WEBVTT - The Energy Transition Fuels Competition in European Utilities 0:00:00.280 --> 0:00:02.680 Hi, I'm Dana Perkins and you're listening to Switch It 0:00:02.759 --> 0:00:06.080 on the bn EF podcast. So today I'm joined by Bocan, 0:00:06.400 --> 0:00:09.360 she is a carbon analyst for BNF, and she's joined 0:00:09.400 --> 0:00:12.680 by Michael Keneffect who's part of our Decentralized Energy team, 0:00:12.720 --> 0:00:15.000 and they're here to talk to me about a recent 0:00:15.040 --> 0:00:18.560 piece of work they did titled European Utility Company Profiles. 0:00:19.680 --> 0:00:21.439 They're going to talk to us about different parts of 0:00:21.480 --> 0:00:24.639 the value chain, generation, networks and retail and where some 0:00:24.720 --> 0:00:27.760 of these strategies are different and which ones are actually 0:00:27.880 --> 0:00:32.040 proving successful. As the energy transition continues full steam ahead, 0:00:32.360 --> 0:00:35.360 what can we learn from the decisions these European utilities 0:00:35.360 --> 0:00:37.760 have made. Now, if you want to read this report, 0:00:37.800 --> 0:00:39.960 it can be found on the Bloomberg terminal at b 0:00:40.040 --> 0:00:43.440 NF Go or at BNF dot com. As a quick reminder, 0:00:43.520 --> 0:00:46.600 BNF does not provide investment or strategy advice, and you 0:00:46.640 --> 0:00:49.000 can hear a more complete disclaimer at the very end 0:00:49.000 --> 0:01:01.040 of the show. But now let's speak with Bo and Michael. Bo. Michael, 0:01:01.120 --> 0:01:03.600 thank you very much for joining today. Thank you, Dana. 0:01:04.760 --> 0:01:08.640 So today we're going to talk about utilities, specifically European utilities. 0:01:09.000 --> 0:01:11.200 And this is a really exciting space at the moment 0:01:11.240 --> 0:01:13.199 because there are a lot of things that I would 0:01:13.200 --> 0:01:14.960 say it's safe to say we're looking at maybe they're 0:01:15.040 --> 0:01:19.240 changing going forward. But before we dive right into what 0:01:19.440 --> 0:01:21.640 b anf is so good at, which is talking about 0:01:21.680 --> 0:01:23.880 the future, let's talk a little bit and lay the 0:01:23.880 --> 0:01:27.080 groundwork for those out there in you know, podcast land, 0:01:27.400 --> 0:01:30.800 wondering what specifically we're talking about when we mean utilities, 0:01:30.840 --> 0:01:33.959 and would you guys kind of break down which part 0:01:34.160 --> 0:01:37.959 of the utility value chain we are looking at when 0:01:37.959 --> 0:01:40.360 we're looking at the company profiles, where you stually look 0:01:40.400 --> 0:01:43.920 at the utube value chain by separating the upstream, midstream 0:01:43.959 --> 0:01:46.920 and downstream. And what do we mean by upstream is 0:01:47.000 --> 0:01:51.920 mainly fossil fuels, thermogeneration and renewable generation, everything that makes 0:01:51.920 --> 0:01:54.720 power general at the end and midstream we look at 0:01:54.920 --> 0:01:59.800 transmission and distribution basically all the grids and networks that 0:02:00.120 --> 0:02:03.400 runs our power. And in the downstream will focus on 0:02:03.640 --> 0:02:08.000 retail and energy services and also non energy services such 0:02:08.040 --> 0:02:12.560 as like telecom, real estate management, insurance and finance. Now 0:02:12.720 --> 0:02:15.760 all of us are here in London still in lockdown, 0:02:15.880 --> 0:02:19.520 so we see a path forward. Depending on when you're 0:02:19.560 --> 0:02:21.640 listening to this, we may or may not yet be 0:02:21.720 --> 0:02:25.520 permitted to have coffee with somebody outdoors in a park. 0:02:25.960 --> 0:02:29.919 So my question is what has changed for the European 0:02:30.000 --> 0:02:35.040 utility space over the past