Utilities worldwide have been on a roller-coaster ride, and an often painful one, over the past decade. Despite the sharp growth in global demand for electricity, many utilities have lost value or posted below-average returns. A McKinsey analysis of 50 major publicly listed utilities from Asia, Europe, and North America showed average total cumulative returns to shareholders of about 1 percent from July 2007 to July 2017, compared with 55 percent for the MSCI World Index.

Utilities with high exposure to merchant revenues did even worse. Two reasons stand out. First, the collapse of merchant conventional generation eroded profits in Europe and the United States, and the growth in other sectors, such as renewables and transmission and distribution (T&D), was not enough to compensate. Second, utilities worldwide are losing market share to entrants from new sectors, such as the financial industry and the oil and gas industry.

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