– Impairments in 2014 focus mainly on assets
– Generation assets account for 75% of total at 14.6b euros
– Pricing and regulation top drivers of impairments in sector
LONDON, Sept. 10, 2015 /PRNewswire/ — European utilities experienced yet another year of significant asset impairments (22.9b euros) in 2014 as depressed energy prices and regulatory changes took their toll on the region, according to EY’s Benchmarking European power and utility asset impairments: Testing times ahead study.
The analysis of 16 leading European utilities shows impairment on assets accounted for 19.4b euros or 85% of total impairment recorded in 2014. Generation assets represented the greatest share of impairments (75%) with 14.6b euros. Exploration and production (E&P) assets were also hit following commodity price uncertainty with a total of 2.2b euros impaired in 2014.
Charles-Emmanuel Chosson, EY’s Global Assurance Power & Utilities Leader, says:
“Europe’s power and utilities companies continue to grapple with a changing energy landscape. In 2014, depressed energy prices and evolving regulation added to the complexity companies already face and resulted in yet another year of significant impairments. Weak commodity prices led to the impairment of generation and E&P assets while regulations focusing on security of supply or reducing carbon emissions also drove impairments in many regions.”
Rapid transformation in the sector is creating big challenges for traditional European utilities. The continuing rise of renewables and improved energy efficiency keep adding pressure on conventional generation assets. Disruptive factors, such as the rise in distributed generation, and new developments in demand response and storage capacities could also have a resounding impact on asset impairment.
Chosson says: “Adapting to the changing energy world requires companies to think thoughtfully about capital investment. That means assessing tomorrow’s value chain, identifying how they want to be positioned and planning how that translates into investments and asset rotation.”
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About the report
The analysis within Benchmarking European power and utility asset impairments: Testing times ahead is based on EY’s review of the information disclosed by 16 major European utilities’ annual reports. The publication aims to help power and utility companies prepare for the 2015 round of impairment exercises by benchmarking the approach of different companies. It summarizes key factors affecting utility asset valuations today and in the future, as well as provides broad comparisons between major European utility reports and accounts.
About EY’s Global Power & Utilities Sector
In a world of uncertainty, changing regulatory frameworks and environmental challenges, utility companies need to maintain a secure and reliable supply, while anticipating change and reacting to it quickly. EY’s Global Power & Utilities Sector brings together a worldwide team of professionals to help you succeed – a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Sector team works to anticipate market trends, identify their implications and develop points of view on relevant sector issues. Ultimately, this team enables us to help you meet your goals and compete more effectively.
For more information, please visit ey.com/powerandutilities.