year with COVID nineteen. COVID 0:02:35.120 --> 0:02:38.960 nineteen has really impacted different parts of utility value in 0:02:39.000 --> 0:02:42.960 a different way. We have those field suppliers and generators 0:02:43.040 --> 0:02:47.360 with exposure to lower power demand and lower power prices 0:02:47.400 --> 0:02:51.320 and fuel prices, they have been hardest hit, while those 0:02:51.440 --> 0:02:55.799 units with more regulative returns and residential power retail they 0:02:55.840 --> 0:03:00.040 have been more protected. Yeah, and I talking more a 0:03:00.400 --> 0:03:03.800 denis from side of things, in particular energy services, which 0:03:03.840 --> 0:03:07.079 bowmanshures what we mean by energy services is like installing 0:03:07.560 --> 0:03:11.200 rooftop TV or storage or electric electric vehicle charge church 0:03:11.240 --> 0:03:14.680 chargers our energy efficiency for residential and commercial users. And 0:03:15.639 --> 0:03:18.359 we kind of saw the acceleration of a trend. We've 0:03:18.360 --> 0:03:20.960 been seeing that this businesses a lot of comp utilities 0:03:21.000 --> 0:03:22.760 that invest in the space, but it kind of been 0:03:22.800 --> 0:03:26.600 a bit maybe a bit slow to find growth. And 0:03:27.120 --> 0:03:30.200 I think COVID nineteen meant that utilities couldn't get in 0:03:30.200 --> 0:03:32.360 and install the stuff they cann't get to clients to 0:03:32.360 --> 0:03:35.119 to sell that, and we've kind of we've seen several 0:03:35.200 --> 0:03:39.000 utilities perhaps step back from the space centric and energy 0:03:39.120 --> 0:03:43.480 being to data data come to mind. Especially COVID nanty 0:03:43.560 --> 0:03:47.520 has exposed kind of the weaknesses of the coal industry. 0:03:47.600 --> 0:03:51.880 So we've seen basically all this reduced power demand and 0:03:51.960 --> 0:03:57.200 reduced a kind of power prices hitting those thermal generators, 0:03:57.440 --> 0:04:02.040 those coal industry, and meanwhile, renewables have been basically quite 0:04:02.040 --> 0:04:05.760 protected because they have the great priority and they have 0:04:05.880 --> 0:04:10.320 been able to secure good prices through like predetermined price 0:04:10.360 --> 0:04:13.640 agreements such as p p a s power purchase agreements. 0:04:13.720 --> 0:04:16.120 So do we think that these changes are here to last? 0:04:16.200 --> 0:04:19.800 Because you know, this industry doesn't change on a dime 0:04:19.800 --> 0:04:22.120 in terms of the infrastructure that you build and these 0:04:22.160 --> 0:04:24.600 p p as that you're signing into the future. So 0:04:24.680 --> 0:04:27.479 does this mean that these will be lasting impacts? When 0:04:27.560 --> 0:04:31.760 demand does what we think will actually return pretty you know, 0:04:31.800 --> 0:04:34.239 aggressively as soon as they start to open up again. 0:04:34.480 --> 0:04:37.640 In Gurnal, the thermal producers haven't doing well. It's not 0:04:37.720 --> 0:04:40.640 just because of COVID nineteen and the reduced power demand, 0:04:40.839 --> 0:04:44.960 but also because of the carbon price in Europe. We 0:04:45.040 --> 0:04:48.080 actually just hit a record high carbon price a few 0:04:48.160 --> 0:04:51.640 days ago, hitting over four d euros permetrics on and 0:04:51.800 --> 0:04:55.040 this adds quite a lot of price pressure cost pressure 0:04:55.120 --> 0:04:58.119 for these So basically the carbon price hits over forty 0:04:58.320 --> 0:05:01.720 or else prometric town a small and it's quite a 0:05:01.800 --> 0:05:04.880 big hight compared to seventeen when it was just over 0:05:05.080 --> 0:05:08.839 five years preton and it takes a ginormous bite into 0:05:09.000 --> 0:05:13.520 those carbon intensive coal and lignite generator's