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South East Asia Infrastructure

Second-quarter deals boost first-half count as the renewable energy sector leads the charge in Southeast Asia

Deal count in Southeast Asia surprised on the upside in the second quarter, despite delays and multiple lockdowns, as international interest in renewables and trust in the market’s fundamentals outweighed the impact of COVID-19.

The number of deals that closed in the April-June period rose to 13 from 11 a year earlier, taking the first half's total to 22, according to the 1H20 League Tables for Inframation and Sparkspread. Transportation and renewables led the gains.

“We have found the renewables sector in Southeast Asia particularly resilient [to the pandemic],” says Hans Menski, Tokyo-based partner at law firm Clifford Chance, which is involved in renewables transactions in the region. “We have advised developers and lenders on ensuring project documents are sufficiently robust to anticipate and respond to the cost and time impacts of COVID-19.”

Despite this, transaction value during the second quarter tumbled as smaller projects dominated the tables. The total value was USD 1.57bn, a 63% on-year drop compared with a year earlier when two big-ticket deals in the transportation and power sectors added up to more than USD 3.5bn.

The region is set to see further activity in the coming months as deals that have been postponed try and reach financial close. Practical issues such as mobility restrictions have hindered onsite due diligence, says David Ng, principal, transport lead for Southeast Asia at consulting firm KPMG.

“We expect to see transactions pick up in the second half of 2020,” Ng says, adding that regional governments are aiming to use infrastructure spending to quickly bolster the economy. "We are seeing a perceptible pick-up of activity with respect to tenders for consultancy services to advance new projects."

Both Myanmar and the Philippines have flagged that new public-private partnerships will be key to relaunching their economies in the next few months, while Thailand presented in April a list of PPPs to be developed between 2020 and 2027 totaling USD 33bn.

Other big-ticket PPPs that have been delayed - including opportunities in the airport, toll road and waste management sectors - are scheduled to be awarded before the end of the year.

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