European Utilities Key Players and Strategies - Scottish Power

Table of Contents

• CHAPTER 1 INTRODUCTION
  • Utility competition is starting to transcend national borders, but a single EU market place remains distant
  • Larger utilities need to find a suitable geographical arena in which to pursue their ambitions
  • The emergence of pan-European suppliers is an ideal for now, the reality is the emergence of geographic competitive arenas
• CHAPTER 2 DATAMONITORS EUROPEAN UTILITY SCORECARD
  • E.ON leads the Datamonitor European Utility Ranking, ScottishPower ranks eighth out of the 12 companies benchmarked
  • ScottishPowers financial strength push up its score on Datamonitors European Utility Scorecard, to 37* out of 100
  • ScottishPower is concentrated in only the NWE European competitive arenas
  • ScottishPower is active in only 1 of the 5 competitive arenas, but spans supply and demand assets
  • ScottishPower does not break into the top twelve suppliers of end user volumes for power and gas across 32 European markets*
• CHAPTER 3 POWER SUPPLY VOLUMES AND MARKET SHARES
  • ScottishPower has not entered the rest of Europe for power sales, remaining UK focused, with sales across MEU, SME and RES supply
  • ScottishPower has a 0.8%* market share for power volume sales across the EU 32 markets
  • ScottishPowers geographic spread of power volumes is limited to only the NWE competitive arena
  • ScottishPower has no power volumes across the Nordic region, a region dominated by Vattenfall, E.ON and Nordic regional suppliers
  • ScottishPowers power volume across the NWE arena totals 61TWh, the sixth biggest player in the region, with volumes sales all in the UK
  • ScottishPower has no power volumes across the CEE region, where CEZ, E.ON and RWE are the leading suppliers
  • ScottishPower has no significant power volumes sales across the WMed region, a region dominated by incumbents, i.e. EDF and Enel
  • ScottishPower is only active in the UK market, its RES and I&C weighting finds a 39% to 61% split
  • ScottishPower has market share in one leading competitive market, the UK, as assessed by Datamonitors MCI rating
  • ScottishPowers power supply revenues total €3,869m, with 71% of this contribution made from supplying RES customers
• CHAPTER 4 GAS SUPPLY VOLUMES AND MARKET SHARES
  • ScottishPower focus remains the UK and thus active only in the NWE markets, and only prominent volumes from SME and RES supply
  • ScottishPower has a 0.4%* market share across the EU 32 markets for end user gas supply volumes
  • ScottishPowers geographic spread of gas volume matches that of its power spread, thus only active in the NWE competitive arena
  • ScottishPower has no gas volumes sales across the Nordic region, a market that is still immature, with only E.ON and oil majors active
  • ScottishPower gas volume across the NWE region totals 30TWh, with 92% of the volumes sold into its RES customer base
  • ScottishPower has no gas volume across the CEE region, this region is dominated by Russia and therefore Gazprom
  • ScottishPower has no gas volumes across the WMed region, an arena dominated by national players, from GDF, Eni and Gas Natural
  • ScottishPower is only active in its home market of the UK, where its RES to I&C split is 92% to 8%
  • ScottishPower has market share in the leading competitive gas market, that of the UK, as assessed by Datamonitors MCI rating
  • ScottishPowers gas supply revenues total €830m, all from the UK and the RES and SME sectors
• CHAPTER 5 GENERATION CAPACITY AND MARKET SHARE
  • ScottishPower has remained focused on the UK, with a respectable market share, having entered the US ( now pulled out) for growth
  • ScottishPower ranks as the ninth largest European generator across Europe, with just under 6GW of capacity
  • ScottishPowers geographic power plant spread is located all in the NWE competitive arena
  • ScottishPowers has no power plant assets across Nordic region, a region dominated by Vattenfall, E.ON, Fortum and Statkraft
  • ScottishPowers plant capacity across the NWE region totals 5.6GW, all located with in the UK with a coal and gas weighted fuel mix
  • ScottishPower has no power plant assets in the CEE region, a region dominated by CEZ, with EDF, Electrabel, Vattenfall and RWE active