margin. And we 0:05:13.640 --> 0:05:16.960 will continue to say that cold being squeezed out the 0:05:17.080 --> 0:05:21.840 group by renewables and cheap gas. So this is geographically 0:05:21.920 --> 0:05:23.840 very split though, because there are some countries that are 0:05:23.880 --> 0:05:26.880 way more exposed to lignite than others. So which countries 0:05:27.000 --> 0:05:30.840 are changing the most? Definitely Germany has been one of 0:05:30.920 --> 0:05:35.839 those that are being hit the most. Also, increasingly we're 0:05:35.880 --> 0:05:39.000 saying that this is hitting also those Eastern European countries 0:05:39.040 --> 0:05:41.960 such as Poland. We will most likely to see like 0:05:42.120 --> 0:05:45.640 a cold face that is even faster than what has 0:05:45.720 --> 0:05:48.760 been said in the news at the moment, which then 0:05:48.839 --> 0:05:53.120 brings me to which companies, So you know, this will 0:05:53.680 --> 0:05:58.240 probably disproportionately advantage or disadvantage certain companies so which companies 0:05:58.360 --> 0:06:02.039 have done the best. We have been following this as well, 0:06:02.360 --> 0:06:06.640 like which companies have been performing better and based on 0:06:06.800 --> 0:06:10.520 like the three year return on investing capital. We're seeing 0:06:10.600 --> 0:06:14.120 that those who have been exposed mostly to the thermal 0:06:14.360 --> 0:06:17.480 generation like Uniper and r w E, they have been 0:06:17.680 --> 0:06:22.000 performing less well as those who have more renewable exposures 0:06:22.000 --> 0:06:26.039 such as like Nail and a bedroller and button Fell 0:06:26.279 --> 0:06:30.680 for example. Ultimately, the high performers have been those with 0:06:31.000 --> 0:06:36.680 regulator return whether it's from like grid operations or from renewables. However, 0:06:37.040 --> 0:06:40.600 there is a caveat about regulator returns is that it 0:06:40.760 --> 0:06:44.280 exposes these companies to polish a risk. For example, for 0:06:44.560 --> 0:06:48.200 European grids that which allowed returns have been falling. There 0:06:48.360 --> 0:06:52.360 is falling returns for European networks. An example that is 0:06:52.480 --> 0:06:57.080 off JAM the UK energy regulators have the return on 0:06:57.640 --> 0:07:01.560 equity transmission network GOT riders can achieve. And we're seeing 0:07:01.600 --> 0:07:05.800 systemilar trends across Europe, in Spain, Germany, in Scandinavia as well. 0:07:06.480 --> 0:07:09.720 And I guess in response to that, we're seeing I 0:07:09.760 --> 0:07:13.400 guess the the European Utilities Expanded Site of Europe. I 0:07:13.440 --> 0:07:15.960 guess Latin America has been one of the main targets 0:07:16.000 --> 0:07:18.280 there and they'll is it wants to expand, it's it's 0:07:18.320 --> 0:07:23.400 gris business there. Energy bought TAG Brazilian networks company, and 0:07:23.760 --> 0:07:27.280 eber Droll as well is also expanding its business in 0:07:27.360 --> 0:07:29.840 Brazil and the US, and it's really where it caes 0:07:29.880 --> 0:07:32.920 its growth in networks and not in its European businesses. 0:07:33.360 --> 0:07:35.960 So really, when we're talking about European utilities, in many 0:07:36.040 --> 0:07:38.960 respects we're talking about global utilities. Would you say that 0:07:39.360 --> 0:07:42.560 that is the strategy of the majority of the utilities 0:07:42.600 --> 0:07:45.080 in Europe is to be looking for expansion areas either 0:07:45.240 --> 0:07:48.520 in South America you know, typically very much linked to 0:07:48.560 --> 0:07:51.520 those in Iberia, right the utilities that operate there, or 0:07:52.040 --> 0:07:55.040 is that just you know, the select few. There is 0:07:55.080 --> 0:07:59.880 