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Energy M&A update: Q1 2018

Climbing oil prices in Q4 2017 due to the diminishing global supply, have caused a shift in the market toward those integrating renewable energy sources such as, electric, solar, and nuclear power. This Energy mergers and acquisitions (M&A) update provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the energy industry.

Energy trends

  • Oil rises on falling supply, prospects of Iran sanctions1: Oil prices ended the quarter at the highest level in eight weeks, lifted by declining global supply along with the possibility of new Iran sanctions by the United Nations. Saudi Arabia reiterated its commitment to lowering a global crude surplus in a recent meeting with Organization of the Petroleum Exporting Countries. Growing global demand for oil amid economic expansion has helped offset concerns over record high shale production in the United States.
  • PJM proposes two-stage capacity auction2: To better facilitate competition in the eastern US market for electric power, PJM Interconnection LLC has proposed to the Federal Energy Regulatory Commission to change the way generation capacity is sold in the market. PJM proposes a two-step auction that will level the playing field between subsidized producers and nonsubsidized producers, in order to keep the market competitive while encouraging clean energy developments.
  • Non-residential solar growth accelerates in 20173: In 2017, the non-residential sector grew by 28 percent year-over-year, and solar remains a popular source for new energy coming online—representing 30 percent of all new electric capacity. This growth offsets a decline in residential photovoltaic system driven by contraction in core markets due to shifting business strategies for key residential installers, such as Tesla, as well as looming government regulation.
  • Nuclear production tax credit spurs growth4: On February 9, the US Congress passed bipartisan legislation to allow new reactors to receive the nuclear production tax credit beyond 2020. In addition, the legislation allows public-entity project partners to transfer their credits to other project partners which is expected to spur investment in new reactors. Projects expected to benefit from this legislation include two reactors at Vogtle Electric in Georgia and NuScale Power’s new project in Idaho.

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1 “Oil rises on falling supply, prospects of Iran sanctions,” Wall Street Journal. April 9, 2018.
2 “Biggest US electric grid has plan to keep power plants afloat,” Bloomberg. April 9, 2018.
3 “Home solar dims as tesla, others curb aggressive sales,” Wall Street Journal. April 9, 2018; “Solar market insight report 2017 year in review,” Solar Energy Industries Association.
4 “NEI: Nuclear production tax credit represents investment in America’s energy future,” NEI. February 9, 2018.

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