Utilities Remain a Focal Point in Energy Services M&A as Centrica Buys ENER-G

On May 16 2016, Centrica announced that it has acquired combined heat and power (CHP) specialist ENER-G Cogen for £145 million ($210 million). Centrica plans to use this acquisition within its new international Distributed Energy & Power business, which is focused on installing and managing distributed systems for customers in both the UK and US. ENER-G has an international presence in the CHP market, with over 1,400 units under management. It provides CHP solutions across the fastest growing segment of the market – small to mid-sized CHP units.

This acquisition is not a huge surprise. Verdantix had already predicted that in 2016 power utilities will bring a greater focus on boosting their CHP and decentralized energy capabilities, as part of their ambition to become complete solution providers for energy management. In addition, the business case for CHP has been steadily improving due to attractive spark spreads and the growing impact of transmission and distribution costs within utility electricity bills. We predicted that utilities would take an acquisition route to building in-house capabilities for CHP, as utilities have used this strategy in the past to develop energy data management capabilities.

What does the Centrica deal mean for the broader energy services market? The deal confirms that utilities continue to drive the high profile M&A deals in the market. For example, Centrica recently purchased Panoramic Power, ENGIE bought C3 Resources and Total acquired battery maker Saft. The biggest new development is that the latest Centrica deal will put competitive pressure on utilities to up their game in CHP. This is likely to speed up the pace of acquisitions activity in the distributed energy sector going forward.

To learn more, register for the upcoming webinar, ‘Benchmarking The UK's Energy Services Providers’ on June 16, 2016.