"Cross border competition" of energy companies began to become the new normal

2022-08-20


With the acceleration of energy transformation,"cross-border competition"has become the new normal.The businesses of oil companies and traditional utility companies are increasingly overlapping and overlapping,and it seems difficult to avoid direct competition.
In recent years,the author has repeatedly heard a voice in the industry,that is,many investors begin to treat oil and gas companies as public utilities.
Theoretically speaking,compared with many public utilities(electricity,gas,water supply,etc.)which have natural monopoly properties,the marketization and commercialization of oil and natural gas are generally higher.Moreover,the business interfaces of these two types of companies have been clear in the past many years.Basically,the well water does not interfere with the river water(except that there may be some product supply relationships in the upstream and downstream of the industrial chain,such as the natural gas of oil companies may become the power generation raw materials of public utilities).Therefore,theoretically,it is difficult to compare these two types of companies together.
If we have to talk about the similarities between oil companies and utility companies,I think the first thing is that these two types of companies are in the category of large energy services(water supply,power supply,oil supply,gas supply,heat supply and even hydrogen supply in the future belong to"large energy"supply).
Secondly,the dividend return of oil companies may be relatively stable,which can be comparable to the dividend performance of public utility companies for a long time.Since many public utility companies are regulated by the government,they have always had a relatively fixed return on investment(about 6%-10%in most countries)and a relatively stable dividend return.And multinational oil companies have always attached great importance to shareholder returns.
From the performance in recent years,the dividend return of super oil giant is even better than that of some well-known public utility companies.For example,according to the 2017 annual report of Yiang group,the company's dividend per share in 2016 decreased by 80%compared with that in 2012.Rhine group only paid 5 million euros symbolically in 2015 and 2016,a decrease of nearly 100%compared with 615 million euros in 2013 and 2014.Its dividend performance has been greatly inferior to that of oil giants.
However,against the background of accelerating energy transformation,"cross-border competition"seems to have begun to become the new normal.In particular,"re electrification"is increasingly regarded as the core of future energy transformation,and the transformation to electricity has become the consensus of many oil companies.For a long time,this field has been regarded as the"territory"of traditional power utility giants.
Under the general trend of transforming to electric power,the businesses of oil companies and traditional utility companies are more and more overlapping and overlapping,and it seems difficult to avoid positive competition.
Are oil companies and public utility companies fighting hand to hand in many fields?
Participate in upstream power production and sales.Historically,oil giants such as total and Eni have a certain scale of traditional power installations.According to the annual reports of the two companies,total has a 1.6 GW gas-fired power plant in Abu Dhabi,and Eni has an installed power capacity of 4.7 GW.Total's sales of electricity in Europe in 2017 reached 70.2 billion kwh.Eni's total power generation in 2017 reached 24.27 billion kwh,and its sales in Italy and other regions reached 35.3 billion kwh.In recent years,BP,shell,equinor,total and other companies have gradually increased investment in wind power,photovoltaic power generation and other fields.
In recent years,traditional utility companies have also actively entered into renewable power businesses such as wind energy and photovoltaic.More than 30%of the power structure of Italian national electric power company and Berkshire Hathaway energy company comes from new energy power(non hydropower).French gas Suez group proposes to have 5 GW of wind power and photovoltaic installed capacity by 2022.According to the author's preliminary statistics,there is still an order of magnitude gap between the new energy power installed capacity of multinational oil giants and that of some old power utility companies,but it is not ruled out that some ambitious oil companies may further increase investment in the future.
Expand energy storage business.In recent years,major international oil companies have actively developed lithium batteries,solid-state batteries,fuel cells and high-voltage charging technologies through acquisition,venture capital and cooperation with universities.Total acquired battery manufacturing company saft;BP cooperated with Tesla to build the energy storage system of wind power plants in the United States,and made venture investment in some mobile travel technology companies to promote the development of"ultra fast charging"technology;In May 2018,shell venture capital invested 60 million euros into Sonnen,a German energy storage solution provider,and recently completed the acquisition of 100%of the company.
In recent years,many public utility companies have also paid great attention to the energy storage business and have made a series of investments.According to the statistics of gtmrresearch,from 2010 to 2016,the investment of North American and European utility groups in energy storage accounted for 14%and 13%of their distributed energy investment respectively.For example,innogy,a subsidiary of the Rhine group,invested tens of millions of euros in August 2016 to acquire belectric,a German solar energy and energy storage provider;energreenpower acquired enernoc,a US power demand response service provider;and EDF,a French company,announced that it would invest US$10 billion in energy storage systems by 2035.It is generally felt that these two types of companies are basically on the same starting line in the energy storage field.
Participate in power terminal energy services.In recent years,multinational oil giants have accelerated the layout of mobile travel and other terminal fields.Shell hopes that 20%of the sales of global gas stations will come from rechargeable electric vehicles and low-carbon fuels by 2025.Shell acquired newmotion,a charging network operator,which operates more than 30000 charging stations in 25 countries in Europe.The company has also reached a cooperation agreement with ionity,and plans to establish 80 charging stations on European highways by 2019.BP announced the acquisition of chargemaster in 2018.This company is a major charging point supplier and operator in the UK,with 6500 public and 30000 household charging points.At the same time,BP also invested$5 million to freewire,a supplier of mobile charging system for electric vehicles,and$20 million to storedot,a battery technology company.
