Return of confidence up among power and utility bosses

Confidence in the global economy among power and utility bosses is at its highest in two years, according to consultants EY.

In its newly-published Capital Confidence Barometer: Power and Utilities, EY interviewed 203 global power and utility executives and 67 per cent of them believe the economy is improving, compared with 47 per cent six months ago.

Matt Rennie, global transactions Power & Utilities leader at EY, said this confidence was “reflected in a significant increase in deal volumes and more large deals”. Power and utility M&A

“Half of power and utility executives say growth is their top priority, up from 40 per cent a year ago. Ninety-three per cent consider credit either stable or improving – the highest levels in two years. We expect this alignment of core fundamentals for deal-making – economic confidence, credit availability and focus on growth – to favour higher transactional activity.”

And he added: “As utilities continue to reshape their portfolio and look to newer markets and services, we expect a more robust M&A climate into the next 12 months.”

According to EY, there was a 25 per cent increase in global power and utility deal volumes in the third quarter (Q3) of this year, compared to Q2, with a 67 per cent increase in Q3 global deal value compared to Q2.

EY asked power and utility bosses to name the top five countries outside of their own domestic market in which they were most likely to invest. Brazil came out top, followed by India, Canada, South Africa and Chile.

Other key findings of EY survey of power and utility bosses were: 48 per cent perceive global political instability to be the greatest growth barrier to their business; 59 per cent are confident of the credit availability in the market compared with 32 per cent a year ago; 51 per cent expect to allocate 25 per cent or more of their acquisition capital to BRIC countries in the next 12 months; and 49 per cent have greater focus on investing in emerging markets compared to a year ago.

Pip McCrostie, global vice-chair of EY’s Transaction Advisory Services, said: “Confidence in the global economy is at a two-year high. Companies have weathered a prolonged period of uncertainty during which time they strengthened their balance sheets and optimized their capital structures.

“Having warehoused cash for a number of years and with a ready access to credit, leading corporates are in a strong financial position to do deals – they now have more confidence to pull the trigger.”

But she stressed that “this does not mean we will see a return to boom-time deal-making. That was unsustainable – but so is the M&A recession we have experienced since 2009.

“For many companies, operational efficiencies and a focus on cost cutting can no longer meet growth mandates. As a result, the signs are that M&A will once again be a preferred route to achieve growth.”

To see the full report click here

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