Following Spanish firm Iberdrola’s £11.6 billion acquisition of Scottish Power and Thames Water selling out for £8 billion to a consortium led by Australian bank Macquarie recently, other mid to large players in the sector are set to make acquisitions, according to a survey by KPMG.

The consolidation trend is driven by competition from larger players and the desire to increase market share and achieve greater cost efficiencies. Acquiring new products and services and entering new geographic areas were also cited.

Full deregulation of the European energy market on July 1 will also aide consolidation. For the first time it will allow distributors to compete freely across national borders. In addition, the fragmented US market has potential for consolidation, and China, India, Russia and Australia are also viewed as offering good growth prospects, KPMG reported.

Indeed, about 60% said their business is already seeking acquisitions and nearly half have acquired another utility in the past three years.

“Utility consolidation is a growing global trend,” said Andy Cox, an advisory partner with KPMG in the UK. “Recent headlines across all key markets – for example, Enel and Acciona’s acquisition of Endesa in Spain, Iberdrola’s takeover of Scottish Power in the UK, the acquisition of Thames Water by the Macquarie consortium, and big ticket deals by MMC in Malaysia and Duke Energy in the US – help to show it’s boom time for the sector.

“However, regardless of whether the acquirers are private equity houses, infrastructure funds or trade buyers, more activity can be expected to occur over the next year. Although 2006 was a landmark year – the trend looks like it’s here for some time yet.”