Energy Biz - July/August 2008 - (Page 17) environmental and renewable energy mandates, and may look to private capital for assistance.” Private companies can range from hedge funds to infrastructure funds to venture capital firms and may choose to seek minority or controlling shares. U.S. energy assets are appealing because they are steady revenue producers, which is a huge bonus if companies are to pay down their newly acquired debt. Besides KKR’s purchase of TXU last year, a private consortium led by Australia-based Macquarie Infrastructure Partners is in the process of acquiring Washington State-based Puget Energy for $6.8 billion. For its part, Puget says that it needs to attract $5 billion if it is to upgrade its wires system and that Macquarie has ready access to that capital. Another private BIG DEALS ANNOUNCED SINCE 1999 syndicate comprised DAte AnnounceD tArget nAme Acquirer nAme rAnk vAlue oF DeAl ($mil) of Goldman Sachs 2.26.2007 TXU TXU Corp SPV 44,372.38 Capital Partners, 5.29.2006 Kinder Morgan Knight Holdco LLC 27,592.12 American International 6.28.2006 Duke Energy Corp-Natural Gas Shareholders 17,962.99 Group and the Carlyle 5.21.2008 Calpine NRG Energy 16,474.99 Group bought Kinder 1.18.2000 Coastal El Paso Energy 15,678.58 Morgan. They paid a 5.9.2005 Cinergy Duke Energy 14,137.84 27 percent premium 9.23.1999 Unicom Philadelphia Electric 13,968.22 over $84.41, the 2.27.2006 KeySpan National Grid PLC 11,872.06 closing price of 8.8.2000 GPU FirstEnergy 10,913.72 Kinder’s stock when 2.20.2001 Mirant Shareholders 9,656.00 the deal was first announced May 26, sOurcE: ThOMsOn rEuTErs 2006. Also, Warren Buffett’s Berkshire Hathaway acquired PacifiCorp 16 percent to 133 transactions in 2007. While average global deal size slightly increased from $479.6 million in from ScottishPower in 2005 for $9.4 billion. The same group in 2000 purchased MidAmerican Energy 2006 to $485 million in 2007, North American average Holdings, which at the time was an anomaly. deal size went from $618.3 million to $715.8 million, a It’s all about the need to attract capital. Utilities, in 16 percent growth, for the same period. particular, must build expensive power plants and transmission lines. In the last three years, the cost of those Aging inFrAstructure investments has risen by 50 percent, says Standard & Poor’s. In the last year, utilities have anted up $6 billion In 2008, North American power deals are likely toward infrastructure — an amount that is expected to to be influenced by the need to replace aging keep climbing as the demand for electricity increases infrastructure and the ongoing implementation of and necessitates more generators and wires. renewable portfolio standards at the state levels. The North American Electric Reliability Council, Along those lines, concerns over climate change and the opportunities presented by such challenges in fact, says that by 2015 the country will need an additional 141,000 megawatts to accommodate an will create more activity in non-carbon ventures. expected 19 percent increase in electricity usage. So “Looking ahead, the election year creates more far, only 57,000 megawatts are on the board. uncertainty as it is likely to prompt potential regulatory By going private, utilities are able to avoid quarterly and legislative actions, particularly impacting carbon reporting pressures while having potentially quick access emissions,” says John McConomy, who spearheaded to parents flush with cash. But skeptics question the benthe PricewaterhouseCoopers utility study, adding that efits of such arrangements and ask whether private investhe weak U.S. dollar will attract global suitors. “Energy tors are dedicated to the businesses or whether they companies will be assessing the impact of satisfying an increase of more than 23 percent. Activity within the utility sector in North America climbed to $95.2 billion in 2007, a 34 percent jump from 2006 and a 56 percent growth from 2005, says the firm. Driving the growth in deal value was the $44 billion buyout of TXU by a private equity consortium led by Kohlberg Kravis Roberts, Texas Pacific Group and Goldman Sachs Capital Partners. That transaction contributed 46 percent to the year’s total deal value for the region and roughly 12 percent of global. North American deal value in 2007 represented 26 percent of the global value, up from 24 percent in 2006. After a slight dip in 2006, deal volume grew leading Electric and gas us M&a www.energycentral.com E n E rgyB i z 17 http://www.energycentral.com
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.