Europe’s leading utilities write €23bn off balance sheets in 2014

The difficult situation for utilities in Europe continued in 2014 with many finding the net present value of their assets falling significantly.

According to a study from EY, Benchmarking European power and utility asset impairments: Testing times ahead, 2014 followed 2013 for European utilities as another year of significant asset impairments (the lowering of the market value of an asset compared to the value on a company balance sheet). The EY study points out that a total of €22.9bn was written off utility balance sheets as depressed energy prices and regulatory changes continue to affect Europe.

The analysis, of 16 leading European utilities, shows that impairment on assets accounted for €19.4bn or 85% of the total impairment recorded in 2014. Generation assets represented the greatest share of impairments (75%) with €14.6bn. Exploration and production assets were also hit following commodity price uncertainty with a total of €2.2bn impaired in 2014. 

Charles-Emmanuel Chosson, EY’s Global Assurance Power & Utilities Leader, said:

‘Europe’s power and utilities companies continue to grapple with a changing energy landscape. In 2014, depressed energy prices and evolving regulation added to the complexity companies already face and resulted in yet another year of significant impairments.’

The report says that the continuing rise of renewables and improved energy efficiency keep adding pressure on conventional generation assets. Disruptive factors, such as the rise in distributed generation, and new developments in demand response and storage capacities could also have a large impact on asset impairment.