see attached EU Utilities Lag Because of Climate Spending: Chart of Day
By Kari Lundgren
Oct. 13 (Bloomberg) -- European utility shares will keep underperforming counterparts in Asia and the U.S. because EU generators need to spend 900 billion euros ($1.24 trillion) by 2020 to meet environmental targets the other regions haven't committed to, according to Citigroup Inc.
The CHART OF THE DAY compares the performance of the Stoxx Europe 600 Utilities Index to the FTSE Asian Sector Utilities Index and the Standard and Poor's 500 Electric Utilities Index. In the last two years, European utility shares have trailed their counterparts as investments in renewable energy and replacing aging plants stretch balance sheets.
``The sea of negative cash flow is certainly not making investors rush back into European utilities,'' Peter Atherton, a Citigroup analyst, said at a conference in London yesterday. In addition, the consistency of all European government policies is in doubt after Germany imposed a nuclear tax and Spain debates cutting renewable subsidies, he said.
The 27-nation European Union aims to more than double the share of energy from renewable sources, including wind and solar power, to an average 20 percent by 2020. Many of the continent's power stations and electricity networks were built in the 1960s and 1970s and need to be replaced, he said.
Companies including RWE AG and Electricite de France SA face a financing shortfall of about 277 billion euros, Atherton said. Utilities will struggle to maintain A-level credit ratings if they take on more debt and ``equity is prohibitively expensive,'' the analyst said.
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--Editor: Will Kennedy, Alex Devine
To contact the reporter on this story:
Kari Lundgren in London at +44-20-7073-3442 or
klundgren2@bloomberg.net
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Will Kennedy at +44-20-7073-3603 or
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