Uncertainty About Power Sector Deregularization Stalls Utility Asset Management
However, nearly nine years after the issuing of the directive, not everything is going according to plan. The collapse of Enron Corp., the California power crisis, and similar damaging events have made several states within the United States apprehensive about the advisability of deregulation.
New analysis from Frost & Sullivan, North American Utility Asset Management Markets, reveals that the third party asset management services market generated revenues of $49.7 million and the physical asset related services market generated revenues of $653.4 million during 2004. These figures project to reach $84.4 million and $1,447.2 million for the respective segments by 2011.
"Many states are moving back to regulated markets due to various problems such as regulatory policies, rising fuel prices, demand fluctuations, and shortages in supply," says Frost & Sullivan Research Associate C. Aravind. "This has caused utilities to be more network-focused and to strive for engineering excellence."
With the power sector retracing its steps toward a regulated market, energy companies hold millions of dollars worth of energy assets with huge associated risks. There will be vast opportunities to expand business for third-party asset management service companies that finance the assets of power plants, mainly because the power sector may sell many distressed assets.
This sale of assets gives outsourced owner services (OSS) its only opportunity to conduct business. Currently, financial institutions hold all the assets and sell them only when the prices soar.
"The utility sector market might falter in the long term as only a few assets will be sold," notes Aravind. "Hence, asset owners need to face the challenge of selling them at the right time."
The utility asset management market expects to peak in the next two to three years. Third-party asset management service companies are likely to benefit most during this term, especially since distressed assets may be sold in the near future.
There are more than 100 power plants presently on auction in the North American market. Financial companies have invested billions of dollars in energy assets over the last two years. They hope to buy the assets at reduced rates, restructure operations, and then sell them for a profit.
Energy original equipment manufacturers (OEMs) may lose orders due to the popularity of the third-party service providers that offer services at much lower costs, giving them a huge advantage over the OEMs.
"Energy OEMs have several trademarked products for asset management that are expensive," observes Aravind.
On the other hand, third-party service providers, apart from being cost-effective, are also spread across the region and can rapidly address asset-related issues of the utilities.
North American Utility Asset Management Markets has two segments – third-party asset management services and physical asset-related services. It contains in-depth discussions on market drivers and restraints, revenue forecasts, market and technology trends, and service types along with a thorough competitive analysis. Analyst interviews and executive summaries are available to the press. For more information, visit http://www.energy.frost.com.
SOURCE: Frost & Sullivan