  • ScottishPower has no power plant assets across WMed region, a region dominated by EDF in France, Enel in Italy and Endesa in Spain
  • SPower has a 0.6% and 0.1% market share of total and renewables generation capacity across the EU 32 markets respectively
  • ScottishPowers fuel mix is weighted towards the thermal fuels of coal and gas, evident from its deviation from the EU 32 fuel mix
  • ScottishPower has only UK generation assets, with less than a 10% share of the UK power generation market
  • ScottishPowers generation output totals 27TWh, driven by its UK thermal fuel mix
• CHAPTER 6 STRUCTURAL HEDGE - POWER
  • Datamonitor uses generation and supply market shares to determine if companies are generally long or short in power
  • ScottishPower is well balanced in its NTR*, 6.0TWh, European suppliers tend to be long by over 30TWh
  • Expressing the NTR as a percentage, ScottishPower additional 6.0TWh makes the company long by 29%
  • ScottishPower NTR* is structurally long by 6TWh, being active only in the UK, part of the NWE arena
  • Currently energy companies with higher market share are structurally long and profitable
• CHAPTER 7 STRUCTURAL HEDGE - GAS
  • European utilities gas equity and gas supply market shares determine if these companies are generally long or short in gas
  • ScottishPower is short in its NTR* gas position, at 30.4TWh, where the trend for the leading energy companies remains being significantly short
  • A handful of energy companies other than the oil and gas majors have equity gas, ScottishPower has none, unlike Centrica, GDF, RWE and E.ON
• CHAPTER 8 BASE FINANCIALS OVERVIEW
  • ScottishPowers financial strength has been affected by its US activities, these are now being divested and the company has become an attractive bid target
  • ScottishPowers revenues in 2004 exceeded €10bn, but was the only leading player recording net losses, of €1.0bn
  • Over the last five years ScottishPower revenues and earnings have fallen and risen, driven primarily by its US activities
  • ScottishPowers PE ratio is well above the sector range, driven by bid speculation on a possible takeover by E.ON or SSE
  • ScottishPowers gearing is 1.3x earnings, having leveraged itself to finance the acquisition of Pacificorp in the US
  • ScottishPowers free cash flow amounts to €1.5bn, credible among its peers, but half the sum that EDF, E.ON and Endesa have available
• CHAPTER 9 APPENDIX
  • Understanding Datamonitors European Utility Scorecard rating, focusing on competitive sectors of generation, equity gas and retail volumes
  • Scoring methodology
  • Scorecard rating component breakdowns and scoring metrics and measures
  • Data methodology
  • The MCI Index shows how attractive a particular market is to new entrants in terms of the competitive environment
  • The MCI Index is calculated by deriving a weighted average of scores over 9 key metrics
  • Glossary of terms
  • Future readings
  • SPP writing team
  • How to contact experts in your industry
  • List of Tables
    • Table 1: Datamonitors European Utility Scores and ranking for the 12 benchmarked companies
    • Table 2: ScottishPower Competitive Arenas matrix, 2005
    • Table 3: Scoring rating matrix for Datamonitors European Utility Scorecard
  • List of Figures
    • Figure 1: 32 European markets divided into 5 regional competitive arenas
    • Figure 2: ScottishPowers Datamonitor European Utility Scorecard, 2005
    • Figure 3: Companies matrix by value chain focus and competitive arena, 2005
    • Figure 4: Top twelve power and gas supply volume market shares across 32 European markets, 2005
    • Figure 5: Leading players power supply volumes (GWh) market share across EU 32 markets, 2005
    • Figure 6: Weighting between I&C and residential power volumes for the key players across EU 32 markets, 2005
    • Figure 7: Power volumes supplied across the EU32 markets by sector and competitive arena, 2005
    • Figure 8: Power volumes supplied in the Nordic competitive arena by company, 2005
    • Figure 9: Power volumes supplied in the NWE competitive arena by company, 2005
    • Figure 10: Power volumes supplied in the CEE competitive arena by company, 2005
    • Figure 11: Power volumes supplied in the WMed competitive arena by company, 2005
