Related Expertise:电力和公用事业,Value Creation Strategy and Shareholder Activism Defense
Power and utility (P&U) players, like companies in other sectors, are struggling to make sense of a post-COVID-19 world. Lockdowns worldwide have reduced power consumption, impacting the companies that produce and supply it. The deeper the pandemic-induced recession and the longer the economic recovery, the greater the effect on the sector.
P&U球员风化之前类似的冲击。And they have responded by changing their business models, embracing new technologies to cut costs, and expanding into additional market areas.
Crises have a way of creating or accelerating transformational change. When the COVID-19 pandemic hit, the industry was in the midst of a fundamental shift away from centralized conventional generation and toward a more distributed and digital era. Regardless of how quickly the world recovers from the pandemic, we expect the crisis to accelerate this trend. Companies that reach scale in a decarbonizing world, adopt new data-driven solutions, prioritize best-in-class cost reduction programs and cash management, and identify new pockets of value will emerge as value creation leaders in the coming decade.
在本报告中，我们分析了领先的欧洲和北美P＆U公司在199年前期间确定创建关键价值的驱动因素的历史表演。然后，我们研究了Covid-19对该行业的影响，以了解公司应如何调整其在新大流行现实中繁荣的策略。
在过去的十年中，世界上的P＆U公司遇到了重大挑战。总体需求是平坦的，批发电力价格较弱，但是技术进步和迅速下降的成本使可再生能源具有很高的竞争力，从而促使人们广泛向风和太阳能转移。同时，美国的页岩革命创造了大量廉价的天然气，降低了P＆U Players的发电成本，但也降低了批发价格。
Against the backdrop of healthy global stock markets, European and North American P&U companies delivered a median annual TSR (share price appreciation plus dividends) of 10.5% for the five years from January 1, 2015, to December 31, 2019, placing the sector in the middle of the 33 industries analyzed inBCG’s 2020 Value Creators Rankings。(See the sidebar “The Components of TSR.”)
Investors were attracted by new energy opportunities in solar and wind but also by the sector’s appeal as a relatively safe investment due to market regulation. As a result of these qualities, P&U companies had the second-narrowest spread in TSR results among all sectors, after telecommunications. (See Exhibit 1.)
Nevertheless, all players grappled with the question of how to respond to thesector’s transition toward renewable energy and distributed power generation。TSR leaders grew their renewables portfolios, built new businesses, and added new digital capabilities, although these weren’t the only actions that set them apart.
Our research included a survey of 53 P&U companies. (See the sidebar “Companies in Our Sample.”) We examined the companies’ TSR performance through four lenses: region, business model, leaders and laggards, and value drivers.
地区
North American P&U players generally outperformed their European counterparts, delivering a median annual TSR over our five-year period of 11% versus 6% in Europe. However, the range of results in Europe was wider, indicating that the region faced greater exposure to unregulated and more volatile businesses than did North America.
在这两个地区，平坦的需求导致此期间的销售增长疲软或负面增长。但是在北美，玩家摆脱了风险，有竞争力的一代，进入受监管的企业，提高了EBITDA利润率和估值倍数。积极推动行业合并和提高运营效率也有助于加强这两者。相比之下，到目前为止，股息支出是欧洲TSR表现的最大贡献者，在那里利润和倍数的变化只有很小的影响。
Business Model
Exposure to regulated markets contributed significantly to TSR success during our study period. Grid companies and fully regulated integrated utilities were the best-performing segments, with median TSRs of 11.5% and 11.7%, respectively, and no negative results. Semiregulated integrated utilities performed slightly worse, at 10.2%, but they also contained both the best and the worst TSR performers in our sample. The difference in results was due to the utilities’ expansion into potentially more lucrative—but also riskier and less regulated—areas such as renewable power generation and energy storage.