Traditional utility companies are also"ambitious"for future transportation services.Some companies have set the goal of large-scale construction of charging facilities.For example,Germany's e-on group plans to build 10000 charging stations in Europe around 2020,and Enel(Italian national electric power company)plans to build 7000 charging stations by 2020 and 14000 charging stations by 2022.With the gradual popularization of transportation electrification,it is expected that the competition between these two types of Companies in the field of transportation will become more intense.
Multinational oil giants began to acquire public utility companies.A typical case is shell's acquisition of the UK's first utility.Although firstutility is only a small public utility company in the UK,it only serves 825000 households.However,from the perspective of the UK terminal market,these small utility companies have rapidly increased from less than 1%of the UK market 10 years ago to 20%of the current market(of which firstutility accounts for 3%).It is expected that shell's M&A will become a"catfish"that agitates the UK retail energy market and impact the original market supply pattern.
Under the general trend of energy transformation,it can be seen that the industrial boundaries between oil companies and traditional power,gas and other utility companies are becoming increasingly blurred.In the future,the two types of companies are likely to break the old pattern and have more cross and integration in renewable power production,energy storage,mobile travel and terminal energy services,and compete in some fields.Of course,cooperation in competition may also be a trend.
The two types of companies can give full play to their respective advantages and form cooperation and alliance relations in some new business areas.For example,in the construction of the world's largest offshore wind power project in the dogel sandbar,Statoil has formed a consortium with three public utility companies including Rhine group,South Scotland power company and Statoil,each accounting for 25%of the shares.There are also some gas and power utility companies working with oil companies to promote the acquisition of upstream LNG resources.
Is the transition to"comprehensive energy service provider"a common trend?
From the perspective of the challenges faced by these two types of companies,at present,the substitution of renewable energy for traditional fossil energy mainly occurs in the power sector.Therefore,the impact of low-carbon energy transformation on power utility companies is much greater than that of oil companies(especially in Europe),which also leads to more firm determination and deeper exploration of these utility companies to transform into"comprehensive energy service providers"providing comprehensive energy use solutions.
It can be seen that with the decline in the profit margin of traditional power production and sales business,many utility companies have begun to transform from a single power provider to a comprehensive energy service provider.
For example,in 2016,the Italian state electric power company started a new round of strategic transformation,taking the digital strategy and the customer focus strategy as the two engines to lead the future development,and established five strategic pillars including improving operation efficiency,industrial development,organizational streamlining and active and flexible asset management,open innovation ecology,human resources and social responsibility.It is committed to becoming a leading enterprise based on renewable energy Energy companies whose main development direction is power distribution and comprehensive energy services.
Facing the rapid development of new energy business in Germany in recent years,the power utility companies in the country are forced to accelerate the business transformation.After the asset restructuring of e-on group and Rhine group in March 2018(according to the agreement,e-on group will acquire the assets of innogy power network with 76.8%equity held by Rhine group,and Rhine group will acquire 16.67%equity after E-on Group acquired innogy),e-on group will focus on power grid business and provide energy solutions for downstream customers,with 60%share of distribution network in Germany,and more focus on distribution network,smart grid Electric vehicle charging,energy supply,energy efficiency services and smart home solutions.
In recent years,Rhine group has also been actively assisting families or communities to set up their own decentralized power generation equipment and energy storage integration systems.The energy self-sufficiency rate of many communities can reach 80-90%.The inadequacies are only supplied by the Rhine group's power grid.However,the cost is not calculated based on the amount of electricity(otherwise,only 10-20%of the revenue will be left),but based on the comprehensive service cost.
Gas Suez group is also committed to becoming a global provider of energy services and supply solutions.Its comprehensive energy services include gas supply,heating,power supply and other product services,energy engineering design,installation and big data support services.For example,the company signed a 50 year contract with Ohio State University in the United States to invest 811 million euros to establish an integrated energy production system covering green energy production,storage and electric vehicles.It is expected to provide energy service for 100000 users in the region,which will improve the energy efficiency of buildings by 30%and reduce the energy cost by more than 20%.
From the perspective of M&A investment of public utility groups in North America and Europe,their investment in companies providing energy management solutions and distributed energy system integration companies has gradually increased in recent years.According to the statistical data of gtmrresearch,from 2010 to 2016,public utility groups in Europe and North America invested 130 enterprises in the field of distributed energy,with a total investment of more than US$2.9 billion.Companies that directly provide energy management solutions to consumers received more group investment(27%and 38%respectively).These mergers and acquisitions will undoubtedly further promote the transformation of traditional utility companies into integrated integrated energy service solution providers.
Although in recent years,some international oil companies have also proposed the strategic transformation to"big energy",at present,the main business income of many oil companies still comes from the traditional oil and gas business,and their understanding of the concept of"comprehensive energy service provider"is more focused on providing diversified comprehensive energy products,which is far from establishing a mature business model.
With the help of digital technology,some oil companies have made active explorations in providing terminal services such as refueling,gas filling,charging,commodity retail and auto finance.However,the above explorations seem to be more concentrated in the field of travel.At present,there is no particularly mature sample in providing comprehensive energy solutions for customers(enterprises,communities,etc.).
Perhaps with the gradual deepening of energy transformation in the future and the gradual increase of oil companies'investment in the whole industrial chain of new energy business,there will also be"comprehensive energy service providers"in the camp of oil companies.However,it needs longer observation.

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