Europe sees energy firms as “cash cows”

European governments view utilities as “cash cows” despite extra pressure on them because of the economic crisis, it was claimed yesterday. According to a report by consultants Capgemini, energy firms […]

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By Vicky Ellis

European governments view utilities as “cash cows” despite extra pressure on them because of the economic crisis, it was claimed yesterday.

According to a report by consultants Capgemini, energy firms are feeling “pressure” from governments and regulators which has a knock-on effect on their earnings and stock performance.

The consultancy warns extra government pressure could be jeopardising not only future profitability but also much-needed investment in energy infrastructure. Some figures suggest an extra €1 trillion is needed over the next decade.

The 14th European Energy Market Observatory (EEMO) report lists several problems faced by utilities. Backtracking from nuclear power in several countries in the wake of Japan’s Fukushima accident is one issue, notes the report, as well as new taxes. Volatile prices and stagnating energy use after the financial crisis in the EU and the USA are also issues.

Another “even greater burden” on utilities is an EU ‘compromise text’ in place from 2014, which will penalise them if their customers do not hit certain energy savings targets, states the report.

This sort of law and other political activity suggests utilities are seen as an “as an easy source of revenue” despite their dropping stock performance compared to MSCI Europe and a drop in price earnings ratio, claim researchers.

Colette Lewiner, Energy and Utilities Advisor to Capgemini’s Chairman said: “Governments should be careful not to kill the goose that lays the golden egg, especially as large Utilities are currently divesting from Europe. Undermining utilities’ attempts to make much-needed investment in energy infrastructure could be costly once the economy rebounds and demand for electricity and gas increases again.”

The research is supported by French investment firm Exane BNP Paribas, fellow French law firm CMS Bureau Francis Lefebvre and experts in customer behaviour VaasaETT Global Energy Think Tank.