Energy transition –
The pendulum swings

On the back of this picture, which persisted for the whole of 2023, it is perhaps no surprise that there have not been many significant M&A deals in the energy transition space and we did not witness many headline grabbing deals in 2023. The exceptions were Carrier's €12 billion acquisition of Viessman Climate Solutions, Iberdrola's US$6 billion divestment of its Mexican gas business and Brookfield and EIG’s proposed US$11 billion bid for Origin. The Brookfield bid was ultimately defeated in a dramatic shareholder vote, after the deal had been approved by the Australian Competition and Consumer Commission (ACCC) specifically because of its potential to accelerate the energy transition. 

However, the continued strong support for renewable energy arising from COP28 (where the final agreement released on 12 December included a pledge to triple renewable energy investments by 2030), means that governments will need to step in and step up to ensure that current and future renewable energy investments are viable. This is likely to lead to the renegotiation of underlying project documents to improve underlying economics and the re-tendering of numerous opportunities on improved terms (as we saw with the recent offshore wind auction in the UK). On top of that we can expect to see continued streamlining of planning approvals, acceleration of grid connection applications, revisions of economic regulation and a general build out of network and transmission infrastructure. Once these signals become clear, we can expect the economics of energy transition companies to improve and another wave of M&A activity to take place. Indeed, we closed 2023 with news that Vattenfall had agreed to sell its 4.2GW portfolio of offshore wind assets in the UK to RWE for £963 million. 

The major oil & gas companies are all in healthy financial positions on the back of another year of high commodity prices and all remain committed to the energy transition, albeit with slightly different means of execution. Of the majors, bp, Shell and Total seem more likely to concentrate on renewable energy acquisitions, with Chevron and Exxon showing they are more focused on carbon management of their existing conventional energy businesses. Exxon and Chevron were involved in the two biggest energy M&A deals of the year, with Exxon announcing a US$60 billion acquisition of Pioneer Natural Resources and Chevron announcing a US$53 billion acquisition of Hess, in each case motivated by the US shale assets of these companies. We also saw Eni move for Neptune Energy in a US$5 billion deal and at the time of writing Woodside and Santos have confirmed they are talking about a US$50 billion combination of their businesses. The UK's Harbour Energy has also announced its US$8 billion acquisition of the upstream oil & gas assets of Germany's Wintershall. These deals suggest that that there is plenty of life left in oil & gas and there is likely to be continued consolidation in this sector in 2024.