World Power Markets Can Deepwater Enthuse a New Power Horizon?
By Guy Isherwood
years, and the first decrease in electricity demand since World War II.1 This reversal is the result of two sharply contrasting trends.
T
On the one-hand, China, India, and to a lesser extent other developing Asian countries continued their vigorous growth in energy demand. On the other hand, most OECD countries faced a severe drop in demand for all types of fossil fuels. Without the rise of demand in China and India consumption
would have fallen by 3.5%. Falls were primarily centred on the EU (-5.4%), the US (-4.3%), CIS (-8.6%) with consumption in the OECD as a whole back to 2000 levels. Sustained growth was to be found in China (+7.9%), India (+6%), Africa (+2.1%) and the Middle East (+1.7%). Coal consumption remained stable with oil and gas contributing respectively to a third and around half
Figure 1: World Energy Consumption 2009 = 12.1 GTOE
he economic and financial crisis resulted in a reduction of world energy demand in 2009 by 1% or 130 Mtoe to 12.1 Gtoe. This was the first demand decrease in 30
“2009 will therefore be remembered as the year of major
shifts, with China now becoming the world leader in overall energy demand. India, with the world’s third highest demand, confirms this trend of emerging countries becoming the most robust energy markets,” according to Enerdata. Economists are currently predicting global economic growth
of around 4.0% this year, which is made up of a modest 2% or so for developed economies and an impressive 6% or more for the emerging markets. This multi-speed nature of the global economic recovery is likely to be a feature not only for 2010 but for the next few years. Growth in emerging economies is heavily tilted towards infrastructure spending, not least in the energy sector, and especially for power projects.
Power Deals A still constrained funding environment combined with
an uncertain regulatory climate (particularly in terms of carbon legislation and reduced customer demand) created a tough deal environment in 2009, according to Power Deals, PricewaterhouseCoopers (PwC) annual review of industry trends.2
Only those companies with balance sheet strength were Source: Enerdata
of the consumption decrease. Indeed, stable coal consumption was largely induced by the strong pace of growth in China and India – demand was up 9.2% and 6.9% respectively. Asia’s oil demand also returned to its historical growth path driven by China (in contrast to the major impact (-4.6%) on demand in the OECD). Meanwhile, electricity demand fell in most OECD countries. But despite the crisis, the world share of renewables in electricity production rose by 0.4% with an increase in the share of electricity production from wind and solar in almost
all regions. CO2 emissions decreased by around 1%, in line with the trends in energy consumption. Without the impact of China (where CO2 emissions increased strongly) emission would have declined by 3.8% last year.
4
active players for bigger deals as smaller deals became the order of the day. Actual deal numbers slipped 10%, but still remained at relatively high levels. The power deal spotlight therefore shifted away from the very large deals of earlier years as companies focused their attention on smaller acquisitions. However, the focus on smaller deals meant values took a dive with total value back to levels last seen before the M&A boom of 2005-2008. However, average power deal value (excluding renewables) plummeted from US$428 million in 2008 to US$262 million in 2009. Total deal value across the whole of the sector (including renewables) was barely half (56%) the 2008 level and between a quarter and a third of the heights reached in the peak deal years of 2006 and 2007 (Table 1). Almost a fifth of worldwide power deal target value came
from the Asia-Pacific region last year, second only to Europe and eclipsing North America for the first time. The buoyancy in Asia-Pacific deal making came from China where the target value of all deals more than doubled – from US$7.7 bn in 2008 to US$16 bn in 2009. South American bidder activity also shot up, rising year-on-year from US$5.4 bn to US$13 bn for all deals or more than fivefold from US$1.3 bn to US$7.8 bn excluding renewables. In contrast, North America’s share of power deal activity fell
sharply – down 61% from US$52 bn in 2008. Australasia power deal activity also stalled – with a 71% fall. “Regulatory and policy uncertainty created a deal vacuum in both the US and Australia,” according to PwC. For the second year running, Europe dominated the top
worldPower 2010
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