尽管在所有P＆U领域中，估值倍数和现金流量贡献都很重要，但不同的杠杆驱动了不同细分市场的TSR性能。
Grid Companies.Transmission and distribution players took advantage of low interest rates to invest in their networks to meet regulatory demands for increased integration of renewables, greater reliability, or improved interregional grid connections. As a result of hikes in customer bills to pay for these investments, grid companies were the only segment whose revenues grew during the period.
完全监管的集成公用事业。利润率和估值倍数的提高对完全集成的实用程序的TSR性能更大，而不是其他任何细分市场的TSR。像电网公司一样，该集团从投资者对弹性，受监管的企业的需求中受益。同时，用资本支出代替运营和维护费用可能会提高该细分市场的中位数。通过投资其发电资产（例如，通过更换新的低或零维护可再生能力的老化热电厂以及分销网络，完全监管的玩家能够提高利润率，超过了其利润率all other segments while keeping revenues (and their customers’ bills) flat.
半管制的集成公用事业。由于某些公司向可再生生成的重大行动，该部门的TSR绩效改善了，这使成本下降和支持性政府激励措施的收益获得了收益。一般而言，半受调制的集成公用事业公司通过高额的股息支出奖励了投资者。现金流量贡献是整个细分市场TSR的主要驱动力。
Leaders and Laggards
Strong yet profitable sales growth and changes in valuation multiples were key factors distinguishing leaders from laggards, although dividend payouts were an important driver of good TSR performance across our company sample. (See Exhibit 2.) And even though grid companies were the only segment to increase sales as a whole, individual players in other segments grew sales too—and some achieved double-digit growth.
Overall, top-quartile companies increased sales by a median of 3.6% per year over the five-year study period. Median valuation multiples for this group increased by 6.2% per year, as investors gained greater confidence in their prospects. The magnitude of the multiple uplift is noteworthy because it corresponds to a 35% uplift of the EV/EBITDA multiple over five years. Investors had to significantly reassess a company’s outlook in terms of either the sustainability or the growth of its business model. In contrast, sales and valuation multiples at bottom-quartile companies contracted.
Value Drivers
当我们检查创造股东价值的主要驱动因素时，我们发现了几个重要趋势，这些趋势广泛适用于P＆U行业的公司。
保持强烈的国内重点。北美和欧洲的球员专注于他们的大陆房屋市场，并回避了国际扩张的进一步扩张，提高了其估值的多重和利润率，相对于具有更多国际取向的公司而言。少数国内或大陆焦点的欧洲球员的TSR中位数比国际志趣相投的欧洲公司高10.5个百分点，而北美球员之间的相应差异为2个百分点。随后在大流行期间，P＆U公司的表现扩大了这一发现，因为投资者对新兴市场的曝光率更高，对球员进行了惩罚。许多公司缺乏本地市场知识，例如对客户偏好或有效监管管理的见解，这对于成功的国际扩张至关重要。
投注可再生能源。投资可再生能源并成功采用新技术的玩家优于那些高度接触常规发电的技术。(See the sidebar “How the Sector’s TSR Leaders Rose to the Top.”)
Faster-than-expected growth in solar and wind installations—together with cost reductions, government subsidies, and the positive impact of rising prices for carbon emissions allowances on green energy sources—helped renewable players. Owing to scale effects, the greater the share of renewables in a company’s power generation portfolio, the bigger the boost to TSR performance. (See Exhibit 3.) The outstanding performance of renewables-focused utilities was visible across the entire sector. Companies such as Denmark’s Ørsted, whose shares have traded publicly only since mid-2016, significantly increased their market valuations in recent years (and would have ended up high in our ranking if they had been around long enough to have recorded five years’ worth of TSR data). However, we found that renewable ownership was highly concentrated. Just ten companies—nearly all of them European—accounted for more than three quarters of the sample’s renewable capacity.
