European Utilities: Wholesale price spikes will continue to squeeze retail margins

Table of Contents

• DATAMONITOR VIEW
  • PREDICTION
  • Rising wholesale gas and power prices continue to pressurise Europe's leading energy suppliers into further retail price hikes.
  • SUMMARY
  • Fundamental and sentimental market drivers continue to push wholesale gas and power prices to fresh record highs across Europe's key traded energy markets. While suppliers will adopt varying strategies to protect overall profitability, those with lowest structural exposure to wholesale markets will enjoy the highest retail margins.
  • METHODOLOGY
• ANALYSIS
  • Import dependence and oil indexation drive wholesale gas price gains
  • Environmental obligations and high input costs pull wholesale power higher
  • Gas tariffs will come under greatest wholesale pressure
  • Equity gas position is key to absorbing wholesale market strength
  • Generation prowess will determine Europe's winners and losers in the power market
  • Market impediments will distort the true impact of rising wholesale energy costs
• APPENDIX
  • Further reading
  • Ask the analyst
  • List of Figures
    • Figure 1: Wholesale oil and forward gas prices
    • Figure 2: Forward wholesale electricity prices
    • Figure 3: Wholesale gas prices as a % of retail gas tariffs, Q1 2006
    • Figure 4: Europe's key players: Wholesale gas market exposure
    • Figure 5: Europe's key players: Wholesale electricity market exposure
    • Figure 6: French wholesale versus retail power prices