Company Graphics: The Future of State-owned Utilities

Table of Contents

• CATALYST
• SUMMARY
• ANALYSIS
  • State energy incumbents are similar except in the degree of state ownership
    • The sample of utilities are taken from Datamonitor' s Key Player data
    • The level of state ownership in energy utilities is varied
    • Without exception, the state-owned utilities are all vertically integrated
    • State-owned utilities are mainly focused on power generation and sales
    • State-owned utilities dominate in nuclear generation, but lag in renewable and gas capacity
  • State-owned utilities are dominant in their domestic markets
    • Power focused state-owned utilities dominate their domestic markets
    • Gas focused state-owned utilities dominate their domestic markets
    • Energy volume growth generates extremely high income growth in state-owned utilities
    • State-owned utilities post above average profit margins and energy volume returns
  • In order to weather liberalisation, business inefficiencies need to be reduced
    • The high income growth of state utilities does not generate high cash flow growth
    • Employee efficiency is on average higher in privately owned utilities
    • As domestic competition intensifies, state incumbents will lose power market share
    • As domestic competition intensifies, state incumbents will lose gas market share
  • State-owned utilities' home advantage can be a springboard to enhancing their competitive position
    • State-owned utilities are on average less leveraged than their privately-owned counterparts
    • Private utilities are more exposed to changes in wholesale power markets
    • Both state-owned and privately-owned utilities are highly exposed to wholesale gas markets
  • State-owned utilities are adapting to changing energy market conditions to become more competitive in the longer term
    • As liberalisation gains momentum and competition intensifies, merger and acquisition activity will increase substantially
    • State-owned utilities must navigate both regulatory and political risk
    • State-owned utilities will be pressured to increase the share of renewable energy in their product portfolios
    • The rate of divesture from state-owned utilities will increase
• APPENDIX
  • Definitions
  • Further Reading
  • Ask the Analyst
  • List of Figures
    • Figure 1: European leading utilities key players
    • Figure 2: The level of state ownership in energy utilities is varied
    • Figure 3: State-owned utilities are all vertically integrated (bundled), controlling distribution and transportation/transmission networks
    • Figure 4: State-owned utilities are mainly focused on power generation and sales
    • Figure 5: 2005 Generation capacity - MW
    • Figure 6: 2005 Power market share and national consumption
    • Figure 7: 2005 Gas market share and national consumption
    • Figure 8: 2004-2005 Energy volume and net income growth
    • Figure 9: 2005 Operating power margin and return on energy volumes
    • Figure 10: 2004-2005 Net income and operating cash flow growth
    • Figure 11: Employee efficiency measured by operating profits
    • Figure 12: July 2008 Power switching rates
    • Figure 13: July 2008 Gas switching rates
    • Figure 14: 2005 Debt leverage
    • Figure 15: 2005 Power net trade requirement as a proportion of overall power volume
    • Figure 16: 2005 Gas net trade requirement as a proportion of overall gas volume