The North American electric-power sector remains highly fragmented, with much consolidation potential.
Devrim Albuz is Director, Asset Valuation At Global Energy Advisors. He can be reached at firstname.lastname@example.org
During the last few years, the generating asset-ownership structure in North America has gone through a major change. The recent boom-and-bust cycle has created a different generating plant asset-ownership landscape. During one of the most severe bust cycles of the industry, and the gradual recovery of the markets, significant amounts of assets have changed hands. Between 2002 and 2006, about 144 GW of generating assets have been sold. Average asset value for these transactions was at $441/kw.1
We saw significant activity in this area during the first quarter of 2007, and the general expectation in the industry is the remainder of 2007 will be busy, too. We expect more activity during the second half of the year.
Figure 1 shows the number of transaction deals we have seen between 2002 and 2006. The deal count peaked in 2004, with 60 counted deals based on the closing dates. This peak was driven mostly by the energy companies selling their assets as they struggled to improve their balance sheets.
During this period there were several project-financed assets that defaulted. Because the markets were not robust enough, most of the lenders have set up companies to operate the assets until the markets allow them to recover their debt. Although we do not count these cases as deals, this was a major development in terms of ownership structure.