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Private Equity Investment in the Energy and Utilities Sector in North America – August 2014

by Ciantelle Lawrence

  • 15 Aug 2014
  • PE
  • NR

The energy and utilities sector has received strong interest among private equity investors, particularly in North America during recent years. Preqin’s Buyout Deals Analyst online service contains 13,363 private equity deals across North America since 2006 with an aggregate deal value of $1.7tn. Of these deals, a total of 829 private equity deals with an aggregate deal value of $181.6bn were within the energy and utilities industry. In 2014 YTD, 89 private equity-backed deals with an aggregate value of $8.1bn have been invested within the energy and utilities sector compared to 122 transactions with an aggregate value of $14.3bn in 2013.

Relative to other industries, the energy and utilities sector has seen varying levels of significance in North America in the period 2006 to date. Despite the number of private equity-backed buyout deals in this industry constituting 5% to 6% of the total number of North American deals in each year from 2006 to 2012, the aggregate value of investments has been far more fluctuant. In 2011, the sector accounted for 15% of the total value of deals in North America – a peak in relative value and a significant increase on the previous year, which saw the industry account for just 6% of the total value of deals. The $7.2bn acquisition of Samson Investment Company by a consortium of private equity firms, as well as the purchase of Frac Tech Holdings by RRJ Capital et al. for $3.5bn, helped to propel the aggregate value of deals in the energy and utilities sector to $19.2bn in 2011, yet this was still far below the 2007 peak of $60.6bn.

In terms of value bands, 38% of all private equity-backed energy and utilities deals in 2014 YTD have been valued between $100mn and $249mn. Mid cap deals (in the $250mn-$999mn range) accounted for 41% while just over a fifth of deals (21%) were valued at less than $100mn. This compares to 39% of energy and utilities deals globally falling into the mid cap bracket in 2014 YTD, with 32% in the $100-$249mn range and 26% of deals valued at less than $100mn.

It can be noted that the number of private equity-backed exits in the energy and utilities sector in North America declined between 2006 and 2009, reaching a low of just 17 exits in 2009 with an aggregate value of $1.4bn compared to a total of 30 exits with an aggregate value of $4.7bn in 2006. However, since 2009 the number of exits has increased significantly, peaking at 51 in 2012 with a corresponding aggregate value of $18.9bn, while in 2013 the aggregate value of exits remained at a similar level ($18.3bn) with a total of 44 exits. The year to date has seen a reasonable level of exit activity in the energy and utilities sector with 34 exits valued at $9.5bn, including the bankruptcy of Energy Future Holdings – the recipient of the largest ever private equity investment.

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