M&A deals value in power sector at $116 bn in 2010

The power sector globally saw merger and acquisitions to the tune of $116 billion in 2010, a 19 per cent growth from the previous year, said a report.

According to an annual review of M&As in the global power sector by PricewaterhouseCoopers, the total deal value in the power and gas utilities sectors (excluding renewables) is up 19 per cent year-on-year from $98 billion in 2009 to $116 billion in 2010. The number of deals also went up to 670 in 2010 from 596.

The report said deal values were boosted by a bounce-back in the US and strong performance of Asia-Pacific.

Various reasons have been cited for consolidation in the sector. They mainly include companies looking at gaining a larger presence in growth markets, strong international interest in infrastructure assets and signs of greater Chinese involvement.

Deal activities in the Americas saw a surge in 2010 after an exceptionally subdued 2009. The region contributed $34 billion to the total M&A activity.

Asia Pacific bidders were involved in $25 billion worth of deals, nearly a fifth of all power deal activities worldwide.

The report said Indian companies' interest in global power deals remains lukewarm. They have preferred to invest in resources instead, especially thermal coal, to meet their growing domestic requirements, it added.

"Within the country, the deal activity will gain further momentum as international investors and funds buy into portfolio of lower-risk developed projects, as Indian promoters divest partial stake to fund new plans," PwC India Energy and Utilities (Leader) Kameswara Rao said.

Looking ahead, the report noted that revival in power deal values across the globe would continue in the year 2011.

"The conditions are in place for a return ... Much will depend on the extent to which demand returns in the main developed markets to give companies confidence in their capital expenditure renewal and new build programmes," the report noted.