value for Asia Pacific electricity assets soared by 141% to $34.2 billion.

Manfred Wiegand, global utilities leader at PricewaterhouseCoopers said: “We are seeing record deal levels but, more than ever, it is regulators and politicians that are deal makers or breakers in the utilities sector. The downturn in the US comes as companies hold fire in the wake of moves by state-level regulatory commissions and the cancellation of two big deals. In Europe, the race by utility companies to achieve super-regional scale ahead of retail market liberalisation has intensified. The EU Commission’s push to dilute assumed market concentration will not halt the race but, instead, move it in a new direction as the rules of the game change.”

More details may be found at: www.pwc.com/extweb/ncpressrelease.nsf/docid/C062C1E0EFA16D45852572650054799C

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