慷慨的股息产量。For all P&U players, generous dividend yields were a relatively important value driver. While companies in other sectors typically paid dividend yields of 2% to 3%, the companies in our sample consistently offered yields of 4% to 5%, thanks to the predictable nature of their cash flows. (See Exhibit 4.) Combined with a lower risk profile due to regulation, this attracted investors seeking to reduce risk and position their portfolios more defensively.
Our analysis suggests that TSR leaders tend to operate in regulated markets where cash flows are stable and resilient. They have avoided risks arising from international expansion. They have expanded into renewables businesses. And they provide an attractive dividend play. We expect many of these factors to continue to be differentiators in a post-COVID-19 world, but players will also need to address the question of where to find future growth opportunities and tap new value creation sources. We investigate this question in more detail in the section “What Does the Future Hold?”
The lockdown measures introduced in response to the COVID-19 pandemic inevitably curbed the demand for power. In particular, industrial and commercial companies needed less energy, as they shuttered factories and offices and as people worked from home. The short-term impact of the crisis on P&U TSR was broadly in line with that on global stock markets. Following adoption of a wave of containment measures worldwide in mid-March 2020, the MSCI World Index (a global index covering multiple industries) hit its low point for the year on March 23, with the index’s constituent companies delivering median TSR of –30% from the start of the year. On the same day, the TSR for our P&U sample was –27% over the same period. The subsequent recovery was similar for the global stock market index and for our P&U sample. As a result, the index’s TSR from the beginning of 2020 to July 15 was –1%, while for the P&U companies in our sample it was –5%.
P&U players on both sides of the Atlantic experienced similar challenges—and a similarly steep decline in median TSR performance—due to national lockdowns. (See Exhibit 5.) In both regions, companies grappled with a drop in consumption, an increase in bad debts, and supply chain frictions. And in both, containment measures hit some business areas harder than others. For example, theprofitability of P&U companies’ commercial and industrial retail businesses has come under serious threatas sharply reduced consumption left many players with excess power. Despite collapsing wholesale spot prices, some companies had to sell the surplus power back to the market, realizing significant losses and eroding years of profits in just a few months. On the flip side, sharply lower commodity prices reduced players’ power generation costs.
为了应对危机而引入的监管行动对两个地区的P＆U参与者产生了类似的影响。这些措施包括允许客户推迟公用事业付款或禁止断开连接，将继续影响P＆U公司的前进，增加对公司的压力，以更好地管理其成本和流动性职位，并更有效地管理其与监管机构的关系。
From late March through mid-July, the TSR performance of European P&U players recovered steadily. As a result, the median TSR for these companies from January 1 to July 15 was 3%. The median TSR for North American P&U companies has been more volatile, however, and the impact of COVID-19 on the region’s economy remains more uncertain.
In general, P&U companies were better positioned to weather the effects of the pandemic than other sectors because they entered the crisis with a robust level of liquidity. Nearly all of the companies in our sample had a Standard & Poor’s investment grade rating of BBB– or better. What’s more, as of May, the median current ratio for companies’ last reported 12 months was 1.3, indicating that companies had enough current assets on their balance sheets to meet short-term liabilities without having to borrow. Even so, some leading companies took steps to increase their focus and resilience—and, as a result, the crisis affected them less severely than it did their peers. (See the sidebar “Creating Resilience from a Transformational Deal.”)
Interviews conducted with investors during the second quarter of 2020 underscore our quantitative findings. Investors favored European P&U players that confirmed their short-term earnings guidance and dividend payout and showed signs of having greater resilience to the crisis in their business portfolio and geographic exposure. On the flip side, players that revised earnings and dividend guidance, or faced greater scrutiny of their cash flows due to higher international exposure and lower protection from regulations or long-term contracts, were less appealing to investors and so performed worse in the short term. Investors will probably continue to view stable cash flows as an important differentiator in the medium to long term.
