The outlook for M&A activity in the Canadian power sector is
positive, according to participants in a panel discussion at the Canadian Power Finance
Conference on January 25th. Factors cited by the
panel, which was moderated by Lewis Smith
of Stikeman Elliott's Toronto office, included:
ongoing turmoil in the financial markets continues to create
demand for stable, long-term investments and has lowered the return
expectations for many classes of investor
lower return targets support higher asset valuations, which is
motivating those vendors who have been holding out for higher
large pools of equity capital dedicated to power investments
have been raised and pressure will continue to build for these
funds to be deployed
the end of the cash grant program and looming expiration of the
renewable electricity production tax credit in the US is causing
American investors to look to Canada for new opportunities
low gas prices, which drive pricing in the US merchant market,
and a scarcity of PPAs in the US, make contracted projects in
Canada attractive to US developers
there is increasing interest in the Canadian power sector from
European investors facing challenges in their home markets
Asian buyers continue to seek strategic opportunities in both
renewable and non-renewable power generation in Canada
a dwindling supply of prime greenfield sites is causing
developers to turn to acquisitions in order to secure locations for
smaller developers facing financing constraints will need to
sell or bring in equity partners with deeper pockets, particularly
for projects with looming commercial operation deadlines under
many smaller developers also do not have the expertise or
capacity to bring projects from development into commercial
operation and will be motivated to divest or partner with investors
who do have these capabilities.
This wide range of factors is expected to drive M&A activity
in 2012 for projects at all stages, from early development through
to commercial operation. However, the European financial markets
crisis could very well be a strong countervailing factor, so
Canadian power market players will continue to look nervously
across the Atlantic this year.
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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