Standard content for Members only
To continue reading this article, please login to your Utility Week account, Start 14 day trial or Become a member.
If your organisation already has a corporate membership and you haven’t activated it simply follow the register link below. Check here.
What turns a struggling energy behemoth into a beautiful butterfly? The need for metamorphosis among the market’s established players has never been clearer as this week we see the eye-watering impact of deteriorating market conditions on the bottom line. Take RWE – a €2.1 billion writedown on its conventional generation assets and a suspension of the dividend were announced this week. At Centrica, 2015 adjusted operating profit was down 12 per cent at group level, and E&P and power assets were written down by nearly £2 billion. At Drax, pre-tax profit plummeted 64 per cent.
Money talks, and it doesn’t take the Competition and Markets Authority probe to tell these companies that life as they know it is over. As we report this week, Centrica is well on its way to achieving its billion-pound strategy overhaul, while RWE is preparing to reveal details of a “comprehensive restructure” of Npower’s supply business and its global operations in traditional generation early next month. Drax’s conversion to biomass is, of course, well advanced.
The change will be painful. Centrica has already shed 2,000 jobs, with a further 1,000 to go this year and 3,000 more by the end of the decade. Job cuts seem likely at Npower too, as the promised restructure is designed to cut costs by €2.5 billion at group level by 2018. Specialised players are set to benefit, with companies such as the Czech utility EPH snapping up traditional assets at a low price from established players seeking to get them off their books. On the retail side, fleet-of-foot independents continue to benefit as switching rates rise.
In splitting out their businesses into traditional generators and energy services with renewables and grid operations, the big players will be hoping to benefit from just such specialisation. Not all will succeed. Hamstrung by their legacies, their brands, and their sheer scale, some energy players will doubtless be unable to achieve the necessary transformation in time. For those that do, a very different future beckons.
• Calls for a government strategy for carbon capture and storage have become deafening. As we report this week, shadow energy minister Alan Whitehead and Matthew Bell, chief executive of the Committee for Climate Change, are the latest figures to point out (news p13 and interview p8) the glaring gap in policy after the eleventh-hour cancellation of the competition to develop the new technology last year. How much longer can government hold out?
Please login or Register to leave a comment.