Utilities facing massive investment needs

Worldwide, electric and gas utilities face an investment need of some $12.7 trillion between 2005 and 2030 to meet growing energy infrastructure and capacity needs, according to some analysts. The challenge: poor or confusing regulatory schemes make investors hesitant, according to the consultancy PricewaterhouseCoopers (PwC). For example, in Europe, emerging markets in the newest European Union member states sometimes clash with EU directives.

Electric utilities

Source: Platts

In the 36 countries examined by PwC, the consultancy concluded that poor regulation is deterring needed investment and subsequently threatening supply security. "A policy framework for investment needs to be defined," said Manfred Wiegand, PwC partner. "In Germany alone, the shortfall will be 28% of supply."

Two-thirds of European utilities surveyed by PwC said they expect a nuclear revival in the region as EU mechanisms to meet climate change targets begin to take effect. And with electricity generation in Europe predicted to increase at an average annual rate of 1.3% through 2030, PwC said the benefit of a 10-year shift to cleaner fuel sources "is likely to be dwarfed by the growth in overall emissions."

Nevertheless, 83% of European utility companies are looking at investing in Europe—especially eastern and southeastern Europe and in some former Soviet Union countries—close to existing operations. Europe has joined Asia-Pacific as one of the most attractive markets. "Regionalization is replacing globalization as the dominant paradigm guiding utility company strategic moves," PwC's report said. "It's easier to recognize synergies within existing business," Wiegand explained.

Transmission and pipeline assets are well regarded. Germany's E.ON was cited as the most attractive company for investment, followed closely by France's Suez, Italy's Enel, and the UK's National Grid Transco, PwC found.

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.