Overview 1
Catalyst 1
Summary 1
analysis 2
This brief reviews the competitive strategies and financial performance of 15 leading utilities across Europe. 2
This brief reviews the competitive strategies and financial performance of 15 leading utilities across Europe. 2
Virtually all utilities saw their profitability fall in 2008 3
Fortum has been the most profitable utility for the last four out of five years 3
Overall profitability for the next five utilities did not vary much between 2007-08 4
Centrica and RWE are the only utilities to feature in the bottom five profitable utilities for four out of the last five years 5
Upstream and gas storage businesses have been considerably more profitable than other components of the energy value chain in 2007 and 2008 6
Centrica and Eni's upstream gas assets contributed significantly to utility profitability over 2007-08 8
The retail markets component of the energy value chain was the only component to post low contributions to overall utility profitability compared to overall utility revenue over 2007-08 10
RWE is the only utility to post significant profitability to revenue ratios in power generation over 2007-08 12
Centrica is a strong example of gas storage profitability 14
The lack of robust data from wholesale power trading makes it difficult to distinguish its profitability prospects 16
The distribution business was profitable overall, although there were mixed fortunes across utilities 18
Expansion via M&A activity proved to be more profitable than organic growth between 2006-08 20
Enel's acquisition of Endesa in 2007-08 considerably increased revenues and contributions to profitability 20
Iberdrola's acquisition of Scottish Power in 2007 increased its revenues, profitability, and access to the UK market 21
Over-exposure to one market or one segment of the energy value chain has been the least profitable strategy 22
Over-exposure to one market led to a substantial decrease in profitability for Centrica 22
Volatility in wholesale power prices led to BizzEnergy being taken into administration 23
National Grid was fined £41m in 2007 as a result of anti-competitive behavior 24
High market shares and the diversification of operations in several countries cannot sufficiently explain the differences in profitability between utilities 25
The most profitable utilities are not necessarily those that have high market shares in either the retail gas or power markets 25
Utilities in the top, middle and bottom profitability categories typically derive at least 50% of their revenues within their incumbent markets 27
The most profitable and least profitable utilities are geographically spread across both western and eastern Europe 29
APPENDIX 30
Ask the analyst 30
Datamonitor consulting 30
Disclaimer 30
List of Figures
Figure 1: Leading European utilities, in order of profitability in 2008 2
Figure 2: Top five utilities by profitability (2008), with five-year results 3
Figure 3: Mid-table utilities by profitability (2008), with five-year results 4
Figure 4: Bottom five utilities by profitability (2008), with five-year results 5
Figure 5: Revenue vs Profitability for Individual Business Units (2007-2008) 6
Figure 6: Profitability Scale for Individual Business Units (2007 - 2008) 7
Figure 7: Upstream Gas - Revenue vs Profitability (2007-2008) 8
Figure 8: Profitability Scale for Upstream Gas (2007 - 2008) 9
Figure 9: Retail Markets - Revenue vs Profitability (2007-2008) 10
Figure 10: Profitability Scale for Retail Markets (2007 - 2008) 11
Figure 11: Power Generation - Revenue vs Profitability (2007-2008) 12
Figure 12: Profitability Scale for Power Generation (2007 - 2008) 13
Figure 13: Gas Storage - Revenue vs Profitability (2007-2008) 14
Figure 14: Profitability Scale for Gas Storage (2007 - 2008) 15
Figure 15: Wholesale Power Trading - Revenue vs Profitability (2007-2008) 16
Figure 16: Profitability Scale for Wholesale Power Trading (2007 - 2008) 17
Figure 17: Distribution - Revenue vs Profitability (2007-2008) 18
Figure 18: Profitability Scale for Distribution (2007 - 2008) 19
Figure 19: M & A Case Study 1 - Enel acquires Endesa 20
Figure 20: M & A case study 2 - Iberdrola acquires Scottish Power 21
Figure 21: Centrica's over-exposure to UK retail market 22
Figure 22: BizzEnergy taken into administration 23
Figure 23: National Grid fined £41m in 2007 24
Figure 24: Power Demand Retail Market Share (2008) 25
Figure 25: Gas Demand Retail Market Share (2008) 25
Figure 26: Top Performing Utilities Revenue Breakdown 27
Figure 27: Middle Performing Utilities Revenue Breakdown 27
Figure 28: Lower Performing Utilities Revenue Breakdown 28
Figure 29: Location of Utilities and associated profitabilities (2008) 29
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