US power sector M&A deal values plummet YOY in Q4 2023 as activity slows

The combined value and number of corporate- and asset-level M&A deals in the US electric, multi-utility and independent power producer sector shrank in the fourth quarter of 2023, although the total value of asset deals surged for full year 2023 compared to 2022.

The aggregate value of corporate-level M&A deals in the sector shrank 77% year over year to $2.01 billion from $8.81 billion, with the number of such deals dropping to nine from 14 in the fourth quarter of 2022, according to an analysis of S&P Global Market Intelligence data.

For the full year of 2023, the combined value of corporate-level M&A deals came in at $8.82 billion through 36 transactions, a sharp decrease from the $16.91 billion total through 57 transactions in full year 2022.

Asset-level M&A deals announced in the quarter ticked up to 25, from 24 in the previous quarter, but were down from the 51 asset deals announced in the fourth quarter of 2022. The combined value of those deals plunged by $1.64 billion, or 30%, to $3.79 billion in the most recent quarter, from $5.43 billion a year earlier.

On a yearly basis, the aggregate value of individual asset deals surged by 57.5% year over year to $13.31 billion in 2023 from $8.45 billion a year ago. The number of deals dropped to 127, from 179 deals in 2022.

Market Intelligence calculates a deal's transaction value from the amount paid for equity and in cash plus the value of assumed current liabilities, net of current assets.

Whole company, minority deals

The largest corporate-level M&A deal of the quarter was by Focus Impact BH3 Acquisition Co., which entered a letter of intent Dec. 29, 2023, to acquire XCF Global Capital Inc. for $1.8 billion. The deal is subject to the completion of due diligence, negotiation of and entry into definitive documentation.

Focus Impact BH3 Acquisition is a special purpose acquisition company formed by Focus Impact Acquisition Corp. XCF Global Capital is a New York-based producer of sustainable fuels such as renewable diesel, sustainable aviation fuel and other biofuels.

Asset deals

The largest asset-level transactions during the quarter involved Canadian independent power producer Capital Power Corp., which entered two separate deals with Beal Financial Corp. to acquire two operating gas-fired plants in the Western US. The deals are expected to close in the first quarter of 2024, subject to the receipt of regulatory approvals and customary closing conditions.

In the first deal, Capital Power formed a 50/50 partnership with an affiliate of a BlackRock Inc.-managed fund to acquire the 1,092-MW Harquahala combined-cycle facility in Maricopa County, Ariz., from Beal Financial for $775 million in cash.

In the second deal, Capital Power will pay $675 million in cash to acquire the 1,062-MW La Paloma Generating combined-cycle facility in Kern County, Calif.

Other notable asset deals included TotalEnergies SE's purchase of three gas-fired power plants in Texas with a total capacity of 1.5 GW from TexGen Power LLC for $635 million and Atlas Capital Resources IV LP's acquisition of Cleco Corporate Holdings LLC's unregulated electric utility business for $600 million.

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