Five Factors that will Shape the Future of European Utilities

Table of Contents

• DATAMONITOR VIEW
  • CATALYST
  • SUMMARY
  • METHODOLOGY
• ANALYSIS
  • M&A activity will compromise effective competition
    • Even in the absence of true synergistic savings, acquisition premiums will remain high
    • Governments will continue to create and protect national champions
    • The EU will struggle with a fundamental tension between protecting cross-border investment effective competition
    • At least 3 companies will move from regionally-focused competition to a genuinely pan-European playing-field
  • Wholesale price spikes will continue to squeeze retail margins
    • Security of supply concerns will drive wholesale prices ever upward
    • Retail prices will come under persistent pressure to rise
    • Former power incumbents are best placed to protect margin
  • July 1st 2007 will lead to tough EU sanctions
    • The EU Electricity Directive has five key components that should be reflected in national laws and regulations
    • The EU Gas Directive has three key components that should be reflected in national laws and regulations
    • Many countries will not properly adopt or enforce the national laws necessary to implement the EU Directives
    • Failed market opening in some jurisdictions will push compliance with EU Directives from the national to corporate level
  • The EU emissions trading scheme will fail to deliver
    • Phase one is being undermined by an excess of emissions credits
    • Low carbon prices are undermining initial phase of the ETS
    • Incoherent national policies look set to weaken the second phase
    • Europe's electricity markets will be left in limbo
    • The EU will struggle to meet its Kyoto target
    • The Netherlands will become Europe's most liquid gas market
    • UK gas trade will become increasingly spot-orientated
    • Dutch wholesale gas trading will emerge from Zeebrugge's shadow
    • Nascent regional hubs will begin to take off
• APPENDIX
  • Further reading
  • Ask the analyst