definitely a strong interest in South America. For example, both 0:08:00.160 --> 0:08:03.120 and Nell and I Padrola are strongly there. They are 0:08:03.160 --> 0:08:07.000 attracted by the demand, strong demand. That is, they're also 0:08:07.120 --> 0:08:11.560 attracted by some of the supportive policy regimes that are 0:08:11.640 --> 0:08:15.720 in place, and also by that there's still potential to 0:08:16.200 --> 0:08:20.560 grow quite strongly the renewable generation in those markets. At 0:08:20.560 --> 0:08:24.240 the moment. The good point there is expansion in Latin America. However, 0:08:24.320 --> 0:08:27.160 the sub companies are not expanding and if anything, they 0:08:27.200 --> 0:08:30.640 are actually reducing their geographic coverage. And I think Centrica 0:08:30.840 --> 0:08:33.240 is probably the biggest stories we saw there. Centrica had 0:08:33.400 --> 0:08:37.800 a energy business in North America, Direct Energy, which they 0:08:38.000 --> 0:08:43.439 sold to Energy Energy later in twenty twenty, and I 0:08:43.520 --> 0:08:46.359 guess the goal of Centrica now is to really consolidate 0:08:46.440 --> 0:08:49.760 this business and reduces focus down to just its home 0:08:49.840 --> 0:08:53.920 markets of the UK and Ireland. And essentially we're the 0:08:54.000 --> 0:08:57.840 only company doing this either Energy they have and it's 0:08:57.920 --> 0:09:00.839 quite a big strategy change, and part of that is 0:09:00.880 --> 0:09:05.080 to reduce the number of countries that they operation. Okay, 0:09:05.240 --> 0:09:08.839 so then we are really truly talking about Europe here. 0:09:09.160 --> 0:09:12.400 So since we are talking about Europe and we're looking 0:09:12.600 --> 0:09:17.280 at certain countries maybe decarbonizing faster than others, depending upon 0:09:17.360 --> 0:09:19.199 how their grids are currently set up, I wanted to 0:09:19.280 --> 0:09:22.160 know is there still a strong case for integration. We 0:09:22.280 --> 0:09:26.199 have seen kind of some signs of vertical integral being 0:09:26.440 --> 0:09:31.360 not as avantageous structure anymore. We saw Eon and r 0:09:31.559 --> 0:09:35.240 w E swapping their assets are double A focus is 0:09:35.400 --> 0:09:40.439 now in upstream while Ion is specialized in downstream. We 0:09:40.960 --> 0:09:45.760 also saw Ovote buying SSS retail Arm, which kind of 0:09:45.920 --> 0:09:49.960 raises the question whether the generation retail era is coming 0:09:50.040 --> 0:09:53.760 to an end after this deal, the majority of UK 0:09:54.000 --> 0:09:58.480 customers are now served by retailers with no generation, which 0:09:58.600 --> 0:10:02.200 was not the case twenty years ago where the almost 0:10:02.280 --> 0:10:07.080 nine was served by generator retailers. And there are easy 0:10:07.400 --> 0:10:11.200 kind of two groups of reasons. The pull reason from 0:10:11.360 --> 0:10:15.079 this integrated structure is that the skills to run a 0:10:15.240 --> 0:10:20.080 successful business is not that much. There's like little overlap 0:10:20.200 --> 0:10:24.400 between generation arm and retail arm. And then the ultimately 0:10:24.800 --> 0:10:28.719 the main argument why are many companies have chosen the 0:10:29.240 --> 0:10:33.760 integrated structure is the physical hedge, which means that you 0:10:33.880 --> 0:10:36.839 have one buy empower and one selling power and then 0:10:37.000 --> 0:10:40.000 you can match the volumes with each other. But it's 0:10:40.040 --> 0:10:44.720 becoming less important because of kind of the ongoing evolution 0:10:44.760 --> 0:10:48.959 of financial hedge and tools that it's providing this generator's 0:10:49.280 --> 0:10:53.880 options that are more flexible than coupling their generation with retail. 