APC 2014 Annual Report Download - page 173

BUSINESS REVIEW
TRENDS IN SCHNEIDER ELECTRIC’S CORE MARKETS
Utilities and Infrastructures
Electrical Utilities Oil and Gas
In Western Europe, the market declined further in 2014 due to The Oil &Gas markets have seen an end of an era in 2014.
weak demand, especially in southern countries. In mature The spending levels, in particular in Exploration, have seen a
countries, over-capacities in base generation are caused by energy significant inflation, with Field Service Operators leading the
efficiency and renewable energy growth. charge.
In the USA, the market expanded modestly. The industry has moved to bigger and bigger projects, now often
In new economies, markets were impacted by financial crisis and in the 10+B$ range. Most of these projects have been finalized
political elections. over cost and past delay.
The growth, specifically in solar and wind, faster in emerging The first to react were the International Oil Companies, who had
economies, was fuelled by regulation, dropping costs and the decided end 2013 or early 2014 to limit their Capex spending, as
support of governments and populations. they were challenged to demonstrate the profitability of their
investment.
Looking for diversifying their revenues beyond sales of electricity,
and with their customer base as an asset, utilities explore new Another key evolution in 2014 was the development of
services. Be it multi-utility, energy efficiency, home and life unconventional oil productions in North America. This development
services, or enabling demand response to play in power markets, was led by many small independent companies, which
they can be leveraged with smart grid technologies to improve accumulated debts to generate rapid growth. It has led to an
generation, grid operations and improve overall system efficiency. oversupply of oil on the global market by mid 2014.
To the network operators’ attention to quality of supply was added Moreover, Saudi Arabia decided not to intervene in the market by
more pressure on electricity prices. This led to careful control of regulating supply, despite the drop in oil prices.
network reinforcement and extension investments as well as to In the fourth quarter, most of major oil companies announced
extracting more value from past investment in the grid. drastic reduction in investment plans, especially in the upstream.
While global smart grid investment remained steady, some utilities These spending cuts will affect Schneider only partially, as the
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re-shuffled their priorities to manage urgencies such as company is not positioned in exploration, and has limited exposure
ever-growing renewable penetration or revenue protection. to production. Schneider Electric has developed its presence in
midstream and downstream in the recent years, thanks to the
Telvent and Invensys acquisitions.
Furthermore, a substantial share of company revenues is related to
Opex spending in activities that should be less affected by major
budget cuts (such as field and consulting services, process
optimization software).
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