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29 Jun 2020
How the industry views itself - June 2020 edition
RWE AG (RWE:WBO), 0 | E.ON SE (EOAN:WBO), 0 | VERBUND AG Class A (VER:WBO), 0 | Iberdrola SA (IBE:WBO), 0 | Severn Trent Plc (SVT:LON), 2,445 | ENGIE SA. (ENGI:WBO), 0 | Endesa S.A. (ELE:WBO), 0 | National Grid plc (NG:LON), 1,054 | United Utilities Group PLC (UU:LON), 1,032 | Centrica plc (CNA:LON), 132 | EDP-Energias de Portugal SA (EDP:FRA), 0 | Acciona SA (ANA:WBO), 0 | Naturgy Energy Group, S.A. (GAS:WBO), 0 | SSE plc (SSE:LON), 1,650 | Enel SpA (ENEL:WBO), 0 | Fortum Oyj (FORTUM:HEL), 0 | Veolia Environnement SA (VIE:WBO), 0 | Pennon Group Plc (PNN:LON), 656 | Snam S.p.A. (SRG:WBO), 0 | Enagas SA (ENG:WBO), 0 | Terna S.p.A. (TRN:WBO), 0 | Elia Group SA/NV (ELIA:WBO), 0 | Drax Group plc (DRX:LON), 519 | CEZ as (CEZ:PRA), 0 | Solaria Energia y Medio Ambiente, S.A. (AOR:FRA), 0 | EDP Renovaveis SA (EDW:FRA), 0 | Voltalia SA (0QW7:LON), 0 | Orsted (ORSTED:CSE), 0 | Redeia Corporacion SA (0RI5:LON), 0
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How the industry views itself - June 2020 edition
RWE AG (RWE:WBO), 0 | E.ON SE (EOAN:WBO), 0 | VERBUND AG Class A (VER:WBO), 0 | Iberdrola SA (IBE:WBO), 0 | Severn Trent Plc (SVT:LON), 2,445 | ENGIE SA. (ENGI:WBO), 0 | Endesa S.A. (ELE:WBO), 0 | National Grid plc (NG:LON), 1,054 | United Utilities Group PLC (UU:LON), 1,032 | Centrica plc (CNA:LON), 132 | EDP-Energias de Portugal SA (EDP:FRA), 0 | Acciona SA (ANA:WBO), 0 | Naturgy Energy Group, S.A. (GAS:WBO), 0 | SSE plc (SSE:LON), 1,650 | Enel SpA (ENEL:WBO), 0 | Fortum Oyj (FORTUM:HEL), 0 | Veolia Environnement SA (VIE:WBO), 0 | Pennon Group Plc (PNN:LON), 656 | Snam S.p.A. (SRG:WBO), 0 | Enagas SA (ENG:WBO), 0 | Terna S.p.A. (TRN:WBO), 0 | Elia Group SA/NV (ELIA:WBO), 0 | Drax Group plc (DRX:LON), 519 | CEZ as (CEZ:PRA), 0 | Solaria Energia y Medio Ambiente, S.A. (AOR:FRA), 0 | EDP Renovaveis SA (EDW:FRA), 0 | Voltalia SA (0QW7:LON), 0 | Orsted (ORSTED:CSE), 0 | Redeia Corporacion SA (0RI5:LON), 0
- Published:
29 Jun 2020 -
Author:
Sofia Savvantidou -
Pages:
11
15 questions - 6 months later
We asked European utilities 15 questions on the outlook for investments, growth, strategy and risks and compared the responses to those of the previous editions of our semi-annual survey.
More opportunities than risks
Although utilities remain vigilant around political intervention, the political risk is seen as roughly unchanged despite the pandemic and the recession. Indeed, utilities do not see possible follow-on COVID-19 waves as a major risk to their financial health, and in our open-ended question about the biggest surprise from the COVID-19 crisis, utilities focused on the fact that new investment opportunities have emerged.
Focus on investment
Organic and inorganic capex is where utilities seem to want to spend any excess cash flow. Network returns are seen more favourably than 6 months ago and so are broader returns on capex for the coming years. Most of this investment seems to be focused on Europe with the Green Deal seen as likely to materially accelerate and improve investment opportunities and returns. When looking at assets, perhaps contrary to equity investors'' expectations, electricity networks dominate preferences and offshore wind is losing ground to solar and onshore. Attitudes towards competition, especially in customer facing businesses, have somewhat improved. Views on the power market are pointing towards a tightening.
Exane BNPP thesis
Since Q4 ''18 the themes of Japanification, green capex and ESG investor flows have driven our positive stance on the sector. This survey confirms, in our view, these themes. Although market expectations are higher into the Q2 result season vs Q1, possibly creating more mixed near term share price moves, the medium-term outlook is strengthening and in our view that is not reflected in the sector''s valuation. We still view the energy transition facilitators as underappreciated compared to pure-play names, and that''s best expressed through the integrated...