Utility industry’s future gets vote of confidence

The utility industry is well positioned to withstand political and financial shocks. That is according to a new report from S&P Global Ratings, which says utilities are likely to be kept […]

The utility industry is well positioned to withstand political and financial shocks.

That is according to a new report from S&P Global Ratings, which says utilities are likely to be kept stable through the current period of global uncertainty due to supportive regulations, slow but steady demand and aggressive capital spending.

The vital nature of the products and services they sell means the industry is unlikely to see much overspill from the unsettled state of the world economy.

Changing political trends in historically stable regions like Europe and the US may have far-reaching effects on utilities over time but the report predicts little immediate influence from those factors in 2017.

It expects revenue growth to be modest in most regions, in keeping with slow demand growth where the utility industries are mature.

Growth is likely to be higher in developing countries and regions where utility services have not fully penetrated the market.

Profit margins are generally forecast to improve slightly as favourable operating conditions and fuel cost trends continue.

The report projects solid regulatory support will maintain earnings and cash flow, with the occasional exception due to specific political or policy issues at the local level.

Sales growth for most utilities is closely tied to the economy in which they operate, which can vary considerably from case to case – capital spending will continue to be elevated in most areas thanks to substantial requirements of new infrastructure.

Despite predictions of general stability there is still some risk, as carbon concerns and other environmental considerations lead utilities to change the mix of fuel sources away from ‘tried and tested’ fossil fuels.

The forecast also suggests a need for greater attention to cybersecurity issues as utilities react to technological advances and modernise power grids.

The global value of deals made among power and utilities firms fell by 4% last year.

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