0:10:54.040 --> 0:10:57.839 They basically have now so many different financial instruments like 0:10:58.080 --> 0:11:01.719 pp A, forwards and future which can all do what 0:11:02.040 --> 0:11:06.319 the retail coupling did and maybe better. And also the 0:11:06.559 --> 0:11:12.360 field switching and increasing renewables are really making this hedging 0:11:12.480 --> 0:11:17.160 more difficult than before. And there's also the push element 0:11:17.320 --> 0:11:22.720 here that customers are wanting more today and utilities are 0:11:22.800 --> 0:11:26.040 exploring quite a lot like how can they do this? 0:11:26.240 --> 0:11:30.280 How can they satisfy their customers? But there have them 0:11:30.320 --> 0:11:36.320 been really a winning strategy. So by consolidating and having 0:11:36.400 --> 0:11:40.080 a larger customer base, this could help them to scale 0:11:40.160 --> 0:11:43.520 up faster. Now for a very short break, stay with 0:11:43.679 --> 0:11:49.200 us for right now, Let's say, okay, we've talked about retail. 0:11:49.280 --> 0:11:52.640 Let's throw the metaphorical car in reverse and let's head 0:11:53.160 --> 0:11:57.000 back up the value chain to networks, and let's talk 0:11:57.000 --> 0:11:59.000 about networks. What do you see and what should we 0:11:59.080 --> 0:12:03.160 watch for anyone when it comes to networks. So, as 0:12:03.240 --> 0:12:07.400 you say grid companies looking to grow abroad in Latin America, 0:12:07.440 --> 0:12:10.960 we said, the other big trend you see in networks 0:12:11.360 --> 0:12:16.559 is the adoption of digital technologies, so getting more smart 0:12:16.600 --> 0:12:19.000 meters in the grid. But that's where the smart meters 0:12:19.080 --> 0:12:22.520 live exactly. So that's probably a great use for smart 0:12:22.600 --> 0:12:24.520 meters for network comperies to see what's going on in 0:12:24.559 --> 0:12:26.839 their grids and being able to respond to that more 0:12:27.040 --> 0:12:30.640 quickly and just gathering that data, integrating that with other 0:12:30.800 --> 0:12:33.320 data streams from some stations they have on the grid, 0:12:33.440 --> 0:12:37.200 and using all that to understand where you know, predictive 0:12:37.240 --> 0:12:39.800 maintenance on their grid, you know, reducing those operating costs, 0:12:39.880 --> 0:12:44.040 while at the same time perhaps employing digital or software 0:12:44.400 --> 0:12:48.880 solutions such as local flexibility markets, which we recovering other research, 0:12:49.000 --> 0:12:52.040 which would allow these network companies to reduce the capital 0:12:52.240 --> 0:12:54.320 they're investing, so they might have brings that their building 0:12:54.400 --> 0:12:57.439 as well. So while the returns are falling, I think 0:12:57.480 --> 0:13:00.559 the target now for within your free to Lose is 0:13:00.640 --> 0:13:03.240 to try and get their costs down as much as 0:13:03.280 --> 0:13:06.079 they can. And which companies or utilities are doing this 0:13:06.240 --> 0:13:08.480 the best right now? So sorry, so and I will 0:13:09.480 --> 0:13:14.280 It's okay, it's a very short answer, but I'LL are 0:13:14.600 --> 0:13:18.080 investing very heavily in the digital space. Yeah, and it's 0:13:18.320 --> 0:13:20.800 not only the quality of the grids, but also the quantity. 0:13:21.080 --> 0:13:24.800 Because of the uptake of the huge amount of renewable capacity, 0:13:24.960 --> 0:13:28.160 we will also need a lot more networks to connect them. 0:13:28.679 --> 0:13:32.160 So we're expecting that just more grids will come online. 