Representatives of the world's utility companies (119 from 108 utilities) have sent out a warning about under-investment in the industry. Regulatory uncertainty is holding back the investment needed in the sector to secure power supplies, according to Under pressure, the seventh PricewaterhouseCoopers global utilities survey. Regulatory worries top the list of concerns expressed by investors. Although a majority believe deregulation is helping the investor climate, more than a third (39 %) say market reforms are damaging confidence, highlighting the dangers of inconsistent regulation, energy, tax and environmental policies.
This anxiety within the utilities industry means that despite its growth prospects, it is failing to rise above the pack in attracting the investment it needs. Meeting projected supply needs will require an investment of US$12.7 trillion in the period to 2030 in the power generation, transmission and distribution and gas-supply infrastructure. The report finds that the utilities sector is rated no more attractive than several other sectors, including financial services, consumer and retail and pharmaceuticals. Worryingly, this was the sentiment echoed by investors that are already established as utilities-friendly.
Utility leaders feel that without regulatory certainty and high levels of investment blackouts could become a more frequent occurrence. Two thirds of utility respondents believed that the likelihood of blackouts will increase or remain the same.
These concerns about security of supply are spreading across the industry. 72 % of respondents said that supply security and transmission capacity are major concerns facing the sector – up from 65% in 2004.
Regulatory uncertainty is also affecting investment in renewables. While the focus on renewables is increasing while the industry trying to change the fuel mix, investors feel this area will face the biggest funding challenge. In this climate, more than half (52%) of utility respondents expected a nuclear revival.
Manfred Wiegand, PwC’s global utilities leader, commented: “The challenge for the utilities sector is immense. We urge governments, utility companies, investors and consumers to work together to find a truly sustainable and long-term strategy for the industry. This means getting the equation right in the market through a balanced view of renewables and a streamlined regulatory environment, generating market rates of return for investors and encouraging transparent and well-communicated business strategy among utility companies.”
Under Pressure also highlights record levels of merger and acquisition activity, and a tendency for regionalisation to replace globalisation – only a minority of utility companies are expanding outside their continental boundaries.
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