A significant number of energy companies and investors from the GCC and the Middle East are witnessing a major transformation in power distribution and supply as utility service providers are gearing up to capitalise on ongoing smart energy revolution.
Most of the companies are either into an acquisition spree of smart energy technology firms, or looking forward to establishing joint ventures (JV) with firms providing smart energy solutions, reveals a latest study by a leading tech company.
According to Merger market data, annual global energy M&A deal values doubled to approximately $300bn in 2016 from $150bn in 2012. Deal volumes have also increased by 45 percent from 544 in 2012 to 790 in 2016.
Energy technology bolt-ons has underpinned the future of the global energy industry as companies respond to the seismic shift in energy distribution and supply, consumer demand and to capitalise on the smart energy revolution, research by Pinsent Masons reveals. The study completed by 250 senior level executives at energy and energy investment companies from the EMEA and Asia-Pacific regions showed that 90 percent of energy companies are actively seeking a smart energy technology joint venture or acquisition. The appetite for JVs varies by region: almost half (49 percent) of energy companies in Asia Pacific are enthusiastic about partnerships, compared with a third (33 percent) in EMEA.
Pinsent Masons said lucrative opportunities in Europe and Asia could attract Middle Eastern investment with 85 percent of respondents naming Germany, China and the UK the top three destinations for their next smart energy investment. Furthermore, respondents highlighted the Nordics, North America and Western Europe as the regions with the most growth potential for smart energy initiatives.
The findings indicate investors and energy companies are prioritising smart metres, new methods of harnessing surplus power and in-house development of data analytics technology within the next two years, while cloud management systems and virtual power plants will see a surge of investment over the next six years.
While the lack of competitive electricity markets is stifling innovation in the Middle East, Pinsent Masons says Middle East-wide energy market collaboration and reform is crucial to the dismantling of government subsidies to kick start smart energy projects across the GCC sunbelt.
Sachin Kerur, partner and head of Pinsent Masons Middle East, sees opportunities opening up in the region. “Demographic drivers, growing demand for energy and the fiscal challenge of low oil prices will all contribute to a shift in gear for the Middle Eastern energy industry.” “For Middle Eastern investors and energy companies, the message is clear - innovation and dynamism will be the key to unlocking the smart energy revolution in the region. While pursuing greenfield opportunities on the ground is crucial, cash rich investors and acquisitive energy companies have an opportunity to reap the rewards of innovative new technologies across China, Germany and the UK,” he added.
On a global level, 62 percent of energy companies say they will not opt for in-house development of smart energy solutions due to high start-up costs and a lack of expertise but investors favour joint ventures or acquisitions. The survey shows that the biggest investment driver for investors (46 percent ) and energy companies (30 percent) is access to new technology, offering first-mover advantage, improved profitability, end-customer satisfaction and enhanced brand image.