The value of transactions in the energy and utilities sector reached an absolute maximum of 180 billion dollars in the first half of 2018, writes EY Power transactions and trends: Q2 2018 report. The record comes despite a 14% decrease in the second quarter compared to the same period last year, to 83 billion dollars. The renewable energy sector accounted for nearly half (46%) of the volume of transactions in the second quarter of 2018, EY announced in a press release.
In the second quarter, utilities also invested more in new technologies. In Europe, 5.5 billion dollars have been allocated to energy services and new technology transactions. EY also notes Japan’s Tokyo Electric Power Company (TEPCO), which has set up a subsidiary to develop partnerships for developing innovative technologies.
The appetite for clean energy investment strengthened in the second quarter, with 63 transactions, counted by EY, totaling $ 12.9 billion. EY experts note the historic commitment of the European Union to achieve a 32% share of renewable energy by 2030, as well as three US renewable energy deals totaling $ 3.8 billion.
Renewable might survive without subsidies in Romania
Valeriu Binig, Partner EY Romania, appreciates that the advance of electricity prices in local markets could stimulate the renewable energy business. “Soon, due to the technological progress that leads to lowering the specific investment costs in such technologies and increasing performance, [it is possible] to see business plans that no longer count on support schemes for electricity from renewable sources,” said the expert.
Even though there are no significant developments in strategic projects of high capacity generation, Binig believes that the generation sector may experience increased competition based on of new renewable generation capacities, all the more so as the price advanced by the authorities “for the remuneration of electricity produced by photovoltaic panels installed on individual roofs may soon become attractive for private initiatives”.
“We are also looking forward to possible vertical integration between suppliers and generators, but also horizontally, between generators of different technologies, given that the market price and the CO2 price perspectives on the European market support existing ‘low-carbon’ generators with attractive prices for sellers”, says Valeriu Binig.
Accelerated pace of transactions in developing markets
China ranks first in foreign investment in the second quarter, with announced $ 31.2 billion cross-border transactions, in line with the Chinese government’s One Belt, One Road initiative. Much of this amount ($ 27.4 billion) is the offer to take over the Portuguese company EDP by China Three Gorges.
Thailand and India recorded transactions totaling $ 5.3 billion and $ 3.2 billion respectively, while in Estonia transactions by domestic and foreign investors totaled $ 600 million.
After reaching a record high in the first quarter (63.1 billion dollars), the European M&A market remained strong, reaching $ 45.7 billion in the second quarter, accounting for 55% of the value total transactions in the energy and utilities sector globally.
The value of transactions in the Asia-Pacific region grew by 78% in the second quarter of 2018 compared to the same period last year, to $ 10.3 billion. Renewable energy has fueled most of the region’s deals,, with 25 clean energy transactions totaling $ 3.8 billion.