A new report from Ernst & Young on energy and utilities shows that utilities and other deep-pocketed investors are providing financial support for their environmental, social and governance initiatives.
From pv magazine USA
Ernst & Young (EY) has released a report detailing Power & Utilities (P&U) transactions for the third quarter of 2021, which shows that utilities are providing significant financial support for their environmental, social and governance initiatives (ESG). Investments in gas and electricity networks, energy transition in the broad sense and energy services; including storage, electric vehicles and waste-to-energy, accounted for US$57.2 billion (A$79.6 billion) of the quarter’s total of US$72.8 billion (A$101 billion). Australians) in transaction value.
This trend to focus more on renewable agreements began to intensify in the first half of 2020. EY’s strategic and transactional partner, Miles Huq, in previous conversations with photo magazine, said that individual renewable energy deals are generally lower in value, so the total value generated by those deals shows continued investor confidence.
This mark of US$72.8 billion (A$101 billion) in transaction value represents the highest level of investment in the last eight quarters, showing the potential for a return to activity levels of pre-pandemic transaction. Corporate investors acquired US$8.3 billion (A$11.5 billion) of revolving assets in the third quarter, compared to US$3.2 billion (A$44 billion) from financial investors.
There were 53 deals in the Americas, which includes Central and South America, with a cumulative deal value of US$23.9 billion (Au$33 billion), an increase of 69 % compared to the second quarter. Value was driven by very large “mega-deals” in energy services and network assets. Renewable Assets drove deal volume with 17 deals.
The report also claims that utilities are trying to sell their fossil fuel generating assets, instead focusing on keeping nuclear, renewable and regulated businesses in their portfolios. In return, financial investors jump on discounted assets that are essential to the stability of the network. To illustrate the point, the authors cite Public Service Enterprise Group’s sale of its 13 gas-fired power stations to ArcLight Capital, a private equity investor, for $1.9 billion (A$2.6 billion) for book value of assets of $4.5 billion. (6.2 billion Australian dollars).
And while emerging climate and renewable technologies have historically been slow to attract significant investment activity, that narrative may change as the third quarter saw significant investment in hydrogen technologies. According to the report, gas utilities are increasingly betting on hydrogen to help them transition to clean energy businesses.
For example, the report highlights that Avangrid announced plans to build a 20 MW electrolyzer and hydrogen storage facility for its Connecticut gas and electric utilities, powered by renewable energy from the offshore wind. Nationwide, U.S. utilities have announced more than 26 hydrogen pilot projects.
Author: Tim Sylvie
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