LONDON, April 11, 2006 (PRIMEZONE) -- The utilities industry is facing its biggest challenge in modern times according to the eighth annual PricewaterhouseCoopers report 'The Big Leap: Utilities Global Survey 2006'. According to the report, two-thirds of the world's leading utility company leaders hold this view with the majority rating the changes that the industry will have to undergo as little short of revolutionary. This sentiment is felt most strongly in Europe (72%), which is grappling with conflicting challenges including supply and demand imbalances, infrastructure vulnerability and environmental concerns.
The industry is ready to make a big leap forward with nearly two thirds believing the industry needs to adopt a 10 year focus on reducing environmental damage, developing new technologies, improving customer service relationships and finding new fuel sources. However, many feel that policy-makers also have to make a leap. 80% of respondents believe political and regulatory factors are inhibiting the ability of the sector to respond to these challenges, and shock factors such as supply or environmental crises may need to occur to force change.
The report which presents the views of 116 senior executives from leading utilities companies in 43 countries reveals security of supply remains their primary concern as it has over the last two years, particularly in Europe where twice as many utility leaders believe prospects for power cuts have increased rather than diminished compared to five years ago. Many within the industry believe the pace of change needs to be stepped up to face the challenges that lie ahead. 42%, for example, said the sector is lagging behind in the development of renewable energy sources.
Regulatory uncertainty continues to affect investment in the sector and was cited as one of the top three concerns amongst the utilities companies polled. Meeting projected supply needs will require an investment of US$13 trillion by 2030(a) in power generation, transmission and distribution and gas-supply infrastructure yet 42% of respondents felt that government or regulatory policy restricted their ability to develop long-term plans.
Manfred Wiegand, Global Utilities Leader, PricewaterhouseCoopers said:
"Our report highlights yet again the need for the industry to work with government and investors to make the infrastructure, technological, environmental and investment leaps that need to happen to arrive at a long term sustainable solution."
Looking ahead Manfred Wiegand commented:
"We can expect to see a future power and gas utilities sector that is radically different from now. On the ownership and sector structure front, we will see many fewer and much larger super-regional generation and distribution companies, greater fusion of upstream and downstream energy and a continued move of infrastructure entities into private investment fund ownership. On the customer front, we will have the prospect of much greater end-user involvement in both industrial-scale power projects and smaller and more medium-sized distributed power."
Across all of the industry, technology will be a key driver and investment in technology, particularly in clean coal generation, will be a key determinant in the extent to which greenhouse gas growth is mitigated. Coal and nuclear will play a larger part in the fuel mix. Finally, many in the industry feel there is the very real prospect of 'cap and trade' emission control schemes being extended around the world.
The PricewaterhouseCoopers 'The Big Leap' report also highlights other key developments in the utilities sector:
-- M&A activity at record levels: Both the value of total deals and
the size of deals are at record levels. Total deal value soared to
US$196bn in 2005 from US$123bn in 2004.
-- Coal tops favoured fuel supplies: Coal ranks alongside gas as the
fuel expected to make the biggest contribution to meeting demand
growth in the next five years.
-- Nuclear ready to step up: Half of the respondents in the Americas
and Europe and 44% of all respondents said they expect nuclear
capacity to increase in their region as a result of concerns about
climate change.
-- Technological advances: Companies are increasingly looking to
technological innovation to deliver efficiencies and respond to
the pincer of future demand challenges and environmental concerns.
Notes to Editor:
1. (a)According to the International Energy Agency/OECD World Energy
Outlook 2005.
2. The Big Leap: Utilities Global Survey 2006 is a major survey of
boardroom opinion inside utility companies conducted annually by
PricewaterhouseCoopers.
3. This year, for the first time, the survey focuses on the sector's
viewpoint about the changes needed to meet the challenges ahead.
The report summarises the changes that are being made or need to
be made in technology, investment, M&A, efficiency, cleaner fuels
and customer relationships.
4. It includes data from 116 senior executives, from 98 utility and
utility investor companies across 43 countries. Research covers
Europe, the Americas, Asia-Pacific, Africa and the Middle East.
The majority of utility participants were senior Vice Presidents
and Presidents, CEOs and other senior managers.
5. The PricewaterhouseCoopers Global Energy, Utilities and Mining
group (www.pwc.com/energy) is the professional services leader in
the international energy, utilities and mining community, advising
clients through a global network of fully dedicated industry
specialists.
6. The member firms of the PricewaterhouseCoopers network
(www.pwc.com) provide industry-focused assurance, tax and advisory
services to build public trust and enhance value for its clients
and their stakeholders. More than 130,000 people in 148 countries
across our network work collaboratively using Connected Thinking
to develop fresh perspectives and practical advice.
"PricewaterhouseCoopers" refers to the network of member firms of
PricewaterhouseCoopers International Limited, each of which is a
separate and independent legal entity.
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