The share values of Europe’s biggest utilities have plummeted after the energy companies backed outdated business models that rely on coal, a report published today (5 June) has claimed.
The five largest publicly-listed utilities in the EU collectively lost 100 billion euros or more than a third (37%) of their stock market value from 2008 to 2013, the Carbon Tracker Initiative said.
Germany’s E.ON and RWE, France’s GDF Suez, Électricité de France, and Italy’s Enel are named in the analysis, which found heavily coal-reliant utilities fared worse.
The five companies provide nearly 60% of Europe’s electricity but they significantly underperformed Germany’s stock market, which grew by 18% in the same period.
All five have been downgraded by Moody’s credit rating agency, the authors of Coal: Caught in the EU Utility Death Spiral said.
Changing market conditions for utilities leaves new coal plants failing to generate positive cash-flows even in the most optimistic scenario, according to the report.
Profits were hit by a mix of reliance on coal, renewable policy, technology costs, flat electricity demand and changing customer behaviour.
Use of coal as a fuel dropped 4.7% in total and 4.2% in electricity generation from 2008 to 2013. Over that time, the five utilities increased their reliance on coal generation by 9%.
EU coal-fired generation fell 4.2% over the 2008-2013 period. But the largest utilities maintained significant coal capacity, led by RWE which still had more than half of its generation capacity based on coal at the end of 2013.
EurActiv has asked all five utilities to comment on the report, which is published on the day the Norwegian parliament is expected to vote to divest its $900 billion sovereign wealth fund from coal. See positions below for responses received.
The decision by the world’s largest sovereign wealth fund comes after a worldwide campaign to get public institutions such as universities to quit their coal investments.
The organisers of the campaign claim that about 200 institutions globally, with a combined asset size of over $50bn have committed to divest their fossil fuel assets. They include Stanford and Glasgow universities.
Support has grown as the public becomes increasingly aware that fossil fuel companies have discovered three times more fuel than can be safely burned without serious risk to the climate.
International talks ahead of the UN Climate Change Conference in Paris are also being held this week, further ratcheting up the pressure on the fossil fuel industry.
UN climate talks in Bonn are ongoing, and the Group of Seven (G7) meets in Bavaria on 7 June.
Both meetings aim to pave the way to a worldwide binding agreement to limit global warming, which coal-burning contributes to.
E.ON said, "E.ON has so far invested almost €10 billion into renewable energies since 2007 and is one of the leading companies in wind-energy world-wide. As a response to fundamental market changes – also triggered by climate change – E.ON announced end of last year a fundamental shift in strategy: The company will split and E.ON will focus on renewables, distribution and customer solutions.
"The spun-off company Uniper will focus on upstream, global commodities and power generation. The future E.ON will be a driver of a low emission environment. The split will be completed next year but already today we are preparing the future set-up in a comprehensive organisational reshuffle. We are confident that investors will recognise our efforts and see their investment in E.ON as a chance to support this fundamental transformation towards renewable energies.
"In 2014 we continued to reduce our total carbon emissions (96 Mio metric tons) – 16% less than 2013 - as well as our specific carbon intensity per Megawatthour (0,43 CO2 in metric tons emitted for each MWh).
"In our view, a carbon ranking based on absolute figures does not help. Specific carbon intensity is a better basis for comparing companies’ efforts in reducing their carbon exposure. Otherwise bigger companies will always rank high in those studies."
Brian Ricketts, secretary general of EuraCoal, the European Association for Coal and Lignite, said, "It is always interesting to read reports from those well-funded organisations who oppose the use of the very fossil fuels upon which our society has been built.
"It is certainly true that coal companies are bleeding. But forgive me for pointing out that the whole energy industry is bleeding. Shares in one of the world’s biggest solar PV companies, Hanergy, have just collapsed by 50%. Faced with the sudden fall in oil prices, the oil and gas industry is now slashing its investment programmes. Europe’s largest energy supplier, Russia, is on her knees. The French nuclear industry is now back under the absolute control of the state, after reporting huge losses.
"None of this news should be welcome by anyone; it points to instability, uncertainty and risk. Given this situation, the energy sector now looks to invest only in projects that come with government-backed guarantees: renewables, transmission and distribution, reserve capacity and interconnectors, for example. The dream of a free and liberalised market is fading, to be replaced by a return to central planning.
"EURACOAL itself calls for realism, respect and responsibility during the energy transition. We believe that every energy source plays an important role in society. The messages from too many quarters appear extreme, inciting and unhelpful in a civilised democracy."
The coal industry is under pressure from a campaign to encourage institutions to divest from coal investment, and from an expected international agreement to limit global warming.
Global leaders will met in Paris this Novemebr for the United Nations Climate Change Conference, which aims toi make legally binding a target to keep global warming below two degrees.
- 7 June: G7 meeting
- November:Un Climate Change Conference in Paris.