PRINT THIS PAGE Powering ahead: mergers and acquisitions in the global power and utilities industry
22/08/2007. Source:KPMG.
The power industry is seeing a spate of major deals, finds KPMG, with some of the largest transactions the sector has seen being completed within the last 12 months. This consolidation, on both sides of the Atlantic, is driven by a number of factors: on-going deregulation; the search for secure energy supplies; and the availability of debt to support strong corporate balance sheets and potential financial buyers who are playing an increasing role in the sector. While the restructuring of the industry is in the early stages, it is expected to gather momentum as large, consolidated players begin to vie for markets that previously had been dominated by entrenched incumbents.
The International Energy Agency’s World Energy Outlook, published in 2006, supports this increase in activity. It expects the level of required investment in the electricity sector between 2005 and 2030 to be US$11.3 trillion, a significant increase on the previous estimate of US$10.2 trillion.
For power and utilities, the merger wave offers both promises and risks. The opportunities include expanding to new geographic regions, introducing new products and services, diversifying fuel sources and reducing costs through economies of scale. The risks include dealing with protectionist regulators, possibly over-paying for assets in a super-heated market, and – if the merger goes through – the possibility that cost savings may prove elusive.
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KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the US member firm of KPMG International. KPMG International's member firms have 103,000 professionals, including 6,700 partners, in 144 countries.
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