0:13:32.280 --> 0:13:35.319 And these big utilities in Padrola and now they have 0:13:35.400 --> 0:13:38.679 already made a big commitment to expand their grids in 0:13:38.760 --> 0:13:42.840 Padrolla said that they were invest almost thirty billion euros 0:13:43.000 --> 0:13:48.520 to kind of increase it almost two hundred by which 0:13:48.640 --> 0:13:52.120 is quite a big uptake from their existing base and 0:13:52.400 --> 0:13:56.000 throwing the car in reverse yet one more time. So 0:13:56.280 --> 0:14:00.480 let's go back to generation. So you mentioned that we'renewables 0:14:00.920 --> 0:14:03.280 were an indicator actually, well not an indicator, but that 0:14:03.400 --> 0:14:07.400 we did see some correlation between success recently and the 0:14:07.440 --> 0:14:10.040 amount of existing renewables that people actually had as a 0:14:10.120 --> 0:14:12.400 part of their portfolio. And the question is what are 0:14:12.440 --> 0:14:14.559 the opportunities and what are the things to watch in 0:14:14.640 --> 0:14:17.360 the generation side. We talked a little bit earlier about 0:14:17.480 --> 0:14:20.400 how renewables for some of these companies, the ones that 0:14:20.480 --> 0:14:23.040 actually had a lot of exposure there did pretty well recently. 0:14:23.480 --> 0:14:27.480 And do you see that as continuing to be a trend. Yes, definitely. 0:14:27.960 --> 0:14:31.360 The business case for renewables are definitely there. The cost 0:14:31.600 --> 0:14:35.880 of the technology is falling and climate policy is supporting it. 0:14:36.120 --> 0:14:39.520 And also it's important to think what are the future 0:14:39.600 --> 0:14:44.240 gaps and industrial decarbonization will be a big thing, a 0:14:44.320 --> 0:14:48.640 big thing to watch. Electrification will definitely boost renewables, so 0:14:48.920 --> 0:14:51.560 there will be business case there and there will be 0:14:51.640 --> 0:14:55.160 also a business case to kind of in those newer 0:14:55.280 --> 0:14:59.000 technologies to decarbonize those hard to embate sectors like the 0:14:59.320 --> 0:15:03.680 aluminum and cement. A lot of utilities have already jumped 0:15:03.760 --> 0:15:08.560 into like a development of hydrogen ccs, and it will 0:15:08.600 --> 0:15:12.280 be interesting to see like what kind of business strategy 0:15:12.360 --> 0:15:15.760 will actually be the winning one in those areas. And 0:15:15.880 --> 0:15:19.400 another thing be interesting to watch is the flexibility, which 0:15:20.040 --> 0:15:23.280 will be a key challenge as we have more uptake 0:15:23.400 --> 0:15:26.720 of renewables, So the question will be how do we 0:15:26.920 --> 0:15:31.240 kind of address all these challenges. Companies will definitely want 0:15:31.320 --> 0:15:33.640 to be involved in this, and there will be also 0:15:33.680 --> 0:15:36.840 a market design challenge for kind of making all this 0:15:37.080 --> 0:15:40.640 piece come together. And then how about even further back 0:15:41.200 --> 0:15:44.000 to the fossil fuel part of things, because really, let's 0:15:44.040 --> 0:15:46.880 go as far upstream as possible. Now we're already talking 0:15:46.920 --> 0:15:50.240 about how renewables are going to help with decarbonization, but 0:15:50.400 --> 0:15:53.640 presumably there is still just quite a bit within the 0:15:53.680 --> 0:15:57.560 fossil fuel space that has yet to transition to something else, 0:15:57.720 --> 0:16:00.280 or may never transition to something else. How do you 0:16:00.400 --> 0:16:03.040 see that changing, I guess or maybe not in the 0:16:03.120 --> 0:16:06.400 next year. The story for coal is quite straightforward now 0:16:06.560 --> 0:16:09.200 as we're also expecting the carbon to go up as 0:16:09.320 --> 0:16:12.680 with a renewable uptake. The cold story is that it 0:16:12.800 --> 0:16:16.000 will be faced out just by looking at the economics, 0:16:16.080 --> 0:16:19.760 not even taking into account like those cold face out policies. 