Executive summary

European P&U players started the year consistent with 2019. Similar to a lot of other sectors, the unexpected disruptions due to the covid-19 pandemic had hit the P&U industry by the end of the first quarter.

  • Initially and throughout most of the quarter, prices and margins were primarily driven by geopolitical reasons and/or weather-related demand, and in general characterised by an overall decline in Q1. The pandemic generated a sharp decline in energy prices across the whole spectrum towards the end of Q1 — there was a decrease in electricity demand combined with a demand shift from corporate to residential consumption because of many people working from home.
  • While EU/non-EU measures on emissions reduction, promotion of renewable energy sources as well as specific support initiatives were still on-going, dedicated Covid-19 measures were increasingly being adopted.
  • Eurostoxx Utilities Index reached a peak in February 2020, though gains in capital markets decelerated for some companies even before the outbreak of the pandemic; then, from February to April 2020 Eurostoxx Utilities Index fell by almost 25 percent.
  • Credit ratings (available only before the effects of Covid-19 crisis were realized) of the key 25 players were stable with an average BBB+ rating (S&P) across the portfolio.
  • M&A activity was primarily focused on power generation and renewable energy companies in support of external growth strategies (financial, geographical and operations considerations) with the top 15 deals representing EUR15 billion which is half of Q4 2019 top 15 deal values.