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Analysis

Energy M&A update: Q4 2018

The energy industry had strong mergers and acquisitions (M&A) activity this quarter, seeing oil & gas and energy, mining, and utilities (EMU) deal values excel past the previous quarters this time last year. US renewables also saw growth with corporate off-site deals nearly doubling since 2015. This energy 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

  • Utilities increase investment in microgrid technology1: Recent wildfires in California have led some established utility companies to look into alternate avenues to boost resiliency and functionality outside of traditional utility service offerings. As a result, several utilities have shifted microgrids to the forefront of their business development units and invested significant strategic capital. Widespread adoption by large utility companies is the first step in the commercialization of microgrid technology.
  • Corporate change: Large companies lead the renewable charge2: Since 2015, the US renewables market has nearly doubled its annual total of corporate off-site deals. Corporate power purchase agreements, green power purchases, green tariffs, and sole renewable energy project ownership rose to an annual high of 6.43 GW. Miranda Ballentine, CEO of the Renewable Energy Buyers Alliance, anticipates that there will be a fourfold increase in corporate renewables procurement by 2025. Corporations have purchased over 15 GW of renewables cumulatively since 2013.
  • The Oil market experiences its worst annual loss since 20153: Amid concerns of over-production by Organization of the Petroleum Exporting Countries (OPEC) and Russia, a potential trade war with China, and a faltering stock market, US crude ended the year down nearly 25 percent. Much of this decline can be attributed to a sharp drop in the fourth quarter; since mid-October, crude has tumbled and lost nearly half its value. Heighted geopolitical uncertainty and continued over-production are expected to weigh on the oil market going into 2019.
  • Energy, mining, and utilities dominate global M&A in Q44: Energy, Mining, and Utilities (EMU) led global M&A activity in November 2018. Total deal value within the sector topped $45.8 billion in November 2018, which represented a 30.4 percent increase from the same time last year, even though there were 66 fewer deals. The EMU sector in the US and Canada alone saw 36 deals valued at $35.3 billion, which is up 106 percent by value with 13 fewer deals transacted compared to November 2017. The EMU sector leads almost all regions for M&A value.

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References

1 Peter Asmus, “California moves towards 100% carbon-free electricity after landmark vote,” GreenBiz, December 26, 2018, https://www.greenbiz.com/article/utilities-are-accelerating-microgrid-investments-innovative-and-strategic-ways, accessed January 8, 2019.

2 Betsy Lillian, “Report: 2018 A ‘Record Breaking’ Year For Corporate Renewable Energy Deals,” Solar Industry, December 18, 2018, https://solarindustrymag.com/report-2018-a-record-breaking-year-for-corporate-renewable-energy-deals/Tom, accessed January 16, 2018.

3 Jude Clemente, “Hello, Michael: Beware The Resiliency Of The U.S. Oil And Gas System,” Forbes, October 10, 2018, https://www.forbes.com/sites/judeclemente/2018/10/10/hello-michael-beware-the-resiliency-of-the-u-s-oil-and-gas-system/#58a555113700, accessed October 12, 2018.

4 “Monthly M&A Insider,” Mergermarket, January 7, 2019, https://www.acuris.com/assets/Monthly%20M&A%20Insider%20December%202018-vFinal.pdf, accessed January 16, 2018.

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