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    Power & Energy Q3 2022

    Q3 2022 Power Energy

    Industry Trends

    Energy Commodity Prices Boom on Demand from Europe

    Before the Russian-Ukrainian war, Europe depended on Russia for nearly half of its coal and natural gas. Without Russia's supply, the EU has turned to the rest of the world, resulting in a massive spike in the price and increased production. Coal is now selling for up to $400 a ton, up from $134 at the beginning of the year. Natural gas is averaging around $6/MMBtu as of August 2022, compared to $3.43/MMBtu in 2021.1

    OPEC+ Cuts Oil Production by 2 Million Barrels

    The reduction in daily output by OPEC+ is the most significant since the outbreak of the pandemic. The rationale given by OPEC+ members was falling crude oil prices and a perceived decrease in demand for 2023. The cut was a loss for the Biden administration, whose recent efforts to tap U.S. oil reserves had brought down gas prices for Americans and will likely be negated by OPEC's recent cut.2

    Climate Incentives Peak Interest of Businesses

    The Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act have over $430 billion in funding for climate and clean energy measures. The technology is available, and it is far more attractive to spend on cutting emissions and renewable-energy sources when incentives are attached. The energy department will need a dedicated staff to oversee the programs. Still, the private sector interest clearly showed that the U.S. is committed to the energy transition.3

    U.S. Solar Power is now Cheaper than Gas Power

    Companies such as NextEra Energy Inc. and Allete Inc. have heavily invested in the clean energy transition. Solar power and onshore wind are now cheaper than gas-fired power by 33% and 44%, respectively. As natural gas prices continue to rise due to global pressures, and renewables are supported by federal incentives, renewables have a huge opportunity to provide a larger portion of U.S. power.4

    Largest Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • Midland Cogeneration Venture Limited Partnership
    • Manulife Investment Management; Capital Power Corporation
    • $894.00
    • Vanguard Renewables LLC
    • BlackRock Real Assets
    • $700.00
    • Hope Gas, Inc.
    • Hearthstone Utilities Inc.
    • $690.00
    • Solar Service Experts, LLC
    • XL Fleet Corp.
    • $600.00
    • Dynapower Company, LLC
    • Sensata Technologies Holding plc
    • $580.00
    • Rattler Midstream LP 
    • Diamondback Energy, Inc.
    • $579.24

    Other Financial Buyer Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • Standard Solar, Inc.
    • Brookfield Asset Management Inc.
    • $540.00
    • AZZ Infrastructure Solutions Segment
    • Fernweh Group LLC
    • $228.00
    • Corning Natural Gas Holding Corporation
    • Argo Infrastructure Partners LP
    • $172.28

    Other Strategic Buyer Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • NorTex Midstream Partners, LLC
    • Williams Field Services Group, LLC
    • $423.00
    • Crestwood Permian Basin Holdings LLC
    • Crestwood Equity Partners LP
    • $401.68
    • Three Landfill Assets in Texas and Louisiana
    • Kinder Morgan, Inc.
    • $358.00
    • Tri Global Energy, LLC
    • Enbridge Inc.
    • $320.00
    • Blueknight Energy Partners, L.P.
    • Ergon Asphalt & Emulsions, Inc.
    • $297.49

     

    Source S&P Capital IQ as of 10/13/2022 and PCE Proprietary Data

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    Data Assumptions

    This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

    Glossary

    EBIT - Earnings Before Interest and Taxes
    EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
    LTM - Last Twelve Months
    TEV - Total Enterprise Value

    Sources:

    1. González, J. C., Hoyle, R., & Forero, J. "Europe's coal-buying frenzy means windfall for producers." The Wall Street Journal, 2 August, 2022.
    2. Faucon, B. and Said, S. "OPEC+ Agrees to Biggest Oil Production Cut Since Start of Pandemic." Wall Street Journal, 5 October, 2022.
    3. Dvorak, P. "Businesses race for U.S. climate incentives." The Wall Street Journal, 27 September, 2022.
    4. Adegbesan, A. "Solar Is Now 33% Cheaper Than Gas Power in US, Guggenheim Says." Bloomberg, 3 October, 2022.

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