Power is generating a lot of buzz for deal makers so far this year.
The first quarter of 2016 saw more dollars flow to power mergers and acquisitions than any other quarter in Canadian history, according to figures compiled by Thomson Reuters.
There were $18.1-billion (U.S.) worth of tie-ups announced, and many of them were multibillion-dollar deals that crossed the border between the United States and Canada. That list primarily includes electrical utility, transmission and distribution businesses, but it also encompasses hydroelectric facilities and nuclear- and wind-power producers.
This transaction peak comes after several hot quarters for power and utility deals, where assets have become much sought-after investments for their dependability and stable cash flows – the very same attributes that once made them look boring. But before 2016, the billions of dollars of deals done in any one quarter had scarcely crossed into the double digits.
St. John's-based Fortis Inc.'s $11.3-billion acquisition of Michigan-based electricity transmission company ITC Holdings Corp. is the largest power deal announced so far this year – and one of the largest ever recorded involving a Canadian company. A driving force behind Fortis's deal was broadening its U.S. footprint through ITC's high-voltage transmission-facilities spread from Michigan to Oklahoma.
U.S. investment banks have largely dominated the advisory roles on these power deals. Goldman Sachs Group Inc. led the rankings across all M&A that involved a Canadian player in the first quarter, followed by Lazard LLC and Wells Fargo & Co.
And there's still runway for more large power deals to come to market. When oil and gas giant TransCanada Corp. announced its blockbuster $12-billion deal for Houston-based Columbia Pipeline Group Inc. in March – the largest deal announced this year so far in any sector – it said it would sell a range of power assets to help pay for the sale.
TransCanada's U.S. portfolio now on the block could be worth several billion dollars and is made up of merchant power plants and facilities, including a Queens, N.Y.-based power plant it purchased in 2008 for about $2.8-billion. Driving this power-deal activity in Canada and abroad is a confluence of factors that includes consolidation among smaller utility companies, shifts to cleaner power sources, regulatory changes and corporate strategic reviews, among many other causes.
In terms of other deal activity in the first quarter, RBC Dominion Securities was the top underwriter of $4.9-billion in stock sales, excluding work on its own deals, while TD Securities and CIBC World Markets placed second and third. There were no initial public offerings on the Toronto Stock Exchange in the quarter.
BMO Nesbitt Burns was the busiest bank for debt underwriting, excluding self-funded deals, raising $7.2-billion for clients. National Bank Financial and CIBC World Markets rounded out the top three.