Thursday 16 May 2013

Utility firms’ confidence in global economy at ‘highest levels’

Confidence among power and utility (P&U) companies is at its “highest levels” for two years, with 89% of executives saying global economy is either improving or is stable.

They are anticipating global growth of more than 3% in the next 12 months, according to a new survey by Ernst & Young. Half of the P&U executives also believe credit availability is improving, compared to just 32% in April.

However, among those P&U firms that expect to engage in mergers and acquisitions (M&A) in the next year, deal sizes remain small. Nearly 90% expect their deals to be worth less than $500 million (£327.3m) and 40% expect them to be under $50 million (£32.7m).

Joseph Rodriquez, Ernst & Young Power & Utilities Sector Senior Manager said: "We believe the disconnect between renewed confidence and M&A activity can be attributed to two distinct reasons. First is the concern that global economic growth has been uneven and heavily supported by monetary policy, which has P&U executives trying not to get ahead of the recovery. Secondly, financial buyers have re-entered the fray for P&U assets. These buyers are pursuing assets more aggressively, looking for assets at attractive valuations. In fact, financial-buyer activity has accelerated and we believe that will continue for the foreseeable future."

The report suggested UK and China are the most confident about global economic growth prospects.