P&U players face multiple challenges arising from the COVID-19 pandemic, including weaker demand, lower wholesale prices, rising bad debts, and increasing cost pressures. The extent of the lockdowns in North America and Europe and the pace and trajectory of the economic recovery will determine how these challenges play out. Rather than a quick-rebound V-shape economic recovery, a longer U-shape recovery is looking more likely for many countries. Such an outcome would prolong the decline in demand, keep wholesale prices low, force P&U companies to adopt significant mitigation measures, and delay the sector’s return to its long-term growth trend.
Beyond the near-term impact of these challenges during lockdown, P&U players must also manage their medium-term effects on operations, investments, profitability, and liquidity as the sector starts to recover from pandemic-induced containment measures. We expect to see different impacts in different parts of the value chain, with conventional generation and retail facing the greatest risks to their current ways of working. (See Exhibit 6.)
Conventional Generation.在放松锁定限制之后，公司的传统一代业务可能会受益于提高效率和更多使用数字技术。但是，需求疲软，可再生能源的持续增长以及商品价格的变化可能会使某些常规发电源在功绩秩序中的地位（边际生产成本对不同的能源排名）。公司已经部署了比过去更少的燃煤电厂，并且他们正在将一些工厂脱机，并用更便宜，更清洁的汽油供气。较低的利用可能会大大侵蚀某些生成资产的盈利能力，要求政府支持计划使其在商业上可行。此外，一个薄弱的环境可能会危及延长当前车队寿命所必需的投资，而下降的收入将阻碍公司维持健康现金余额的能力。
Renewables.COVID-19 lockdowns will probably have less impact on the operations of renewable energy generators than of conventional power plants, since solar and wind technologies require fewer workers to operate. Like conventional plants, renewables will also see greater efficiencies and digitization as governments relax pandemic containment measures. In recent years, renewable generators have benefited from the increased cost of carbon permits, declining technology costs, and the growing relevance of environmental, social, and governance (ESG) principles to investors in the utilities sector. These trends seem likely to continue. But the fallout from COVID-19 could still lead to reduced investment levels, greater uncertainty about future government subsidies, and lower profits, although the dangers for renewables are not as great as for conventional power plants. On the flipside, post-pandemic economic stimulus programs, such as the European Green Deal, could boost renewables as policymakers prioritize the transition to green energy.
Grid.The introduction of artificial intelligence (AI), smart sensors, and digitally enabled predictive maintenance will transform grid companies’ operations，使他们的野外力量更具生产力，并帮助他们克服与大流行有关的工作力量限制。除其他问题外，由于需求下降和付款延误，公司可能会看到现金流量较弱。能源效率的大规模提高可能会影响需求，尤其是在消费效率非常低的北美市场中。加强网络以增加可再生能源集成的需求将继续推动网格公司的投资计划。但是这些投资的时间和程度可能不确定，投资可能会延迟。此外，当监管机构要求他们接受低回报时，公司可能会面临延长的时期。
零售。尽管锁定措施仍在继续，但P＆U公司的零售业务面临着需求急剧下降的前景，尤其是商业和工业客户，以及不付款的坏账急剧上升。尽管我们样本中的公司通常以强大的流动性职位进入了Covid-19危机，但需求不太可能在相当长一段时间内达到流行前的水平。由于越来越多的客户破产和政府干预措施，能源零售商的现金流量已经承受着越来越大的压力，这些干预措施禁止脱节并允许付款延期。然而，从更积极的角度来看，由于近期和中期，Covid-19对能源零售商的运营几乎没有影响，因为它们对数字技术的依赖日益依赖。
The global drop in demand for power is already more severe than it was during the 2008 global financial crisis. According to the International Energy Agency, demand has fallen by 10% in Europe and by 6.5% in North America from pre-lockdown levels. By comparison, demand fell by 5% in Europe and by 4% in North America following the global financial crisis. Nevertheless, the P&U sector’s recovery from the COVID-19 pandemic may follow a similar trajectory, since energy demand closely tracks improving economic activity. After the 2008 crisis, demand in Europe didn’t return to the pre-crisis levels of 2007 until 2010; in North America, the recovery took even longer—between three and seven years, depending on the state. In both regions, interest rate cuts and government investment programs were responsible for the eventual pickup in demand. The sector’s recovery from COVID-19 could depend to a similar degree on governments’ economic stimulus efforts.
