Financial and Risk Management Crucial for Power Utilities, Finds Frost & Sullivan
Focus on capital management and free cash flow generation maximizes sustainability
MOUNTAIN VIEW, Calif., April 4, 2013 /PRNewswire/ -- Energy companies face a challenging environment of overcapacity, unpredictable oil prices, protectionism, geopolitical tensions, high debt-to-GDP ratios, winding down of national stimulus initiatives, unemployment, and fluctuating currencies. To add value to shareholders, it is vital that utilities achieve excellence in financial and risk management through improved working capital management practices and greater focus on free cash flow generation.
New analysis from Frost & Sullivan's (http://www.financialservices.frost.com) Financial Assessment of the Power Systems Industry research reveals that oil and gas production as well as electric distribution companies exhibited the highest profitability. Grid distribution and multi-utilities, in particular, saw heightened activity. Other segments covered in the research include electric power transmission and control, natural gas transmission, oil and gas equipment, rig and service, and oil rig service companies.
For more information on this analysis, please email Britni Myers, Corporate Communications, at email@example.com, with your full name, company name, job title, telephone number, company email address, company website, city, state and country.
Frost & Sullivan conducted an extensive ratio analysis to rank the companies in the power sector on the basis of different financial and risk management parameters. The ratios of the leading companies ranked within the top 33 percent, indicating that sound financial management plays a key role in the success of a business.
"High-performance enterprises diminish uncertainty in demand recovery and risks in customer refinancing through operative measures and customer partnerships," said Frost & Sullivan Business and Financial Services Analyst K. Vinod Cartic. "They follow supply chain management best practices to leverage the economies of scale and minimize raw material price volatility and procurement risks."
Successful utilities use commodity derivatives to hedge raw material risks, and also reduce currency exchange fluctuation liabilities through local production. In addition, they employ derivative-based hedging to mitigate the risks of converting receivables and liabilities, as well as purchases and sales, in foreign currencies.
To ensure profitability, companies must consolidate their presence in new geographies and invest in renewable energy, though the renewable sector is becoming highly competitive as it shifts to cost-based business models. Entrants need to rely on their own capital, as financing is limited for project developers, and technology developers can partner with existing research labs.
"Continuous product advancements to keep up with mega trends such as rapid urbanization, depleting energy resources, and climate protection are crucial for financial sustainability," concluded Cartic. "With the global demand for energy escalating and the focus on a smaller carbon footprint popularizing renewable energy, companies must focus on research and development to match the requirements and growth opportunities in power generation and energy efficiency."
Visionaries will look to quickly grow into grid distribution and multi-utilities by identifying appropriate targets and valuation metrics for the same.
Financial Assessment of the Power Systems Industry is part of the Business and Financial Services subscription, which also includes: Mergers & Acquisitions in Renewable Energy in North America, Financial Assessment of Global Chemicals and Materials Industry, and Private Equity and Venture Capital Investment Trends in the Financial Services Industry in North America. All research services included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.
Frost & Sullivan's Business and Financial Services group serves clients around the world in all aspects of financial analysis, market research and monitoring, due diligence, idea generation, opportunity analysis, investment valuation, and other proprietary research.
About Frost & Sullivan
Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants.
Our "Growth Partnership" supports clients by addressing these opportunities and incorporating two key elements driving visionary innovation: The Integrated Value Proposition and The Partnership Infrastructure.
- The Integrated Value Proposition provides support to our clients throughout all phases of their journey to visionary innovation including: research, analysis, strategy, vision, innovation and implementation.
- The Partnership Infrastructure is entirely unique as it constructs the foundation upon which visionary innovation becomes possible. This includes our 360 degree research, comprehensive industry coverage, career best practices as well as our global footprint of more than 40 offices.
For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies?
Financial Assessment of the Power Systems Industry
SOURCE Frost & Sullivan
More by this Source
Frost & Sullivan Honors 2014 Excellence in Best Practices Award Recipients
Mar 14, 2014, 08:00 ET
Browse our custom packages or build your own to meet your unique communications needs.
Learn about PR Newswire services
Request more information about PR Newswire products and services or call us at (888) 776-0942.