0:16:20.200 --> 0:16:23.160 But the bigger question is is gas. What will happen 0:16:23.240 --> 0:16:26.240 to gas? Right now? There is still a business case 0:16:26.360 --> 0:16:30.080 for gas because of the volatility of renewables and the 0:16:30.240 --> 0:16:33.880 need for balancing the grid and most utilities in Europe 0:16:33.920 --> 0:16:36.720 they have already committed to net zero, but at the 0:16:36.800 --> 0:16:40.320 moment gas is still profitable and it's a money maker 0:16:40.440 --> 0:16:44.080 for them. So how to face out gas will be 0:16:44.200 --> 0:16:46.560 a bigger question for them to kind of get to 0:16:46.680 --> 0:16:50.320 their actual net zero commitment. So what are some of 0:16:50.360 --> 0:16:53.080 the companies again from the business models, So who are 0:16:53.120 --> 0:16:55.040 the utilities that are doing the best in the space 0:16:55.480 --> 0:16:58.840 an upstream? We have seen that it's the renewable majors 0:16:58.880 --> 0:17:01.360 that have been done. The BA asked, So we have 0:17:01.520 --> 0:17:04.240 an l in Padrola and E d F what the 0:17:04.400 --> 0:17:08.440 fall they are all kind of doing similarly well when 0:17:08.480 --> 0:17:11.400 we look at like the return on the investing capital 0:17:11.560 --> 0:17:15.960 and are there any outliers here across the utility space comprehensively. 0:17:16.359 --> 0:17:19.959 We're seeing certain trends and certain sub segments, but are 0:17:20.000 --> 0:17:23.119 there any outliers which just don't seem to be doing 0:17:23.200 --> 0:17:26.360 the things that the others are. So one company made 0:17:26.400 --> 0:17:30.080 one energy major Energy didn't five years ago, didn't take 0:17:30.119 --> 0:17:33.399 the same route as an l or Jola. It preferred 0:17:33.440 --> 0:17:36.200 to go down an energy services rout and and since 0:17:36.280 --> 0:17:39.520 you does intend, they've acquired about nineteen companies in this 0:17:39.760 --> 0:17:44.200 energy services space as energy storage companies, energy efficiency generation, 0:17:44.440 --> 0:17:49.760 and on site generation. Last year they decided against that strategy. 0:17:49.920 --> 0:17:53.399 They've replot of course they are going to spin out 0:17:53.480 --> 0:17:57.320 the energy part of the energy services business and take 0:17:57.520 --> 0:18:02.199 them cash raised from that and invest into developing renewables 0:18:02.760 --> 0:18:07.000 and building as their grids business as well. So there 0:18:07.040 --> 0:18:10.280 were companies who maybe took a different tax and now 0:18:10.359 --> 0:18:13.400 we see them reverting course and going to the same 0:18:13.520 --> 0:18:17.440 route dash an l aber droller that they pursued so 0:18:17.920 --> 0:18:23.000 successfully in the upstream. Maybe one company that comes to 0:18:23.119 --> 0:18:26.520 mind is for Tomb while kind of other companies they've 0:18:26.560 --> 0:18:30.520 been more invested in how to dicarbonize their generation protfolio. 0:18:30.880 --> 0:18:35.000 For to instead, their generation portfolio was quite low carbon, 0:18:35.400 --> 0:18:39.320 but instead of going more or expanding their low carbon 0:18:39.440 --> 0:18:43.120 They went and bought Uniper who had higher carbon intensity 0:18:43.240 --> 0:18:47.720 than they did, so that was an interesting development. But 0:18:47.960 --> 0:18:50.280 I guess what they are really betting on is that 0:18:50.560 --> 0:18:54.920 there will be a tighter power market and while coal 0:18:55.200 --> 0:18:59.760 and nuclear plants retire and the gas production from growing 0:18:59.800 --> 0:19:02.720 and ends, there will be a really tight power market 0:19:03.160 --> 0:19:07.040 where like gas plants that Uniper has a lot and 