DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Chaos in financial markets caused difficulty for renewable energy firms but served mainly to accentuate existing trends in M&A 2
Turmoil in the world's financial markets defined the utilities' agendas in Q1 2009 2
Industrial demand for electricity has declined significantly in the first half of 2009 as a result of the contraction in manufacturing 3
Renewable energy generation was particularly hard hit by the credit crunch, especially in off-shore wind 4
However, long-term prospects for renewables remain extremely strong 5
M&A has dipped, but this is as much due to the utilities ""pausing for breath"" as it is the recession 6
Changes to EU energy regulation over the past 6 months laid the foundation for a fundamental landscape reshaping over the next 5 years 7
The passage of the Third EU Energy Package will encourage midstream M&A activity 7
A group of 8 states led by France and Germany successfully prevented the Commission from forcing either unbundling or the ITO option on utilities 7
Individual member states will have 18 months to choose which of the three options-OU, ISO or ITO-they will enforce 8
The EC will continue to pursue energy market liberalization through antitrust action and the development of a pan-European network code 9
The development of a harmonized network code will reduce utilities' regulatory risk when making strategic and operational decisions 9
The Russia-Ukraine gas crisis brought security concerns into sharp focus, prompting investment in new infrastructure and capacity 10
In April, the European Council allocated billions of Euros for integrating Europe's energy networks 10
The unstable energy relationship between Russia and Ukraine continues to drive European policies aimed at improving security of supply 10
Nabucco crossed a key threshold in H1'09 with the signing of an Inter-Governmental Agreement 11
EU plans for increasing regasification capacity became even more ambitious, but it is unlikely that all projects will come to fruition 12
Europe is increasingly touted as the critical near term market for LNG as the recession has precipitated a world-wide gas glut 13
The Nuclear Renaissance continues but calls are growing for a more ""stable investment climate"" - a carbon floor price 14
The Nuclear Renaissance gained momentum across the EU, but at an uneven pace 14
Changes in consumption patterns suggest an increase in long term baseload demand, favouring investment in nuclear energy 14
Europe currently has plans to increase its nuclear capacity by around 35% 15
Summary & Conclusions: demand and liquidity contracted sharply in H1'09 but the worst appears to be over 16
The financial crisis and economic recession has not created the doomsday scenario envisaged by some but utilities have had to respond. 16
The January Gas Crisis galvanized EU action on energy security, spurring investment in new interconnectors, storage, LNG regasification and pipelines. 16
The financial turbulence which marked H1'09 will subside during H2. 16
The renewable energy industry has struggled to retain the levels of investment seen over the past 2 years, particularly in offshore wind. 16
APPENDIX 17
Further reading 17
Ask the analyst 17
Datamonitor consulting 17
Disclaimer 17
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