P&U companies’ experience during the global financial crisis suggests that they could face weak demand, lower investment, and cost pressures for a prolonged period. We expect many regulated companies in North America to miss their earnings targets for the foreseeable future, owing to lower-than-planned revenue growth, which, in turn, will increase the need to drive down costs. Depending on the path that the economic recovery takes and the annual rate increases that regulators allow, the accumulated earnings gap for the top 33 investor-owned utilities in North America for the period from 2020 to 2024 is likely to be between $10 billion and $49 billion. This amount represents between 0.7% and 3.5% of revenues—or between 6% and 30% of net income—and illustrates both the potential downside and the huge uncertainty that companies face in the current environment.
价值创造也可能受到影响。后global financial crisis, the sector’s TSR performance took five years to recover. Persistently low valuation multiples, weak cash flow contributions, and the impact of one-off events such as the Fukushima nuclear disaster held it back. P&U companies in North America and Europe will likely face a similarly lengthy period of low TSR in the post-COVID-19 era. As a result, companies that want to differentiate themselves in investors’ eyes must take steps to stand out from the crowd.
COVID-19危机肯定会加速多种趋势，这些趋势已经在大流行之前已经塑造了P＆U部门。成本压力将推动增加数字技术和改善现金管理的使用，而传统发电的盈利能力和投资水平较弱将支持向可再生能源和邻近业务领域的持续转变。同时，股东将继续重视监管参与者提供的弹性，可预测的现金流量和稳定的股息。利用这些趋势的P＆U球员将能够为股东带来更大的价值。
In a survey of investors across sectors, we found that 91% want companies to use the COVID-19 crisis as an opportunity to build capabilities for long-term advantage and growth—even at the expense of earnings。对于P＆U行业，我们认为以下四个要求将是未来几个月和几年的价值尤其重要的来源。（请参阅图7.）
Embrace the digital era.数字技术将越来越重要for P&U companies as a source of competitive advantage, allowing them to drive down costs and improve their customer offering. Indeed, digitization could be essential for companies to earn the “right to play” in the sector. Data-driven solutions and intelligent sensors will enable companies to carry out predictive maintenance, provide remote technical support and inspections, and protect themselves from cyber attacks.Digital and data will also help established P&U players’ retail businesses improve customer interactions and experiences, offer their customers additional services, and compete against nimble, inexpensive online-only challengers。
通过将数据与高级分析相结合，公司将能够释放更大的效率和战略见解。AI的使用将引入新的过程，例如指导网络公司现场工作人员，以便他们可以预测和防止问题，并快速安全地解决中断。数字也将是建立新的工作方式的重要组成部分，例如远程工作和使用敏捷，企业家原则，用于需要速度，灵活性和与客户接近的项目。但是，为了取得成功，公司必须建立正确的能力并吸引适当的数字人才。
Reach scale in a decarbonizing world.The decarbonization of the global economy will continue to drive huge change in the P&U sector and many other industries. In the long run, the share of renewables such as solar and wind in the generation mix is certain to increase. To flourish, P&U players will need to reexamine their current investment plans, prioritize renewables as a growth area, and build scale. By gaining scale in their businesses, they can reduce their operating and financing costs, develop important capabilities, and use these advantages to compete in a sector that offers shrinking profit margins. They should also consider driving consolidation in what are generally fragmented renewables markets.
