Rising Risks for Europe’s Power Utilities

From Standard & Poor’s RatingsDirect
Generators and vertically integrated utilities in Europe’s liberalized markets are enjoying high profits resulting from continuing strong power prices, which reflect high oil and gas prices and the introduction of the carbon-dioxide (CO2) emissions trading scheme (EU ETS). In fully liberalized European power markets, where electricity pricing is based on marginal generation costs and where gas-fired generation technology is the price-setting generation technology (as in Britain), the high gas prices can largely be passed along as higher retail power prices.



A number of issues on the horizon, however, need to be monitored, as they’re leading to some uncertainty over future developments in Europe’s power industry. The following trends in particular could pose challenges that imply a higher business risk for the European power sector:

businessweek