    • Figure 12: ScottishPowers power supply volumes (GWh) I&C vs RES breakdown, 2005
    • Figure 13: Scores and geographical distribution of 13 power markets assessed by Datamonitors MCI Index rating, 2005
    • Figure 14: Map representing ScottishPowers size and the geographical distribution of its power market share across EU 32 markets, 2005
    • Figure 15: ScottishPowers power supply volumes revenue breakdown, by sector, 2005
    • Figure 16: ScottishPowers power supply volumes revenue breakdown, by competitive arena, 2005
    • Figure 17: Leading players gas supply volumes (GWh) market share across EU 32 markets, 2005
    • Figure 18: Weighting between I&C and residential gas volumes for the key players across EU 32 markets, 2005
    • Figure 19: Gas volumes supplied across the EU 32 markets by sector and competitive arena, 2005
    • Figure 20: Gas volumes supplied in the Nordic competitive arena by company, 2005
    • Figure 21: Gas volumes supplied in the NWE competitive arena by company, 2005
    • Figure 22: Gas volumes supplied in the CEE competitive arena by company, 2005
    • Figure 23: Gas volumes supplied in the WMed competitive arena by company, 2005
    • Figure 24: ScottishPowers gas supply volumes (GWh) I&C vs RES breakdown, 2005
    • Figure 25: Scores and geographical distribution of 13 gas markets assessed by Datamonitors MCI Index rating, 2005
    • Figure 26: Map representing ScottishPowers size and the geographical distribution of its gas market share across EU 32 markets, 2005
    • Figure 27: ScottishPowers gas supply volumes revenue breakdown, by sector, 2005
    • Figure 28: ScottishPowers gas supply volumes revenue breakdown, by competitive arena, 2005
    • Figure 29: Generation capacity (MW) for 12 leading European energy companies across 32 European markets, broken down by fuel type, 2005
    • Figure 30: Generation capacity (MW) across the EU32 markets by sector and competitive arena, 2005
    • Figure 31: Generation capacity (MW) across the Nordic competitive arena by company, 2005
    • Figure 32: Generation capacity (MW) across the NWE competitive arena by company, 2005
    • Figure 33: Generation capacity (MW) across the CEE competitive arena by company, 2005
    • Figure 34: Generation capacity (MW) across the WMed competitive arena by company, 2005
    • Figure 35: SPowers generation capacity (MW) market share across 32 European markets, 2005
    • Figure 36: SPowers renewable capacity (MW) market share across 32 European markets, 2005
    • Figure 37: ScottishPowers generation fuel mix across its European asset base, 2005
    • Figure 38: ScottishPowers generation fuel mix across its European asset base against EU 32 market proportions, 2005
    • Figure 39: ScottishPower owned generation capacity (MW) breakdown by country, 2005
    • Figure 40: ScottishPower generation capacity (MW) market share in each European country, 2005
    • Figure 41: ScottishPowers generation output by fuel type, 2005
    • Figure 42: ScottishPowers generation output breakdown, by competitive arena, 2005
    • Figure 43: Estimated absolute Net Trade Requirements (NTR)* for power, for the benchmarked 12 players, 2005
    • Figure 44: Estimated percentage Net Trade Requirements (NTR)* for power, for the benchmarked 12 players, 2005
    • Figure 45: ScottishPowers Power NTR position across the European markets it is active in
    • Figure 46: Operating income vs. NTR position for 12 benchmarked players, 2004/2005
    • Figure 47: Estimated absolute Net Trade Requirements (NTR)* for gas, for the 12 benchmarked players, 2005
    • Figure 48: Estimated percentage Net Trade Requirements (NTR)* for gas, for the 12 benchmarked players, 2005
    • Figure 49: Revenue and net income for 12 energy companies benchmarked, 2004
    • Figure 50: ScottishPowers revenue and net income 5 year summary, 2000 - 2004
    • Figure 51: PE ratio for listed companies, for the 12 companies benchmarked, 2004*
    • Figure 52: Debt/Equity ratio for 12 benchmarked companies, 2004
    • Figure 53: Free Cash Flow for the 12 benchmarked companies, 2004
    • Figure 54: Understanding Datamonitors European Utility Scorecard
    • Figure 55: Datamonitors MCI Index scale for market assessment
    • Figure 56: The MCI Index is calculated by deriving a weighted average of scores over 9 key metrics