Transcript Company Prospects in the European Energy Market

Company Prospects in the European
Energy Market
Energy Companies all face similar issues:
 High Debt Levels
 Uncertain economic outlook
 Oversupply: energy consumption
recovering slowly
 Increased competition
 New regulatory requirements
 Unrealistic shareholder expectations
Similar prospects
Oversupply of
power , expected to
increase
+
Taxes on nuclear
and thermal
electricity,
Poor economic climate,
increasing pressure on
the governments to levy
new taxes.
Forecast for earnings
development was
subject to significant
uncertainty due to the
world economic crisis
German tax on nuclear
fuel will have an adverse The group’s gas
effect averaging
business is affected by
“difficult regulatory between €600 and €700 overcapacity.
and legislative
million p.a. on our
environment”
operating result. We are
considering taking legal
action against it.
Challenging market
outlook.
Has to improve
operational
efficiency and
availability, decrease
debt levels and CO2exposure which is
above the industry
average.
Similar prospects
Unexpected and fast
deterioration in the
global economic
and financial
conditions,
Large industries’
activity in Europe
has been slowed
down by global
economic downturn
Management to
focus on preserving
the Group’s balance
sheet strength, while
reducing operating
costs
Lower energy
consumption and
lower level of
contractualizations
And try to resolve them with
similar solutions:
 Restructuring
 Green Profiling
 Nuclear
Revival
Restructuring
 Companies making operations ‘leaner’, outsourcing and
disinvesting, focus on core activities
 Confirms EPSU research (2008/2009): companies had high
debts; profits and dividends were stagnating
EDF is now
“concentrating” on
Edison and the Italian
market.
Making RWE AG leaner
and pooling activities
in Germany and
Eastern Europe
Europe will remain the
main focus of E.ON‟s
operations
focus on Sweden,
Germany and the
Netherlands
“difficult german
regulatory and legislative”
environment, leading to
the sale of its stake in
EnBW to the German
state.
Shut downs of old
inefficient and
inflexible power plants
Divestments and portfolio
optimization cost
reductions totalling
1.5 bn annually by 2011
To deliver an additional
600 million in cost
reductions by 2013
Limiting investment
programme for the
coming five years
Reducing annual
operating expenses,
some cost reductions
to be achieved by
reducing employees
Target of €300 mill
annual savings by 2012.
Divestment process,
Iberdrola foresees to
carry out certain asset
sales which are
expected to be
executed during the
last quarter of the year.
to optimize the Enel
portfolio, together with
measures to improve
operating cash flow
Decrease the
importance of the
Nordic power ,
increased investments in
Russia
CEZ Group is focusing
on markets in Central
and Southeastern
Europe,
Investment plan 2010 –
2014 decreased by 78
billion crowns
reduce standard
operating costs over
the next 5 years+
headcount reduction.
All segments are
targeted for cost
reduction in New
Vision program
 ‘Green investments’ very prominent in strategy forecasts
 EPSU report dating 2008-2009 shows this is mostly PR
“Expand our electricity
and gas business while
reducing CO2
emissions”
“To actively participate in
the growth of the new
emerging generation
(offshore wind…)”
“Promote energy
efficiency and
renewable energies”
“focus on renewables
capacity”
“will grow in energy
types with low or
lower climate impact”
“Strategy builds on the
company's core
competence in CO2free nuclear and hydro
power”
“Some of the investments
will also be in
renewable sources of
energy “
 Main focus in almost every future investment scheme of the major European
energy companies is on nuclear
 New reactors planned throughout Europe , some already under construction.
 Old plants are being patched up while companies negotiate the extension of their
operational life.
“Be a major player in the
global nuclear revival,
EDF aims to invest in up
to four new Nuclear
plants in the UK”
“New nuclear
opportunities: +70GW
build up of new plants by
2030
Strategy builds on the
company's core
competence in CO2-free
nuclear and hydro
power”
The Group’s expertise is
based on two key forms of
energy: nuclear energy
and natural gas.
“Plans are afoot to add
another two reactor units
to Temelín Nuclear Power
Station”
Focus on wind, nuclear,
biomass, hydro and
natural gas.
Summary
 Similar pressures are at work in all of the European energy
companies:
o Increased competition
o High Debt
o New regulatory requirements (CO2 emission reduction,
renewables directive eg)
o The pressure to invest in new capacity, technologies and networks
o Shareholder expectations to keep profit margins high.
 Who are trying to combat these problems in similar ways:
o Restructuring
o Green profiling
o Nuclear revival
•Which illustrates how ‘European’ these companies have become.