0:19:07.200 --> 0:19:10.880 hydro they will have a huge advantage in that case. 0:19:11.440 --> 0:19:14.280 So we've talked about a lot of successful business models 0:19:14.320 --> 0:19:16.600 and a lot of successful businesses on the show, keeping 0:19:16.680 --> 0:19:19.960 it really quite upbeat. But I want to know about 0:19:20.040 --> 0:19:23.199 how competitive this space is and what we see happening 0:19:23.240 --> 0:19:24.639 in the future. I mean, is it is it a 0:19:24.680 --> 0:19:28.000 crowded market? That it is definitely. We have been seen 0:19:28.160 --> 0:19:31.840 quite a lot of new entrants in this market, especially 0:19:31.920 --> 0:19:34.800 from oil and gas sector. There is a huge gap 0:19:34.880 --> 0:19:37.760 between kind of now and reaching the Paris Agreement, so 0:19:37.880 --> 0:19:42.439 there is space as well, but it definitely getting more competitive. 0:19:42.560 --> 0:19:44.720 And example of that is what we saw with the 0:19:45.119 --> 0:19:48.240 U k C Bed auction where we saw a record 0:19:48.400 --> 0:19:51.639 high level of bidding from oil and gas sector. From 0:19:51.720 --> 0:19:54.400 BP and in theF both of the oil and gas 0:19:54.560 --> 0:19:58.639 and utilities have their advantages. And it's good to notice 0:19:58.720 --> 0:20:01.280 that even though maybe oil and gas have a lot 0:20:01.359 --> 0:20:06.600 of money, but utilities they have advantage in um their 0:20:06.720 --> 0:20:11.840 experience of developing assets and building looss renewable projects and 0:20:12.119 --> 0:20:17.000 also their existing pipeline is invaluable and those factors have 0:20:17.119 --> 0:20:20.360 been built over the years and it may give them 0:20:20.520 --> 0:20:24.520 an edge over this oil majors coming into the power sector. 0:20:24.760 --> 0:20:28.800 But what also Shells mentioned earlier that they have big 0:20:28.880 --> 0:20:34.520 trading desks and ability to manage big offshore projects. This 0:20:34.760 --> 0:20:38.720 could help them kind of to manage those merchant risks 0:20:38.840 --> 0:20:41.480 that we see in a power sector and manage those 0:20:41.560 --> 0:20:44.600 unsubsidized revenue risks. And all the gas majors in their 0:20:44.600 --> 0:20:48.440 focus isn't just on the upstream in renewable development. We're 0:20:48.440 --> 0:20:51.879 actually seeing a lot of activity from shell in particular 0:20:52.040 --> 0:20:56.520 in the downstream space. So show has acquired energy retail 0:20:56.560 --> 0:21:01.320 businesses in Australia. In the UK they about battery storage 0:21:01.400 --> 0:21:05.880 companies that's on and in Germany they have but four 0:21:06.160 --> 0:21:11.000 separate electric vehicle charging companies total has bought SAFT an 0:21:11.160 --> 0:21:13.920 array of ev charging companies itself. So oil and cast 0:21:14.000 --> 0:21:18.439 companies are chargeting both the upstream the generation side as 0:21:18.480 --> 0:21:22.280 well as the downstream on the retail side, and Shell 0:21:22.600 --> 0:21:25.639 only recently announced that they want to double the amount 0:21:25.760 --> 0:21:31.119 of electricity that they sell to customers by With that, 0:21:31.280 --> 0:21:33.879 that's what to watch when we sit down to do 0:21:34.200 --> 0:21:38.320 the next look at these utilities and their company profiles. 0:21:38.600 --> 0:21:40.840 This may be a very different conversation with a lot 0:21:40.960 --> 0:21:44.760 more energy companies involved in a bigger way going forward. 0:21:45.040 --> 0:21:48.240 And with that, Michael both, thank you so much for 0:21:48.320 --> 0:21:50.280 your insights today and great having you on the show. 0:21:50.520 --> 0:22:02.600 Thank you, Thank you. Ny. 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