April 10, 2020 Read More →

Europe’s green utilities outperforming competitors in current downturn


Europe’s green energy companies are emerging as shelter for investors in market fallout from the coronavirus.

Utilities in the region are holding up better than other industries in the health crisis. While the Stoxx 600 Index of European shares fell 21% since the start of the year, the utilities component of that measure has declined only 14%. Within that, renewable power producers are outperforming their less green rivals.

The trend is most clear in Europe, where renewables developers rely on power purchase agreements and feed-in tariffs for the electricity they sell. Those deals have left the greener utilities insulated from the slump in power prices that followed lockdowns in major markets.

The best performers are the greenest utilities including the Danish offshore wind developer Orsted A/S along with Italy’s Enel SpA and Energias de Portugal SA. Others more dependent on wholesale power prices include Centrica Plc, Engie SA and Electricite de France SA, each of which has scaled back dividends and withdrawing earnings guidance because of the jolt from the virus.

“When we run scenarios around the impact of Covid-19, we find that networks and renewables segments are largely insulated,” Deepa Venkateswaran, a managing director at Sanford C. Bernstein & Co. LLC. “We see the long-term renewables growth trends unchanged. For integrated and power price exposed companies, market reactions are in line with our deeply depressed worst-case estimates.”

The pandemic and subsequent economic downturn “will marginally delay the renewable energy transition, but it will not be knocked off course,” analysts including John Musk at RBC Europe Ltd said. “Project delays may occur due to supply-chain disruption, but equally there could be positives as renewables operators may even see reduced competition in bids by more challenged and leveraged players.

[Rachel Morison, Ronan Martin]

More: Green utilities are proving a safe haven in market rout

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