The COVID-19 outbreak has illuminated the global power and utility industry’s resilience and presented unique opportunities to fast forward renewables

While the effect of COVID-19 was immediately felt in the first quarter, the deeper repercussions were felt in the second quarter of 2020. Revenues and EBITDA of top 20 P&U European companies fell by ~18 percent and ~14 percent in 2Q20 from 1Q20, on an average. While some metrics like Net Debt/EBITDA increased indicating an increase in the debt position, others like capex declined. Despite the lackluster second quarter, the European P&U industry has witnessed good recovery in the third quarter of 2020. Electricity prices rose as Europe emerged from the impact of the first wave of COVID-19. Input prices also witnessed a steady recovery from the lows of last quarter. And while clean spark and dark spreads witnessed slight declines, the EUROSTOXX utilities index was up on an average.

This recovery was supported by easing restrictions on travel and businesses resuming operations after the coronavirus-imposed lockdown. The COVID-19 pandemic not only accelerated the investments in green initiatives, and drafting of decarbonization plans, but also augmented European utilities’ digital drive.

While it may be too early to surmise how the 3Q20 performance of these companies might be – as by the time this report is getting published 3Q20 results are not out yet - early indications and forecasts from analyst reports don’t paint a negative picture. In fact, the M&A activity in the industry has increased in 3Q, with companies focusing on expanding their renewables portfolio, increasing geographic footprint, achieving net zero goals and acquiring waste-to-energy projects. However, recent increases in COVID-19 cases in few countries have led to renewed government-imposed restrictions that may lead to downward revisions in some of the key metrics as well as electricity prices in major European markets.

It is expected that the rest of 2020 might witness a partial recovery for most P&U players in Europe as price hedges are in place and companies which have a heavy renewables presence will likely recover faster. Also, with the Green Deal and other similar stimulus measures from the European governments, it is likely that the COVID-19 pandemic will succeed in accelerating the pace of energy transition & decarbonization as well as digital transformation, with European P&U players at the center of it.

This ongoing report on the European power and utilities sector is released at the end of each quarter and offers a single-source summary of the following pressing industry topics:

  1. Prices and margins
  2. Regulatory developments
  3. Financial performance
  4. M&A activity
  5. Outlook

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