Nuclear Energy Quarterly Deals Analysis - M&A and Investment Trends, Q3 2011 - ReportsnReports

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M&As Decreased In The Nuclear Energy Market In Q3 2011

M&As and asset transactions, which include changes in the ownership and control of companies or assets (GlobalData does not consider this value as a new investment in the market), in the nuclear energy industry registered a significant decrease of 84% in deal value with $1.3 billion in Q3 2011, as compared to $8.2 billion in Q2 2011. The significant difference in deal value was due to the high value deal of Exelon’s agreement to merge with Constellation Energy Group for $7.9 billion in Q2 2011. However, excluding this deal, the industry recorded an increase in deal value from $0.3m in Q2 2011 to $1.3 billion in Q3 2011. The number of M&A deals increased from six in Q2 2011 to 10 deals in Q3 2011. North America remained dominant in the nuclear energy M&A activity with seven deals in Q3 2011, followed by Europe with two deals.

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According to Prabhanjan, Analyst at GlobalData, “Post Japan nuclear crisis, most of the utility companies continue to focus on reviewing their safety standards at the existing and under construction nuclear power reactors. Barring the high value deal of Exelon’s agreement to merge with Constellation Energy Group for $7.9 billion in Q2 2011 there were no significant M&A deals. The industry recorded a mere increase in deal value from $0.3m in Q2 2011 to $1.3 billion in Q3 2011. However this stance of utility companies in the industry may not sustain for long period, because the growing energy needs and the government’s commitment to cut down carbon emission rates will induce companies to move from cautionary mode to action mode.”

New Investments In The Nuclear Energy Industry Decreased In Q3 2011

Investments in nuclear energy companies, including new investments through equity/debt offerings and financings by PE/VC firms, recorded a decrease of 23% in the number of deals and 59% in deal value with 73 delas worth $9 billion in Q3 2011, as compared to 95 deals worth $21.9 billion in Q2 2011.

Equity offerings accounted for 70% of the total financing deals with 51 deals in Q3 2011, and in terms of capital raised, debt offerings accounted for 98% of the deal value with $8.8 billion in Q3 2011.

North America topped the table with 31 deals worth $5.2 billion in Q3 2011, followed by Asia-Pacific with 37 deals worth $1.4 billion in Q3 2011. Schneider Electric’s proposed offering of Euro medium term notes for $1.1 billion, China Guangdong Nuclear Power’s private placement of notes for $783.7m, and ABB’s public offering of notes for $566m were some of the notable deals registered in Q3 2011.

According to Prabhanjan, Analyst at GlobalData, “The new investments in nuclear energy industry has decreased in Q3 2011 by 23% in the number of deals and 59% by value with 73 delas worth $9 billion in Q3 2011, as compared to 95 deals worth $21.9 billion in Q2 2011. This trend emphasizes the fact that the nuclear accident in Japan is not only having an affect on the country’s future nuclear power projects but also on the global nuclear power industry. Germany has decided to close its nuclear power plants by 2022 and focus on alternate energy production. The US is intending to revisit their safety measures and emergency preparation strategy pertaining to the nuclear power reactors in the country. However Asia-Pacific countries such as India and China are planning to strengthen their safety measures for operating nuclear power reactors and continue their nuclear power project plans.”

Decreased Financing Through Equity Offerings and Debt Offerings In Q3 2011

Global equity offerings, including initial public offerings (IPOs), secondary offerings, and private investment in public equities (PIPEs), registered a significant decrease of 96% in deal value from $4.1 billion in Q2 2011 to $147.3m in Q3 2011. The large difference was due to PPL Corporation’s two separate secondary offerings of $2.3 billion and $977.5m in Q2 2011. The average deal value also registered a substantial decrease from $63m in Q2 2011 to $2.9m in Q2 2011. The number of deals registered a decrease of 23% from 66 in Q2 2011 to 51 in Q3 2011. PIPE segment accounted for 75% of the total number of deals, with 38 deals in Q3 2011. Secondary offerings accounted for 42% of the total investments, with $62.4m in Q3 2011.

Global debt offerings, including public and private debt placements, by nuclear energy companies registered a decrease of 12% in the number of deals and 40% in deal value with 22 deals worth $8.8 billion in Q3 2011, as compared to 25 deals worth $14.8 billion in Q2 2011. Public debt offerings registered a marginal decrease in deal value from $8 billion in Q2 2011 to $7.5 billion in Q3 2011, while private debt placements registered a substantial decrease of 85% in deal value from $6.8 billion in Q2 2011 to $1.3 billion in Q3 2011.

Deals Decreased In North America And Europe In Q3 2011

North America and Europe recorded a decrease of 8% and 46% in the number of deals with 54 and seven deals in Q3 2011, as compared to 59 and 13 deals respectively in Q2 2011. Deal values in both the regions also decreased substantially from $21 billion and $8.2 billion in Q2 2011 to $5.3 billion and $3.5 billion respectively in Q3 2011. Exelon’s agreement to merge with Constellation Energy Group, valued at $7.9 billion, PPL Corporation’s three separate public offerings with a combined worth of $4.6 billion, Energy Future Holdings’s private placement of 11.5% senior secured notes for $1.7 billion, and NRG Energy’s private placement of senior notes for $1.2 billion were the major transactions that led to a high deal value in Q2 2011. Some of the high value deals in Europe, which led to a high deal value in Q2 2011, include Qatar Holdings’s acquisition of 6.16% stake in Iberdrola for $2.7 billion, Ansaldo Electric Drives’s acquisition of 45% interest in Ansaldo Energia for $1.7 billion, and Enel’s private placement of bonds for $1.4 billion.

The Asia Pacific region registered an increase in the number of deals and deal value with 43 deals worth $1.4 billion in Q3 2011, as compared to 40 deals worth $645.6m in Q2 2011. Australia continued to dominate the nuclear market in the Asia-Pacific region, accounting for 93% of the number of deals with 40 deals in Q3 2011. The increase in deal activity in Australia was primarily driven by the expected increase in demand for uranium resources as nuclear power programs are on the rise. The number of deals in China decreased from two nuclear deals in Q2 2011 to one deal in Q3 2011.

According to Prabhanjan, Analyst at GlobalData, “The governments across the different nations are taking necessary precautionary steps to strengthen the safety measures of their respective nuclear power plants post Japan Nuclear crisis. Countries such as India, China, Russian Federation and South Korea are moving forward with their nuclear power plans while European countries have either decided to either close or slow down their nuclear plans. The government’s commitment to reduce greenhouse gas emissions and adhere to Kyoto protocol has made them to include nuclear in their country’s energy mix. The necessity to rely on nuclear may be one of the primary reasons for them to provide loan guarantees for new nuclear projects. Due to loan guarantees already the need for the utility companies to finance through equity and debt offerings declined. The Japan’s nuclear crisis further decreased the financing through equity and debt offerings.”

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