ESG principles were becoming part of the mainstream for societies, companies, and investors even before the coronavirus crisis. But developments in the past few months have underlined their growing importance. Despite COVID-19, large investors, including Legal & General Investment Management and BlackRock, have reiterated their commitment to making sustainability a key part of their investment criteria. So far, ESG exchange-traded funds have performed significantly better during the crisis than they did before it began. For P&U companies, emphasizing decarbonization not only secures a long-term license to operate with environmentally minded stakeholders, but also provide business opportunities that will help others decarbonize their operations.
一些P＆U公司已经参与了建造公用事业规模的电解器的项目，这些电解液将为钢铁行业生产氢。通过跟随脚步，玩家可以扩展到零碳区域，并受益于政府支持的绿色恢复计划，这些计划将大量后的经济刺激与向较低的碳依赖性转变。同时，P＆U公司必须警惕能源过渡引起的风险。尽管公司需要为脱碳世界做准备，但不确定性将持续一段时间，以了解哪些法规将会证明哪些技术将是最有前途的，以及这些技术在商业上可行的速度迅速。公司必须积极管理并不断审查这些风险。
Place bets on new value pools.随着新发电的可能性和技术gies continue to transform the P&U sector, question marks remain over where P&U companies will find pockets of growth and value creation in future. As we have seen, conventional generation and retail face significant short-term challenges. Grid companies, despite providing stable cash flows, will feel the effects of evolving regulation and will probably have to endure prolonged periods of low returns. And although renewables will prosper in the long term, COVID-19 could have negative short-term implications for the segment.
Against a backdrop of uncertainty and limited growth in many existing areas of their businesses, companies must work doubly hard to identify new value creation opportunities. A good approach is to concentrate on the needs of customers and explore energy solutions that add value and achieve customer satisfaction, while continuing to be alert to changing customer needs and preferences. Companies should not view creating energy solutions as a goal in itself, however. New solutions must reflect companies’ available capabilities. Players should identify opportunities that they can use to build market leadership and that offer a clear unique selling proposition. They should then double down on investments in the most promising areas, while also considering partnerships and opportunistic M&A to strengthen their position.
P&U companies should develop their solutions offering (whether it involves hydrogen, e-mobility, smart meters, energy storage, or household behind-the-meter systems that produce onsite power) around their existing business, balancing the imperative to tap new value pools against the requirement to use their existing core business to fund these activities. Many companies have struggled in the past. It is not enough to be clear about the what; companies also need to excel in the how,such as successfully integrating newly acquired companiesor introducing innovative financing mechanisms. Unless they achieve excellence in execution, companies will fail to create the value they seek.
推动一流的表现。Because of the similarity in business models across the P&U sector, companies must go further than their peers if they want to stand out from the pack. They must understand the critical value drivers in their business and professionalize all measures that help optimize these drivers. For example, many players will need to prioritize operational excellence programs that enable them to become sector leaders in profit margins by cutting costs in areas such as procurement. In an environment where all players feel pressure to keep their costs low, they must fundamentally question their cost position and consider applying a基于零的预算方法。To secure the funding they need for growth and for paying out dividends, they should carefully manage their liquidity position, optimize payment collection, minimize bad debts, keep inventory levels low, and take steps to mitigate any potential financial distress they may face.
Companies should take these actions continuously rather than treating them as a one-off response to COVID-19. Savvy players will also actively engage with the local regulator so that they can participate in shaping the regulatory agenda on key issues, such as retirement of conventional power plants, greater use of renewables, and permitted regulatory returns.
COVID-19带来的不确定性增加P&U sector, creating fresh challenges for players within different segments. But while the pandemic undoubtedly constitutes a sizable dip in the road, we believe that savvy companies will continue to apply lessons they were learning before the crisis. Indeed, they will accelerate their transformation journey to become the value creators of the future.
The authors would like to thank Max Lutter-Günther, Dina Loeper, Corina Melchor, Jiemei Liu, Martin Link, and Dirk Schilder for their contributions to this report.
Managing Director & Senior Partner; Global Leader, Center for CFO Excellence
Berlin
