Four years have now passed since the bankruptcy of Lehman Brothers and the consequent explosion of the global crisis. However the economic situation in the Eurozone does not seem to have changed much: the critical issues persist and overcoming them does not seem to be a realistic prospect in the short and perhaps even in the medium term.
The global crisis has also affected the large European utilities, until a few years ago considered a safe haven almost impervious to crises and speculation, are feeling the pinch. This clearly emerges from the analyzes on the 40 major European energy groups contained in the 2012 Report "Strategic Actions in a Time of Sustained Uncertainty" of the Agici Observatory on Utilities which will be presented on 17 February in Milan at Palazzo Clerici (http://www. agici.it/eventi/17_02_12.php).
While on the one hand the turnover of the major European utilities continued to grow even during the crisis (+12% in 2011 compared to 2008), the same cannot be said of profitability. Since 2009 the aggregate profit of the major European utilities has steadily declined, passing from €51 billion in 2009 to €34 billion in 2011 (-33%). The main causes are the stability of demand, the production overcapacity which forces many plants to shut down, as well as the growing competition which is driving down energy prices, especially gas. Only large Oil & Gas companies remain "unscathed" by this trend thanks to the growth in demand and prices in the large developing markets as well as the strategic control of reserves.
The large European utilities are increasingly aware of these critical issues and are changing their strategies, in many cases radically. On the one hand, there is a rationalization and efficiency improvement of their corporate and organizational structure. This is essentially expressed in two types of actions:
1) Disposal of assets and non-strategic investments (not profitable enough, involving low-growth markets or “symbolic” minority stakes). In 2012, the disposals of the major European utilities reached a value of €21 billion, which adds to the €27 billion of 2010 and the over €5 billion of 2009 (the year in which this type of strategy started to take hold).
2) Rationalization of the corporate structure, with actions aimed at recovering efficiency and exploiting the synergies deriving from the large M&A operations carried out by these companies in the last 5 years. The Agici Accenture study "Developing Winning Moves for Merger and Acquisition Integration in European Utilities", (it too will be presented on February 17 at Palazzo Clerici) shows how the eleven major European utilities are planning €2014 billion of savings by 9 cost deriving from the exploitation of post merger synergies.
Alongside these actions having an effect "inside" the groups, there are new growth and development strategies. With large acquisitions temporarily "frozen", utilities are aiming above all at:
1) Growth in clean technologies and renewables. Despite the constant reduction of incentives in all major European countries, utilities are continuing to invest in renewables. The Observatory's 2012 report calculates the investments planned by the large European utilities in renewables by 75 at over €2020 billion.
2) Growth in large emerging markets. It is now clear to utilities that the crisis and increased energy efficiency will in all likelihood keep European demand for gas and electricity stable. Players are therefore aiming to grow in developing countries, especially in the Far East and South America. North Africa is also considered an area of interest due to its high potential for renewables and the stabilization of the geopolitical situation.
3) Extension of the offer: services for energy efficiency. Energy efficiency is transforming itself from a threat to an opportunity for large European utilities. Given the stagnant demand, these services are considered attractive because they are not regulated (and therefore with potentially higher profitability) and because they strengthen the bond with customers, who are particularly sensitive in this period of crisis to offers capable of generating savings. European utilities are providing customers with an ever-expanding range of post-meter services: from energy audits, boiler replacement, thermal insulation, to solar panel installation.
4) Development of unconventional gas resources. The security of supplies and the reduction of energy dependence has always been considered a crucial issue. The recent gas crisis is yet another demonstration of this. The large European energy groups, for this reason, are developing unconventional gas resources which are found in large quantities even in countries, such as Poland or Ukraine, which are not Europe's historical suppliers. In 2011, the Observatory monitored 10 agreements for the development of these sources.
